Guest Post: The Coronavirus Pandemic Exposes Brands That Were Slow to Embrace Ecommerce
By Nick Stoltz, COO, Measured
The longer the COVID-19 crisis goes on, the more likely it is we will hit warp speed in the decades-long march toward ecommerce and away from stores.
COVID-19 has swiftly brought on an unprecedented social and economic situation globally. Throughout March and April, many sectors, including travel, hospitality, and non-essential retail, have come to a screeching halt. Others have seen unprecedented demand, including consumer packaged goods, food and beverage delivery, educational software, health and wellness and video conferencing software.
Yet many categories are decidedly mixed. Take fashion as an example. For those brands that sell heavily in wholesale and retail channels, this has quickly become an existential crisis. Others more heavily focused on ecommerce and direct-to-consumer have seen surprisingly strong results. The reality is that most of these brands have some mix of retail and online sales.
A closer analysis of marketing and ecommerce sales across 12 of these brands shows clear results:
- Brands that have pulled back on marketing spending (-42% vs. February), whether out of an abundance of caution or necessary cost-cutting in the face of the loss of sales, are seeing their online DTC sales struggle (-40% vs. the same period a year ago).
- Those that stayed the course with their marketing (+27% vs. February) have seen online sales weather the storm outside a temporary sales dip during the onset of the crisis (+8% vs. a year ago).
- A third group that has aggressively pushed in with marketing and promotions (+95% vs. February) is seeing unprecedented year-over-year sales growth (+70% vs. year ago).
Faced with precipitously falling sales the week of March 9, retailers Johnny Was and Faherty Brand doubled down on direct-to-consumer. Both had lost revenue from their retail stores and wholesale, and both came out swinging. They leaned heavily into promotions that had been uncommon for the brands in the past. Faherty offered to donate 2% of sales to COVID-19 relief Johnny Was moved quickly to offer fashionable face masks with one pack donated to essential workers for each one sold. Both increased marketing to get their messaging out there, first to customers and eventually to prospects based on overwhelming response. Both have seen online sales grow by more than 50% vs. a year ago and have found a silver lining in this challenging environment.
Maybe you find this outcome surprising, but further examination suggests that it should not be. Consumer discretionary spending is down by more than 50%, according to a study in The Economist. But consumers are still shopping online; the inability to spend on things like travel, restaurants and childcare and reduced costs for things like basic transportation means that there is still strong discretionary spending on ecommerce beyond essential goods. Throw in the amazing discounts being offered all over the place and it makes sense why, outside of a dip in mid-March, overall, non-essential ecommerce has fared well.
Individual brands may be seeing wildly different outcomes based on their chosen strategies. Much as bricks, mortar, rent, and sales associates are the cost of doing business in retail, digital advertising on Facebook, Google AdWords and elsewhere is the price of doing business online. While brands that are pulling back on marketing investment may conclude that online demand is soft, it is not. The brands that are fighting for it are taking wallet share.
Brands with large retail and wholesale presence face difficult choices. They know cutting back on marketing will have some negative effect on online sales. Keeping your powder dry for a few months and waiting for stores to reopen looks like the logical move facing a temporary closure of a major sales channel. But the longer this crisis goes on, the more likely it is we will hit warp speed in the decades-long march in consumer purchase behavior from retail stores to online.
Many consumers are trying online purchases for goods they have never considered previously; others are increasing online purchases because it is the only option. Either way, some of this behavior will stick, the presumption that a return to normalcy is around the corner and that retail stores will open with a rush of customers in June looks more challenging by the day. Stores could likely reopen to a flood of week-one returns and very tepid traffic after that. It may take a long time or even a vaccine before consumers fully return to some semblance pre-coronavirus shopping behaviors.
Decision-making in the face of the range of possible outcomes is strategically challenging. Rushing blindly into digital marketing is not the right move for any brand. But getting your messaging, promotional and media strategy right is crucial. Right now is your opportunity to hone that strategy with the specific goal of growing your online sales channel.
Take the opportunity to design in-market tests that validate the incrementality of your marketing efforts, select best-of-breed promotional and messaging strategies based on observed performance and develop testing strategies to scale into marketing channels that are effectively driving online purchasing behavior. Establish returns and customer acquisition costs that make sense for your business and spend in the places where you meet those targets. Take the opportunity to grow your online sales channel and digitally transform your business; the longer you wait for a return to normalcy, the more likely you will be to wake up in six months with multiple underperforming sales channels.
The coronavirus pandemic is changing the world in countless ways we can’t even begin to see or imagine. That will be stress-inducing and uncomfortable, but brands must view this as an opportunity to remake their business strategy by focusing on digital growth and transformation. Those that don’t evolve will quickly face an existential crisis. Meanwhile, agile direct to consumer brands are happy to fill the void.