Photo: Amazon
What distinguished e-commerce winners and losers during the pandemic?
The novel coronavirus pandemic gave e-commerce adoption an unprecedented boost and brought huge sales increases to some retailers. New data suggests, however, that retailers of all sizes did not benefit equally from the e-commerce boom.
The biggest retailers in the U.S. including Amazon.com, Walmart and Target received the majority of the windfall from the public’s pandemic-era e-commerce habits, according to a study by Digital Commerce 360, reported on Inc.
The research found that the top 500 companies generated $849.5 billion in online sales in 2020, a 45.3 percent increase year-over-year and the biggest jump since Digital Commerce 360 began tracking the statistic in 2006. While retailers of all sizes did benefit from online sales, new customers largely turned to familiar, big brands, allowing those retail enterprises to take share from smaller operators. Crafting company Joann represented the fastest growing online business of the Digital Commerce 360’s top 500.
Even among the top 500, the top 100 largest companies grew at a rate greater than that of the whole, according to an analysis of the report. In 2019 the opposite was true, with the bottom 100 registering the fastest growth and the top 100 growing the slowest. In 2020, the top 10 grew even faster than the top 100.
While the Inc. article refers to larger brands succeeding in part due to their ability to more adequately manage shipping and supply chain issues throughout the pandemic, this was not the case at every point during the pandemic.
In March of 2020, e-commerce’s biggest player, Amazon, ran into problems fulfilling orders on time. Long waits and order cancellations became common, and for a time during the pandemic’s first U.S. wave the e-tailer stopped fulfilling orders for items deemed “non-essential” entirely.
There were also instances of big businesses booming due to their facilitating small business successes.
Etsy, for example, was anticipated to perform poorly during the pandemic at the outset, but due to a sudden public need for cloth masks ended up experiencing a tripling of its stock value by June. While the company numbered among Digital Commerce 360’s top 500 in 2015, as a marketplace its success comes from facilitating access to smaller sellers.
- Online Sales Exploded in 2020–But Mostly For Retail Giants – Inc.
- Meet the 500 largest online retailers in North America – Digital Commerce 360
- Is Amazon facing a crossroads with the coronavirus pandemic? – RetailWire
- Etsy’s stock jumps to record, tripling in three months on surge in face mask sales – CNBC
- Amazon preps an Etsy-like marketplace – Digital Commerce 360
Discussion Questions
DISCUSSION QUESTIONS: What factors have created winners and losers during the months since the pandemic hit the U.S.? How do losers go about crossing over into the winners column more than a year in?
Poll
BrainTrust
Retailers with a brick-and-mortar presence grew faster than Amazon, or in other words took e-commerce share from them. Their success was a function of ready inventory in stores, omnichannel investments and delivery/pickup options and a customer loyalty that has been under-appreciated as a powerful force in marketing. Shopping is an inherently social experience, defining local connectivity, and brick-and-mortar despite a pandemic year did quite well. Now with recovery in motion, in-store sales will grow more than e-commerce on a dollar basis this year, once again proving the importance of stores in marketing, fulfillment and overall customer experience – even as a boost to e-commerce sales.
Yes the brick and mortar presence or lack thereof was critical during the height of COVID. Previously being in the furniture vertical we say 140% gains YOY in terms of ecommerce selling to the consumer side. Ecommerce had always been Industry West’s (industrywest.com) bread and butter and it was never reliant on brick and mortar, but I think adoption of peoples’ willingness to purchase furniture online increased exponentially with COVID.
The retailers who won the pandemic showed flexibility, made quick pivots, and trusted store associates to create innovations. Another distinguishing factor was rollouts of new communications tools to eliminate confusion. Stores really delivered in the past 15 months, and retail companies won’t take them for granted again.
The buzzword for retail during the pandemic was “pivot.” Critical capability.
The winners of the pandemic e-commerce boom were the big brands and the niche players — those in the middle got squeezed. Big brands have the benefit of scale and familiarity, which reduced the barrier to trying new habits. The niche brands offered something unique and helped people solve a problem. Those in the middle did not offer anything meaningful and got passed over. Of course, this analysis excludes supply chain issues and technology issues…
The winners likely align with non-discretionary purchases and those with familiar brands. Trust and reliability undoubtedly played an important role. During the pandemic, smaller retailers likely didn’t have the items people were shopping for and if they did, had operational issues.
