This Is The Best Moment In History To Get Into Ecommerce
Anyone who had big plans for their brick & mortar business this year watched Coronavirus make off with them faster than a rat with a slice of pizza. But while Forrester predicts that U.S. retail sales will fall by $321 billion in 2020 (or 9.1% YOY), and by $25 billion in Canada (7.7% YOY), these sales aren’t simply vanishing into the ether as they tend to during policy- or market-driven economic recessions. Rather, as the data below shows, the worldwide surcease of in-person commerce has driven shoppers online in a major way:
Source: Bank of America, U.S. Dept. of Commerce, ShawSpring Research
Don't you just love a dramatic inflection point? As you can see, over the last eight weeks, the proportion of retail transactions occurring online in the U.S. has risen by a whopping 11%--that’s a larger gain in share than online storefronts had accumulated over the entire previous decade.
This massive and sudden shift in consumer behavior has created a rising-tide effect across industries in the ecommerce space. Klaviyo reports that after initial dips in March, ecommerce spending is up dramatically across all of the product categories they monitor. You can find YOY comparative data going back to January 1st 2020 at the link above, but this snapshot from May 13th illustrates just how significantly consumer spending has changed:
Source: Klaviyo, COVID-19 Ecommerce Market Pulse
Likewise, while Shopify revealed in their Q1 earnings announcement that the pandemic had caused POS revenues to fall 71% YOY for the period between 3/22 and 4/24, they also reported that Shopify merchants were able to recoup 94% of these B&M losses in online sales. This observation is especially heartening because it indicates a mass consumer exodus to virtual storefronts, rather than the programmatic belt-tightening we saw in 2008. What’s more, from March to May, Shopify has seen a 45% increase in people buying from stores they’ve never bought from before, compared with the period directly previous to the pandemic. Not only are consumers flooding the online space, but a significant portion of those dollars are heading to merchants with no previous presence or visibility online. Good news for B&M’s looking to replicate their offerings in the virtual space for the first time.
Anecdotally, P3 has observed a similarly dramatic shift to online spending, and we have worked closely with our full-service clients to leverage this change from the start. For instance, when the pandemic caused CPM’s and CPC’s to dip by almost 40% across social channels in March, we helped our clients to maximize ad spend, conceive timely promotions, and introduce new campaigns to creatively retarget their best customers. Our clients were among the few brands increasing ad spend and gaining audience share while the majority hesitated or decided to reduce their marketing budgets. As a result, even as CPC’s and CPM’s have recovered, P3 clients are up YOY across the board—in many cases outperforming the average industry lift by a wide margin. On the high end, we’ve helped one of our active women’s apparel brands—which already commanded double-digit market share in its space—grow their ecommerce revenue by 100%+ YOY, and expand their online customer base a full 2X. That’s almost three times better than the 37% average rise in revenue seen by the American fashion industry between March and April, according to Nosto. And although this particular brand had historically relied on B&M placements to generate significant revenue, the rapid growth of their D2C ecommerce channel over the course of this crisis has provided the company with a critical safety net, and helped to stabilize their earnings.
The unprecedented surge in ecommerce spending has been buoyed and sustained by uncharacteristically strong consumer confidence across North America. Global Web Index (GWI) has measured consumer attitudes regularly since the pandemic began, and has consistently found that around 60% of surveyed Americans and 54% of surveyed Canadians expect to experience “no” or “little” impact to their personal finances as a result of the crisis, compared with 8% and 11% respectively expecting to see a “dramatic” impact. With a steady proportion of consumers remaining “convinced they can weather the storm,” online spending has accelerated rather than slowed.
In the same survey, GWI found that almost half of all respondents globally said they would not return to B&M’s “for some time” or “for a long time,” after the crisis has passed, with respondents reporting the strongest sense of reticence across higher age and income brackets. Almost the same proportion (43%) of respondents said they’d continue to shop online more frequently after the outbreak is over, and 30% said they’d use mobile payment systems more frequently. While expert projections differ, consumer data like the above has caused most to agree that even once the crisis has passed, the jump we’ve seen in ecommerce spending is likely to benchmark the new normal. In other words, while online spending levels will certainly fall from their pandemic-fueled peaks, new online shopping behaviors established during this period are expected to persist.
