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        Alaska and Hawaiian Airlines Are Merging: What It Means for Travelers

        Alaska and Hawaiian Airlines Are Merging: What It Means for Travelers

        Oh, Christmas tree: The economics of the US holiday tree industry

        Oh, Christmas tree: The economics of the US holiday tree industry

        How AI Chat Search Could Disrupt Online Advertising

        Spotify CEO cites “expensive” capital as factor in layoffs. What does that mean?

        EXPERT: IN-PERSON WORK ALONE WON’T FIX LONELINESS

        EXPERT: IN-PERSON WORK ALONE WON’T FIX LONELINESS

        Can Important Unions Collapse and Disappear?

        Can Important Unions Collapse and Disappear?

        The Right Amount of Cards, Cash and ID to Carry in Your Wallet

        Why Is Everyone So Unhappy at Work Right Now?

        Scrapping the state’s liquor license law makes economic sense

        Scrapping the state’s liquor license law makes economic sense

        Airlines are frustrating travelers by changing frequent flyer program rules – here’s why they keep doing it

        Airlines are frustrating travelers by changing frequent flyer program rules – here’s why they keep doing it

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        S1:E1 CVS Paying the “Pink Tax” on Certain Products and the Evolution of the Electric Vehicle Industry

        Questrom $50K Case Competition: In the Trenches of Sustainability with Casella

        S1:E1 CVS Paying the “Pink Tax” on Certain Products and the Evolution of the Electric Vehicle Industry

        The Optimistic Pessimist

        Shein & Forever 21 Strike a Deal

        Shein & Forever 21 Strike a Deal

        S1:E1 CVS Paying the “Pink Tax” on Certain Products and the Evolution of the Electric Vehicle Industry

        Questrom and BU Means Innovation and Entreprenuership

        A new travel nightmare: New passport delays lasting 13 weeks

        A new travel nightmare: New passport delays lasting 13 weeks

        Leadership Communications

        Leadership Communications

        Demotivating Effects of Relative Performance Feedback on Middle-Ranked Workers’ Performance

        Demotivating Effects of Relative Performance Feedback on Middle-Ranked Workers’ Performance

        S1:E1 CVS Paying the “Pink Tax” on Certain Products and the Evolution of the Electric Vehicle Industry

        AI: What is it and how will it impact business?

        Is Creativity in Advertising Dead in the age of AI?

        Is Creativity in Advertising Dead in the age of AI?

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        Alaska and Hawaiian Airlines Are Merging: What It Means for Travelers

        Alaska and Hawaiian Airlines Are Merging: What It Means for Travelers

        Newton Grandmother Scammed out of $20,000, Used Bitcoing ATMs to Send Money

        Which is better – a real or a fake Christmas tree?

        How AI Chat Search Could Disrupt Online Advertising

        Spotify CEO cites “expensive” capital as factor in layoffs. What does that mean?

        The Danger of Racial Colorblindness 

        The Danger of Racial Colorblindness 

        EXPERT: IN-PERSON WORK ALONE WON’T FIX LONELINESS

        EXPERT: IN-PERSON WORK ALONE WON’T FIX LONELINESS

        Can we count on carbon capture to abate climate change?

        Can we count on carbon capture to abate climate change?

        The Cybertruck Must Be Huge—or It Will Dig Tesla’s Grave

        The Cybertruck Must Be Huge—or It Will Dig Tesla’s Grave

        Can Important Unions Collapse and Disappear?

        Can Important Unions Collapse and Disappear?

        The Right Amount of Cards, Cash and ID to Carry in Your Wallet

        Why Is Everyone So Unhappy at Work Right Now?

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          AI Adoption in U.S. Health Care Won’t Be Easy 

          Where Should Your Company Start with GenAI? 

          Where Should Your Company Start with GenAI? 

          How Retailers Can Capitalize on the “Refund Effect”

          How Retailers Can Capitalize on the “Refund Effect”

          Should Companies Refrain From Making Political Statements?

          Should Companies Refrain From Making Political Statements?

          Make It Safe for Employees to Speak Up – Especially in Risky Times

          Make It Safe for Employees to Speak Up – Especially in Risky Times

          Will Generative AI Create a New Era of Search Competition?

          Will Generative AI Create a New Era of Search Competition?

          A Better Approach to Customer-Centric Messaging and Engagement

          A Better Approach to Customer-Centric Messaging and Engagement

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          How Coworking Spaces Impact Employee Well-Being

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          Insights@Questrom
          Home Our Insights Business Challenges Digital Business

          How Has the Pandemic Impacted Digital Retail?

          Adriane AylingbyAdriane Ayling
          December 21, 2020
          in Digital Business
          20
          0
          How Has the Pandemic Impacted Digital Retail?
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          The pandemic has increased dependence on online shopping and the way consumers interact with companies. How has the digital purchase journey changed for retailers? Are certain sectors affected more than others? Moving forward, how will retailers have to adapt their business models to changing consumer habits towards online?

          Professor of Marketing Shuba Srinivasan sits down with Insights@Questrom to answer a few questions on trends she has seen in digital retail during COVID-19.

          IN GENERAL TERMS, WHAT IMPACT HAS THE PANDEMIC HAD ON DIGITAL RETAIL?

          The impact of the pandemic on physical retail was far more severe than on digital retail. According to new data from IBM’s U.S. Retail Index, the pandemic has accelerated the shift away from physical stores to digital shopping by approximately five years. Physical retail has taken a big hit. Per the same study, department stores are seeing significant sales drop, and overall sales are expected to decline by over 60% for the full year.

