Shopping’s shift online, from necessity to preference
‘2021 is going to be the year when we start to rebuild; that work must be done with a digital-first mindset’
The coronavirus pandemic has fundamentally reshaped how we shop. Closure of non-essential retail stores for long periods, combined with the emptying of city centres as many people work from home, has fuelled a boom in online retail.
Online retail sales growth has been huge this year as a result. Just look at some of these year-to-date (January to October) sales growth figures for various product categories: home up 70 per cent, electricals up 91 per cent, garden up 235 per cent. These extraordinary growth rates have not been seen since the infancy of ecommerce over a decade ago.
This, however, is some turnaround. At the start of the year, we reported year-on-year growth for online sales in 2019 at just 6.7 per cent, the lowest for any year since we started tracking in 2000. The travails on the high street are well documented, but online retail was not really booming either. The pandemic has triggered five years’ worth of growth in a matter of months.
The likely causes are multiple and complex, nonetheless 2020 has been a tumultuous year when retailers have been caught in the eye of the storm, dealing with an unplanned peak while having the pressures of social distancing limiting their capacity to process volume quickly in warehouses. Once we are through this incredibly hectic Christmas trading period online, it will be time to start executing revised retail growth strategies.
How should retail pivot to grow?
What, then, should those strategies focus on? Difficulty lies in the sheer depth of the unknowns facing us. Will we get on top of the virus in 2021 or will it continue to dictate what we can and cannot do? Will people work from home far more or return to offices? In what ways, if any, has customer behaviour been altered long term?
There are no straightforward answers, but one thing seems apparent that retail’s rapid shift online is permanent. The reason online experienced such a surge in demand was because the stores were ordered to close. People had to buy online through necessity; some were not regular online shoppers or had never purchased online before. Clearly for many, the migration of offline to online shopping behaviour will stick for them now through preference.
We are now in the second national lockdown, but after the previous one, when the stores reopened on June 15, online volumes remained very high. Even as other types of business opened again, providing people other options to spend their money, those elevated online volumes did not suddenly cease. The rate of growth has declined from above 50 per cent during the first lockdown, to just below 40 per cent now, but this is still five to six times higher than the growth rate in 2019. This year’s Black Friday period is already looking like it will be a record breaker.
Why going “digital-first” is crucial
2021 is likely to be tough as the economy recovers from the huge impact of the pandemic. Overall retail spending is likely to be lower as shoppers have less disposable income, but we anticipate online’s share of the retail pie will remain substantial and continue to grow, albeit at a more measured pace.
The term “digital first” has been around for a long time, but it has often seemed more an aspiration than a reality for retailers. The closure of stores only lasted for three months during the first lockdown, but in forcing shoppers to focus their behaviour online, their perception of it as the primary channel for retail has been further underscored.
For retail, just as in every industry, 2021 is going to be the year when we start to rebuild; that work must be done with a digital-first mindset if it is to be successful long term.
Retailers, including those with stores, with strong online propositions, will continue to trade well. Those without, for whom it’s not already too late, must adapt now if they are to survive.