These “new behaviors” account for people making their first ever online purchases (9% of Americans, according to an early April survey from Statista), but also encompass blended shopping behaviors like buy online/pick up in store (BOPIS). Commenting on a piece for Forbes, Adobe reps noted a 62% increase in “click and collect” behaviors way back at the end of March. By the end of April, Shopify was reporting a 13X increase in merchants using “some form of local in-store/curbside pickup and delivery solution” since February, up from 2% to a massive 26%. Changes to the purchase process that reduce friction for the consumer tend to stick (remember when it seemed like a scam to let Amazon hold your credit card info just so you could get your copy of Angela’s Ashes?), and the overwhelming popularity of these services today will ensure their use tomorrow. Think about it—how many of your friends are rage-tweeting about having their groceries delivered, or posting sepia-tinged photos of their younger selves waiting in checkout lines? Ours aren’t either.
Companies that remain offline throughout the pandemic will find themselves well behind the curve in offering these popular low-friction purchase options once the threat posed by the virus subsides. Companies that stay offline altogether will never be able to harness these new consumer buying patterns, losing out to forward-thinking competitors over the long term.
Of course, most businesses aren’t just waiting on the inevitable like Fredo at the Corleone family lake house. As consumers flock online, many are following. Between March and May, Amazon hired 175,000 new warehouse workers worldwide and committed an additional $800,000,000 to hourly associate pay. But as extended fulfillment and replenishment windows have caused more shoppers to search for their preferred brands and retailers directly from the URL bar, other multi-channel and B&M businesses alike have rushed to reach and service their customers directly online. Econsultancy & Market Week report that 20% of large corporations (defined as organizations generating >$60,000,000 in annual rev) are investing heavily in “digital transformation initiatives” over the first half of 2020. Meanwhile, Shopify has reported that in the period between 3/22 and 4/24, new stores on the platform grew by 62% compared with the previous six weeks.
Shopify admits that these numbers have been influenced by the suite of COVID-related incentives and relief initiatives they’ve introduced for merchants, but independent research also shows that established multi-channel businesses are choosing to reinvest in D2C ecommerce on the strength of their Q1 results.
On May 1st, DeMatteo Research published a survey in which four multichannel business operators working in different verticals were asked to detail the impact of the pandemic on revenue. Three of the four were up in March compared with January and February, and all four were significantly up in April, YOY. And while most respondents initially adjusted their earnings forecasts down for the year when the pandemic struck, figures from March and April were so encouraging that three of the four retailers are now projecting total annual revenue to be up YOY, and the fourth is projecting flat returns. Based on Q1 patterns, each respondent expected to see the largest channel increase in their Shopify-run storefronts over the coming year. All planned to increase their investment in Shopify sales channels, though many planned to reduce their online investment in other, lower performing areas (Amazon, eBay).
It’s especially significant that merchants are seeing their strongest returns through D2C platforms like Shopify, because these platforms specialize in creating high-touch shopping environments that increase the likelihood of conversion, promote the establishment of relationships between brand and audience, and incentivize first-time customers to become brand loyal shoppers.
While merchants and consumers have been playing a global game of cat and mouse, tech providers have been quick to develop merchant-focused solutions meant for the near term and the long. At their first annual Reunite event on May 20th for instance, Shopify announced a slew of new features and programs meant to assist merchants through the Corona crisis and beyond, including access to business loans from $200-$1 Million through Shopify Capital, and rewards on business spending via the new “Shopify Balance” merchant account. We’ve already covered why we recommend Shopify to most of our clients in our comprehensive comparison of Shopify Plus and Magento 2, but the announcements from Reunite underscore just how seriously the platform takes its commitment to entrepreneurs. Below, we examine the most impactful ecommerce programs and tools the company is set to roll out over the next few months.
You can watch the full recording from Reunite above, or read the full list of tools, programs, and features Shopify is set to release throughout the next year over on Shopify’s blog. Below, we give a rundown of the developments that will have the biggest impact on businesses affected by the COVID crisis.
Shopify is currently offering a number of incentives and special products aimed at businesses that have yet to take the ecommerce plunge, including:
From the details made available at Reunite, it’s clear that if you’re an entrepreneur doing entrepreneur things right now, Shopify wants to be your bank. And that’s good news at a time when most actual banks don’t.
Shopify Capital is Shopify’s streamlined business loans program, launched in the U.S. in 2016, and expanded to Canada and the UK earlier this year. Merchants on Shopify can apply for loans from $200-$1 Million right from their store dashboards, and successful applicants can get their money within a few days. Loan recipients can use the funds they secure to buy equipment or inventory, launch new products, hire employees—even build a marketing budget. And because Shopify uses extant store data to evaluate applications rather than mountains of paperwork, they claim to have made the process of getting funds faster, more straightforward, and more SMB friendly than navigating the mazes of red tape traditional banks erect to protect themselves from risk. (Case in point: they don’t even run credit checks before making approval decisions.) And unlike private investors, Shopify says they will never ask for equity in exchange for cash on the barrelhead. The company has already distributed $1 billion+ in loans since the program’s inception, and has committed an additional $200,000,000 to the program during the COVID crisis.
