The year 2020 changed the world of e-commerce forever. A mass movement from traditional brick-and-mortar shopping methods toward more online activity was inevitable, and already in process, but the COVID-19 pandemic accelerated the transformation. This huge shift has been driven both by consumer demand and by brands or retailers offering new ways to shop.
The fashion sector, for example, has seen volume increases of 50% to 80%, especially in the first months of the crisis. In some cases, this activity exceeded peaks in Christmas business. The enormous growth is confirmed by market experts at Digital Commerce 360, who estimate that U.S. consumers will spend around $861 billion online in 2020. That's an incredible 44% year-over-year increase, and the highest annual e-commerce growth in the U.S. in at least two decades. The trend has moved initiatives for worldwide e-commerce operations to previously unseen levels.
These new online shopping behaviors force brands and retailers either to offer a multitude of omnichannel shopping solutions or become extinct. Pandemic-induced capacity constraints, coupled with high demand for omnichannel and e-commerce, are driving retailers to keep up and pushing the importance of supply chains to the forefront.
In doing so, retailers and their fulfillment providers need to focus on perfecting the overall customer journey. By offering options that enhance customers’ offline shopping experiences, brands and retailers can provide customers with the high level of convenience that they’re seeking, while also offering an increased sense of safety. One example of such an offline experience would be a customer ordering an item online, then picking it up curbside at a brick-and-mortar store.
The change in consumer shopping behaviors raises the question of whether online shopping will continue to be the new normal after the pandemic is over, or whether people will rush back to brick-and-mortar stores with renewed fervor. Customers may always favor the human interaction involved in the traditional experience of shopping at stores and malls, but their omnichannel behaviors will undoubtedly continue to evolve.
The Retailers’ Response
Quite a few companies have already responded to this challenge: Yahoo reports that Ulta Beauty increased its e-commerce sales by 200% in the second quarter of 2020, and that the jump was supported by the company’s offering of options for curbside pickup or buying online and picking up safely in-store. The retailer is using technology such as virtual reality to provide customers with new ways to discover beauty products. By employing artificial intelligence and augmented reality to analyze skin, Ulta Beauty has been able to replicate the brick-and-mortar beauty counter experience.
Apple launched a two-hour shipping option during the 2020 Christmas holiday shopping season, using its stores as shipping hubs. Deliveries were provided with no contact, relying on verbal confirmation instead of signatures at customers’ request. Apple continues to offer safe in-store, curbside, and express omnichannel solutions.
Nordstrom is reinforcing the importance of supply chains to retailers’ ability to serve customers and maintain margins. The fashion retailer expanded the selection of merchandise available for two-day delivery and next-day pickup across top markets. As part of its omnichannel strategy, the company has made online order pickups available at all Nordstrom and Nordstrom Rack stores in the U.S.
Retail giants such as Walmart and Target have been successful at optimizing curbside shopping through their apps. They let customers alert the store when they’re on their way or when they have arrived, direct store staff to put purchased items in customers’ cars, and offer additional enhanced customer solutions. Omnichannel strategies can be adapted to fit any customer’s shopping need or behavior, regardless of industry vertical.
Brands are noticing that their customers are buying different products in the post-pandemic world. Business professionals who used to go into retail stores to get fitted for office attire are now ordering comfortable leisurewear from a brand or retailer’s website. The same patterns can be seen for non-business-related spending and activities. People aren’t spending as much to go out on weekends, but instead might be investing in skincare and shirts that accent facial features so they can look sharp on Zoom calls.
Brands need to look at their portfolios of products and determine if they still fit with what and how customers are buying. Brands are adjusting their sales, advertising, social media marketing, and other relevant techniques to accommodate for the consumer shift toward online sales. With the dramatic increase in online shopping volume, brands and retailers need to be able to shift their logistics operations accordingly.
Social selling, started years ago in China by Alibaba, has turned into a multi-billion-dollar business and is becoming more lucrative every day. As the world continues to rebound from the COVID-19 pandemic, e-commerce retailers around the world will need to keep coming up with digital channel innovations in order to support physical and online commerce.
Walmart recently partnered with the e-commerce platform Shopify to focus on online sales, through its own third-party marketplace. The brand is also taking its social selling to the next level by partnering with TikTok, and enabling this social giant’s users to shop directly for Walmart fashion without leaving the app. According to William White, the U.S. chief marketing officer of Walmart, the retailer is moving faster than ever to find new and improved ways to serve customers and meet them where they are.
Omnichannel solutions provide better inventory and stock management across channels, and help to smooth out-of-stock and overstock situations. To achieve this, businesses need a centralized and nearly real-time view of inventory, with simultaneous access to multiple storage locations from different touchpoints. This is becoming even more critical in a world characterized by a wider range of increasingly complex channels such as marketplaces and social media platforms. Many businesses still struggle to ensure a centralized inventory data pool due to their siloed legacy systems, leaving a lot of money on the table.
A Need for Channel Integration
E-commerce retailers are streamlining everything, from marketplace channels to customer communications. They’re even modifying return windows to adjust for carrier constraints. By integrating all channels into their logistics sites — including those of brands’ websites, marketplaces and retailers — companies can make omnichannel strategies successful. Through proper logistics management, all channel-specific warehouse teams can plan ahead to make sure space is correctly allocated.
When a customer orders an item, they expect to see it delivered in two or three days tops (or the next day, for many items). This expectation has become increasingly difficult to meet using omnichannel logistics processes. Ordered items may be shipped from a warehouse, shipped from a store, or picked up at a store. Top brands are finding retailers are set up to fulfill orders, but most lack inventory visibility and are looking to partner with logistics providers to help satisfy the increased customer demand.
Having defined returns processes in place is crucial for any omnichannel strategy. And just as order deliveries need to be optimized throughout all channels, returns processes need to be fully integrated, to meet customers’ expectations of an easy returns process.
Ongoing market developments, accelerated and intensified by the COVID-19 pandemic, show that the role of brick-and-mortar retail stores will be completely different in the future. Brands and retailers that had already started to utilize omnichannel strategies before the pandemic hit, are now better equipped to handle new customer shopping behaviors. By having established processes in place, they’ve been able to effectively expand and scale their capacity, and keep up with higher demand.
As alluded to in the Ulta Beauty example above, stores will increasingly transition toward becoming showrooms and experience centers. The focus will be less on physically selling items in store, and will instead be on pushing digital sales. The necessity of rethinking inventory management under these conditions is undeniable.
Konstantin Bohmeyer is vice president of consumer products at Arvato Supply Chain Solutions North America.
Timely, incisive articles delivered directly to your inbox.