To cross from loser to winner, those retailers will have to work on awareness, ensure they have a compelling assortment and can be at parity with delivery time expectations. To generate awareness, they’ll want to figure out their social media advertising strategy among other drivers.
Finally, they will need to think about their overall e-commerce experience. Is it easy to shop, easy to purchase (e.g. few clicks), easy to view reviews, easy to return items — things that shoppers of leading retailers have come to expect.
During the pandemic large companies, especially those that were considered “essential” retail, were e-commerce winners because of brand loyalty, the breadth of offerings and the ability to return items at physical stores. Many consumers may have hesitated buying products online from brands that temporarily closed their stores due to concerns about returning items or the risk that smaller chains may potentially file for bankruptcy. Smaller companies need to bring back customers with outstanding personalization and promotions.
To win, retailers will have to deliver the goods as quickly and efficiently as possible. It is critical to leverage stores as distribution points so getting product out of DCs and closer to the end-customer is another path to success. Controlling the supply chain is key. Retailers have to understand where their product is in real time. They need to seek alternate sources where possible as well and communicate the status of product with their customers and associates. Transparency, or as some call it the “glass pipeline,” the Holy Grail of logistics, is now center stage to gain pocketbook or wallet share. Retailers will never completely predict demand, so their only hope is to fulfill orders as quickly and efficiently as humanly — and technically — possible.
Stores – and store associates – were retail’s winners during the pandemic. Almost overnight, stores became fulfillment centers and providers of contactless pickup services. Frustrated online shoppers, facing long delivery times and inventory shortages, turned to their local stores for safe, speedy and convenient options — and the stores delivered.
The winners were able to fulfill orders and avoid stockouts. They were classified as essential and were open vs. the smaller players that were forced to close shop while stay at home orders were in effect. The winners were winning because they had the product that customers were on the hunt for.
The losers did not reap the benefits because they were either closed or did not enable technologies like live streaming or a digital store to accommodate new shifts in shopping behavior. They didn’t have the right product mix or just couldn’t keep up with the pace of what the customer wanted. Arcadia Group (Topshop) is a great example of how a retailer did not have the right tools, people or leadership in place to keep up with the shift in retail due to the pandemic. They did not enable the right technology or shift their product mix to reflect what customers were looking for and they lost.
The only way to win is to put the customer in the center of your retail strategy – from product assortment to how and what platform you go to market. If you can’t be fluid and flexible, you will not survive the next pandemic.
During the pandemic we witnessed the resurgence of the same consumer behavior that drove supermarkets, department stores and mass merchants in their infancy — people were looking for the most accessible, convenient and cost effective way to meet their needs possible. In what was a relatively new digital shopping/home delivery world for many, that meant going to the largest online retailers. They offered “one website shopping,” attractive pricing and a single delivery for multiple items. Eventually consumers will become more comfortable with online shopping. They will be okay with going to multiple specialty websites to find shoes or sunglasses or a special wine. But just as we do today, 99 percent of us will still go to Walmart (or Amazon) at least once a year. We will still go to the “virtual malls.” And the largest retailers will continue to get the lion’s share of our shopping bitcoin.
I think there were two critical drivers; 1.) Product availability. Companies with robust supply chains who could deliver high demand goods, especially early in the pandemic had a huge advantage. 2.) How fast they could they deliver as close to a frictionless experience as possible for their customers was also critical to building market share.
Early on supply chain execution on high demand products was a massive differentiator. Customers were willing to go anywhere if they thought they could find things like bathroom tissue, cleaning supplies or shelf stable foods. Companies who were nimble and could flex as demand accelerated were at a distinct advantage. As those products become more available, the priority sort of shifted to retailers that offered curbside, contact-free commerce in a way that was easy for the customer.
It’s no coincidence that the big winners were those retailers who had made investments in unified commerce before the pandemic and as a result were well positioned to succeed during it.
Agility, a digital mindset, and tech and logistics investments set winners apart. Lululemon, Nike and Sephora were ready to pounce once the pandemic hit due to their mature e-commerce infrastructure.
Prioritizing e-commerce investments and strategic partnerships can propel laggards into today’s digital economy.
