The pandemic seems to have pressed the pause button on retail demand for many off-line businesses. Many have scrambled online to resume. As businesses move to open, brick and mortar retail firms have begun to register sales prompting Wall Street Journal to forecast a 7.5% increase in US retail sales in June. CNBC predicts a 5% increase in retail spending. The digital Digital presence will spell recovery for most affected brick and mortar businesses and online firms will do well to ramp up visibility across the web and along with various platforms.
Demand across categories seems to be heavily dependent on the COVID-19 pandemic’s course and the pace of reopening. But getting customers to stay and buy online will still depend on the retailer. NetElixir’s lab has been following six major retail categories including Food and Grocery and Apparel closely for over 6 months now. While conversions, transactions, mobile orders and new online orders are picking up across categories, average order value is declining.
There are many ways to interpret datasets. But given the drastic fluctuation across various retail categories in the past months, it is safer to look for the constants and pointers. A simple average across all the six categories gives us an 86% increase in online orders and a 70% increase in the number of transactions. The average, in this case, can be a useful tool to understand the presence of strong demand. The interesting growth in mobile orders (over 10%) across categories is food for thought, with home furnishings topping the list at a whopping 109% growth over the previous year.
Even though average order values continue to decrease year over year for most retail categories, the number of new online shoppers and transactions has increased across all categories within NetElixir’s dataset. Interesting new retail channels like ordering online for curbside pickup are springing up. Under the circumstances, it is imperative for small businesses to come up with new ideas across the buying cycle for servicing customers, with emphasis on innovative cross-selling and related strategies for encouraging repeat buying. While the year-on-year online sales metrics are doing well, the food and grocery retail category are seeing some of its lowest growth yet.
As government policy changes to accommodate the dynamics of the pandemic’s course, the interactions between these two will have a definite impact on demand. What is more, the dynamics affecting demand is not just pandemic and government policy. For certain retail categories, changing seasons are also seen to interact with demand. The first two weeks of July has witnessed one of the largest year-on-year increase in transactions and new online orders for apparel. The reason for the triple-digit growth can be attributed to the move to reopen malls and offices in many locations. But what is surprising and yet truth is that even during a pandemic, the onset of summer is affecting apparel retail positively.
As demand in various retail categories contracts, expands, and readjusts itself, the most important guideline for small businesses is just this: seize the moment. Online buying habits have already been formed. It is up to the retailer to prove how easy and fulfilling the online experience is. Most essential retail categories will be able to manage their demand at a higher level than in the pre-pandemic time. Even those in the nonessential categories can provide services built around outdoor activities, making it safer and easier for people when they want to move outdoors.
Across categories, the demand is shifting. This dynamic is a measure of uncertainty that seems to be surrounding the pandemic and all that it affects. Increasingly, what is also obvious is that calibrated rational responses built using simple customer data does produce smoother results and helps tame the jerky demand curve. This is true for all categories.
The way forward for most online retail categories is to build a viable buying environment around people carrying out a good part of their buying activities from the comfort of their homes. Small businesses should concentrate on enabler services that help build this overall online ecosystem for the new indoor buying or stay at home buying environment. Adding such innovative services will help businesses retain their edge over others. An indoor buying ecosystem built around people operating from home and facilitated by online businesses is not just a commercial proposition, but also a social obligation.