Online retail has been a growing part of the retail landscape in recent years, with increasing acceptance across a range of categories and the shifting of sales dollars from traditional bricks and mortar channels, primarily driven by convenience, but also price.
Lock downs and distancing restrictions connected with COVID-19 (“COVID”) have resulted in a step change shift towards online, initially out of necessity, and some of that change in consumer behaviour appears likely to be permanent.
More broadly, COVID and restrictions also changed consumer behaviour when they did venture out. Consumers were more deliberate in their approach – while traffic and dwell times were down, conversion and transaction values increased.
While reversion to some pre-COVID behaviours has been evident where lockdowns have eased, the exception is online adoption, which is more likely to accelerate than it is to retreat. Online sales reached 12% of traditional sales in September compared to 9.4% pre-COVID.
Retailers have been forced to adapt their models in response to this trend, and that goes for everyone. Those that previously saw online as optional have now been forced to play catch up, and those with a strong existing presence have had to deal with distribution and logistics challenges and introduce new ‘minimal contact’ options that minimise consumers leaving their homes (or cars in the case of delivery to your boot).
Online is a different type of shopping, with search behaviour being more targeted and top down. Being tuned-in to this type of awareness/shopping is becoming critical as it is often harder to capture consumer attention. Digital touch points such as social selling through Facebook, the newest Instagram Shop tab and engagement through means such as TikTok and Instagram Reels, has in many scenarios replaced browsing that would have otherwise happened in our shopping centres and strips.
Based on published and anecdotal sales results, it is clear those operators with a strong online (particularly mobile) platform and brand awareness were able to capture market share from their competitors (particularly those pure play e-tailers, and those digital native brands).
In the face of headwinds to retail sales, flash sales events (Prime Day, Click Frenzy, Singles Day recently and Black Friday and Cyber Monday more recently) have become even more important, both to shore up sales but also clear aged stock.
These events can be a big challenge in an already challenging year, particularly in determining whether the sales during these events will provide incremental increases in the top line as we come out of lockdown, or merely pull forward Christmas spending. Whilst physical stores are not going away, their place in shopping is certainly evolving more quickly than ever, so retailers must look beyond the four walls of their stores to remain current and protect and grow market share.