Shopify Balance is the company’s new merchant account, announced for the first time at Reunite. Balance will give SMB’s and independent businesses the tools to pay bills, track expenses, and make smarter decisions about the future of their stores, right from their dash. Shopify says that merchants who opt to use a no-minimum, no-fee Balance account will see money from sales land in their accounts faster, and receive both physical & virtual Shopify Balance cards for making business purchases (no word yet on whether the cards will come with those addictive-to-use aluminum inserts, but we’ll keep our ears to the ground, finance bros). Shopify says that the Balance card will be attached to ‘the most powerful rewards program for businesses,’ and claims that merchants using the card will receive cash back on shipping and marketing expenses, among others. However, the exact details about the card and the overall program are still forthcoming.
Each of the options we discuss below is intended to help merchants maximize conversions while providing customers with a reliable, high-quality experience suitable for the age of social distancing.
Curbside Pickup – Great news! Any Shopify store with fewer than 20 locations can already turn this feature on. Shopify is working to optimize this service to eliminate wait times, and will add both pickup scheduling and the ability for customers to ping shop owners with arrival notifications within the next few weeks.
Buy Online, Pick Up In Store | Buy In Store, Deliver to Customer | Browse In Store, Buy Online – Each of these blended checkout options is already available through the revamped Shopify POS, which is great news since BOPIS especially is emerging as a new conversion driver. (We’ve touted this stat before, but we can’t stress it enough: Shopify has observed a 13X jump in stores using these blended checkout options between February and May.)
Local Delivery – From mid-March thru April, Shopify observed that local orders were up 176% compared w/ the previous six weeks. Now they’re rolling out the ability for Shopify merchants to offer scheduled or same-day delivery to customers in their local areas, all without giving up a portion of their sales to an extortionate courier service. As we type this, merchants should be able to access a “Local Delivery” option from their shipping settings, which they can then use to set up a local delivery zone for orders that originate within a vicinity they define. Eligible buyers will see a local delivery option at checkout, while buyers outside of the radius will see a standard checkout. Customers who elect to receive local delivery will be able to leave a note for couriers with special delivery instructions, while merchants will be able to pull all local orders from the order index page, optimize delivery routes, and even notify customers when deliveries are on the way or have been dropped off. All of these additional features will be free to use for Shopify merchants who install the Shopify Local Delivery App (coming soon).
2-Day Worldwide Fulfillment – The Shopify Fulfillment Network has been live for 11 months, though it’s only recently become available to a wide swath of Shopify stores. Shopify’s fulfillment arm promises to give all merchants the ability to provide customers with sustainable 2-day shipping anywhere on the planet, and to send out orders in store-branded, environmentally friendly packaging. Research has shown that during the pandemic, consumers are most concerned with whether online stores can provide “fast and reliable shipment.” If Shopify can deliver on their vision, merchants in their ecosystem will soon be able to provide shoppers with an exceptionally convenient customer experience, while mitigating most of the headaches that come with using a 3PL.
Installments will be available via Shop Pay and in the Shop App later this year. Like QuadPay, Klarna, Afterpay, and Affirm before it, Installments will allow your customers to split any purchase over 4 equal monthly payments with no interest or additional fees. Offering customers the option to pay by installment has been shown to increase conversion rates, and will be an especially important boon to retailers of big-ticket or luxury goods—product categories where consumers have indicated they’re more likely to delay planned purchases, according to GWI.
Free Product Listing on Google Shopping - if you’re a Shopify merchant who’s downloaded Shopify’s Google Shopping app, you can now list your products for free on the Google Shopping tab. Listing on the Google Shopping Tab gives millions of consumers a new way to discover your best offerings, and a pathway for them to convert directly from search. Businesses have been able to pay to list for a long time, but the introduction of free listings gives SMB’s and businesses with smaller marketing budgets a democratic, no-lose way to widen the audience that sees their products. At P3, we advise our clients to tap into as many high-quality sales channels as possible, and since the Google Shopping tab is designed to drive new business to your website rather than cannibalize sales you would have made on other channels, we think that for merchants on Shopify, using this tool is a no-brainer.