On top of the other factors discussed here, the ability to execute curbside pickup or home delivery was a huge factor. Nimble inventory management of certain high-demand products was essential, but the “last mile” to the customer’s car trunk or front door really separated the winners from the losers.
While the question being posed is asking about e-commerce during the pandemic, I would argue that the real winners are the front-line, in-store employees who went to work, opened the retailer’s doors and made it possible for the rest of us to live. Thank you! The value of these front-line brand ambassadors was on full display. I for one learned that in-store technology should simultaneously support and assist both the shopper and the store associates – not replace, but enhance and empower the human connection.
Essential companies had essential merchandise. It’s what consumers needed. That’s one reason the winners prevailed. Everyone needs to eat. Everyone needs toilet paper. The list goes on and on. And beyond that, the winners had convenience baked into their process. Delivery, curb-side pickup, etc. Put the two of those together and you have the winning formula.
Losers, if you want to call them that, should take notes about what the winners did. Not all retailers will be able to adopt the same processes and technology of the winners, but there’s something they can learn to create a better experience. It’s an assumption that the merchandise is what the customer wants. So, find ways to be more convenient.
The retailers that fared best during the pandemic were those that were able to provide safe and effective e-commerce experiences from home page to checkout, and to extend their online experiences to curbside pickup and BOPIS. Online traffic surged above previous Cyber 5 rates and so did cybercrime: account takeovers comprised 85 percent of all login attempts in some months and gift card attacks were up from four to eight times during major U.S. holidays. Larger retailers had a head start because of more advanced e-commerce and supply chain infrastructure, though many had to accelerate their digital and omnichannel plans. Retailers that didn’t fare well should learn from those that did: safe omnichannel experiences and a focus on transparency and customer satisfaction will go a long way.
Since no one could have predicted a pandemic, winners and losers were determined mostly by luck – those who happen to be in the right place at the right time or wrong place at the wrong time.
This is surprising to me to read, as other than industry (like TP, sanitzer, etc.) I don’t think any retailer would say they just “got lucky” last year. I think any “luck” as you call it would be the result of good planning, proper systems, and strong partnerships prior to the pandemic.
During times of difficulties, human psychology is to turn to the familiar. The familiar companies were usually the top choice and they rightly prioritized essential items that were experiencing multiples times the normal demand over non-essentials.
I agree, Venky. I think familiarity played a huge role.
We all heard the word “pivot” ad nauseam last year, but the brands and retailers that thrived were the ones who had agility with their technology and supply chain. These brands had the ability to make quick moves like enabling cross-channel inventory sellability via OMS, converting stores to micro-fulfillment centers, and leveraging already-strong DTC muscles to continue to reach customers, etc. They seemed to have better outcomes during and after the pandemic. Them and the toilet paper, wine, and athleisure industries. 🙂
Retailers that provided wide range of essentials (Target, Walmart, Amazon) and niche brands that provided unique items were the winners. Communications with customers for support and on inventory, delays, and availability played a big role in keeping consumers informed, loyal and satisfied.
“A sense of shock a sense of danger, and then, seemingly we return to old ways. But the change has come.” Theodore Dreiser.
Dreiser wasn’t referring to the pandemic, of course, but the point remains valid: even “game changing” events often are followed by a regression to old patterns … but not completely. Some of the recent changes — an accelerated shift to online for everything from shopping to meeting, for example — will remain. Others are more ambiguous: will outdoor dining remain popular? Will business travel return? What about international travel? Businesses in affected sectors like restaurants/bars, hotels, and airlines are the most likely to be impacted by paradigm shifts.
The Pandemic showed the value of flexibility, of course, but it also showed the limitations of even a great degree of preparedness.
E-commerce winners pivoted into a free shipping, easily available product, app accessible fulfillment platform for their products. The e-commerce losers ignored the reach and accessibility that e-commerce afforded them, the time and safety it offered their customers, and the clear medical safety net it afforded their customers.
The winners were already focused on supply chain and order fulfillment investments. The losers were simply laggards in preparing as fast as they should have been and COVID simply accelerated out from underneath them. This applies to many technology investments whether systems updating and consolidation. Process streamlining, and the investment in people and their career pathing — given the increased technology staffing needs.