          E-commerce is projected to grow by nearly 20% in 2020 (ref. same study). Most retailers are trying to recover some of their business through online methods. Consumer behavior is changing as well. More consumers are increasingly comfortable shopping online, including older demographics, accelerating the trend to digital shopping. For certain categories, that works. For many other categories, it doesn’t. Big-box retail is a high-cost sector with high debt and high leverage. For many large retailers, whether they would recover from the Covid related recession, even if it is temporary, is a bit of a question. It will depend on how long [a recession] would be, and whether they would have the liquidity to come back up again.

          WERE ANY SECTORS PARTICULARLY AFFECTED MORE OR LESS THAN OTHERS BY THE PUSH TO ONLINE RETAIL DURING THE PANDEMIC?

          During the COVID-19 pandemic, consumer shopping online has increased significantly across many categories. Essentials such as over-the-counter (OTC) medicine, groceries, household supplies, and personal-care products are going to be doing fine. An interesting trend is that even smaller grocery retailers (e.g., ethnic and mom and pop grocery retailers) have adapted to the online environment and made it easy to buy online. Spending in at-home entertainment (e.g., Netflix, Amazon Prime) and fitness through equipment purchases (e.g., exercise machines) and online activity (e.g., online yoga classes) is growing due to stay at home and work from home.

          Physical distancing and stay-at-home orders have forced whole consumer segments to shop differently. Department and big box stores with big footprints are going to be more affected. Fashion wear, clothing etc. are going to be suffering for a while since people are not wearing fashion wear during the stay-at-home/work-from-home phase that the pandemic has brought about.

          Purchases of items that are postpone-able (e.g., fine jewelry, high-end footwear, designer clothing) are going to be postponed. Home improvement projects (unless they are DIY projects) are more likely to be put off. Restaurants have also seen a big negative impact on business, particularly those that have prime real estate and plenty of indoor capacity; on the other hand, the take-out food business has offset some of these losses but not nearly enough.

          I think we’ll have to look at impact category by category. Anywhere where consumption is discretionary or postpone-able, people are going to postpone it. Things that if you don’t consume today it’s no longer necessary—you will see a big drop.

          HAVE YOU SEEN ANY SPECIFIC TRENDS IN ONLINE PURCHASES THAT WEREN’T PRESENT BEFORE THE PANDEMIC OR ANY THAT WERE EXACERBATED BY THE PANDEMIC? DO YOU EXPECT ANY OF THESE TRENDS TO LINGER ONCE THE PANDEMIC PASSES?

          Consumer intent to shop online continues to increase, especially in essentials and home-entertainment categories. More interestingly, these habits seem like they’re going to stick as US consumers report an intent to shop online even after the COVID-19 crisis. There is going to be stickiness, e.g., older folks who stayed away from online shopping are now going to remain online shoppers.

          We can expect that physical retail stores would permanently evolve, incorporating omnichannel features and services. Retailers will look for ways to integrate offline and online channels. Consumers will likely browse in physical stores but will expect to buy the products online. This might result in more stores with smaller footprints and could hasten the decline of the large footprint retailers with high operating costs.

          WHAT IS THE DIGITAL PURCHASE JOURNEY?

          When shopping was primarily done offline, a purchase funnel where customers sequentially proceed through the stages of awareness, familiarity, consideration, liking, and purchase, served as a useful model of this process. However, in the era of online shopping, customers gather information, evaluate, and seek opinions on products from a variety of easily accessible online and offline sources in a manner that best fits their unique needs. In addition, consumers are exposed to various marketing stimuli (such as online advertisements, reviews, email marketing, etc.) that constantly alter their shopping process. As a result, the concept of the purchase funnel has evolved to that of a digital purchase journey to describe shopping behavior that is non-linear and heterogeneous across consumers.

          HOW SHOULD COMPANIES MODIFY THEIR BUSINESS MODELS MOVING FORWARD TO DEAL WITH THE INFLUX OF ONLINE PURCHASES?

          The pandemic also forced many traditional retailers to realize the potential of e-commerce. The barriers for mom-and-pop shops to switch online, such as the switching costs and inertia, have been shattered in the pandemic. This has created an opportunity for platforms such as Shopify (whose market capitalization now exceeds $100 billion) which has helped thousands of independent businesses embrace e-commerce. Shopify offers merchants seamless direct-to-consumer logistics while still maintaining their distinct brand identity and relationship with their customers. This tectonic shift in the business model of smaller retailers using Shopify like platforms, where they own their consumer relationships, is here to stay and thrive.

          With consumers, retailers should try to maintain as much of the relationship and trust. Amazon has become the de-facto standard for online retailers for customer relationships and reputation. I think the biggest thing for most retailers is to think about the appropriate use of content marketing—e.g., the appropriate use of influencers (e.g., social media stars) in an online world to still reach out to customers and be able to gain business. Research on recessionary spending has shown that companies that have continued to establish those relationships—e.g., by spending the money on advertising and retaining some of the relationships with customers —have flourished post-recession.

          The shift in consumer behavior has resulted in a lot of data becoming available at the customer level on the digital purchase journey – how customers browse, how they search, what they buy, how they repeat buy etc. Retailers will be focusing their efforts to capture and use customer-level data in increasingly sophisticated ways. We will see the increased use of retail analytics in understanding the digital purchase journey and consumer behavior using the data that are being generated by consumers.

          Tags: COVID-19Shuba Srinivasan
          Adriane Ayling

          Adriane Ayling

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