Facebook Shops - Shopify merchants who install Facebook to their Shopify admins will soon be able to add synced versions of their Shopify stores directly to Facebook and Instagram. Adding slick, fully functional storefronts to the world’s most popular social networks makes sense for a number of reasons: doing so improves the likelihood of organic discovery, gives your customers a friction-free checkout option that doesn’t require them to leave the platform they’re browsing, and creates additional touchpoints for fans of your brand who may not be regularly navigating to your D2C site. Plus, Shopify says that these social-ready shops will sync with your existing back office, meaning that you’ll still sell and fulfill from a single inventory. The addition of this channel is especially timely considering that during the COVID crisis, 36% of American internet users are spending more time on social media, and post engagement is up quarter-on-quarter across both Facebook and Instagram, according to Hootsuite.
We’ve already dedicated a lot of text to the explosion in “blended” shopping behaviors currently being observed all over the world, but if you’re a retailer who relies on a physical sales environment to seduce your customers, you’re also concerned with how to recreate some of that high-touch IRL experience online. Luckily, compared with even two years ago, the solutions available to you are extraordinarily robust:
A Totally Revamped Shopify POS – The new Shopify POS system is designed to unify your B&M and Ecom operations, so that no matter how your customers are shopping, you can provide them with hand-in-glove service and a seamless checkout. The new POS is also designed to be at least as extensible and configurable as your Shopify store, and includes all of the following goodies:
The Shop App & Shop Pay – Shopify has branded their Shop app (formerly Shopify Pay) as a virtual “shopping assistant,” and it’s designed with both consumers and merchants in mind. On the consumer side, Shop provides users with a frictionless checkout experience on Shopify stores with Shop Pay turned on, as well as centralized access to all of their online purchase activity. On the merchant side, the Shop App creates a robust new marketing channel in the form of a curated shopping feed. Up to now, the app’s biggest non-payment features--like universal shipment tracking and new shop discovery--have been tantalizing, if a little shy of seamless. Even so, the tech has already garnered 16 million app users, and Shopify says that 30 million people total have used Shop Pay to check out online. With Shopify promising to extend merchants finer controls over their Shop App accounts and how these accounts are discovered by app users, we expect Shop’s value as a sales channel to improve. If you’re a little hazy on how Shop and Shop Pay are meant to fit together, here’s a quick rundown of the major points you should know:
Using the Shop App, Customers Can:
Merchants don’t use the Shop App directly in their stores. Instead, Shopify’s provided them with the option to switch on the “Shop Pay” feature from their admin, thereby allowing customers who have the Shop App to speed through checkout. But turning on Shop Pay allows merchants to do more than just provide additional payment flexibility.
Using Shop Pay, Merchants Can:
• Get marketing insights using Shop Channel analytics (new features rolling out throughout the year)
Best of all for merchants, Shop Pay is plug and play and completely free. Just flip the switch on Shop Pay in your admin,
and you and your customers will instantly be able to enjoy all of the benefits above.
3D & Augmented Reality – Shopify has invested a lot in the platform’s video and 3D capabilities over the past few years, and now that their forthcoming page editor experience will allow for drag-and-drop inclusion of video and additional sections in the PDP, merchants who have spent a lot of capital perfecting their physical sales environments will be able to replicate more of those environments online than ever before. Merchants using these technologies on Shopify can currently serve customers a rotatable product view—especially crucial for items that are typically handled before they’re bought—or use augmented reality to display true-to-life product renderings and offer remote shop walkthroughs.
Tipping – Do your employees rely on tips? Switch on the new tipping feature from your admin, and your customers will see an option to leave a tip at checkout. Shop owners can choose how to disburse any funds collected through this feature, but naturally, we recommend that you #MakeGoodChoices.
Shopify is just one platform rushing to assist independent businesses with their digital expertise, but we’ve explored their offerings in depth to illustrate an important point: Whatever your business model, right now you can reach more people and provide more value by meeting shoppers where they are, and furnishing the services they’ve come to rely on. That place is online. And now more than ever, those services require the use of ecommerce platform technology.
In mid-March, the Boston Consulting Group advised their readers that in order to stay ahead of the evolving Corona crisis, business leaders should be prepared to navigate the crisis on three temporal fronts:
With a huge proportion of retail transactions moving online and expected to stay there, businesses that have woven digital interventions into each stage of their crisis management plans are winning, and businesses that haven’t are losing. As an Adobe rep speaking with Forbes put it in April:
“Retailers that had invested in digital early on are seeing those investments pay off… Click-and-collect is a great example. Social distancing is creating a surge there, but not all retailers had invested in that area of blending physical and digital shopping.”
The gap between businesses that invest in their ecommerce operations now and those that don’t will only continue to grow. That is why now is the time to get your ecommerce business off the ground, to experiment, to fail forward, and ultimately—to succeed.
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