Shifting Priorities

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COVID-19 at Retail

Shifting Priorities

By Samantha Nelson - 05/29/2020

Expecting shoppers to sustain pandemic-driven behavioral changes, brands and retailers are building up their e-commerce strategies

I think it’s going to settle out somewhere between pre-COVID and peak COVID [levels]. Even as in-store comes back, we’re likely to see more of that [e-commerce] behavior.
Heather Campain, Johnson & Johnson

The COVID-19 pandemic has fundamentally transformed shopping in the U.S. Retailers have taken a wide variety of approaches to obeying social distancing guidelines and reassuring shoppers of hygiene standards. But a significant number of shoppers now seem to feel safest when they don’t need to go into a store at all.

Total online retail sales increased 40% in the first two weeks of April, according to data from commerce agency TPN. Meanwhile, retail analytics specialist Numerator reported on April 30 that two-thirds of the consumers they surveyed had placed an online order for home delivery over the previous week and nearly half had placed a click-and-collect order during that time period.

"Omnishopping is now for everyone,” said Wendy Liebmann, CEO and chief shopper of research consultancy WSL Strategic Retail, during an April 9 webinar about “How America Shops in a COVID-19 Crisis.” “Grocery and health products were two of the lowest growth categories in shopping online until now; 50% of the people who’ve ordered their groceries and health products online [since the crisis began] are doing it for the first time,” she said.

Liebmann also made a prediction that will have a major impact on the future of shopper engagement: “Once people begin to shop online, they don’t walk away from it,” she said. “It becomes a hugely useful tool.”

While many retailers and brands have dramatically scaled back promotional activity during the crisis, some are looking into new ways to reach shoppers whose behaviors have changed.

“We’ve definitely seen a rush for brands to ramp up their digital commerce efforts,” says Sarah Cunningham, chief growth officer at TPN. “We saw a lift and a shift in our client spending. We believe that the pandemic has forced trial by necessity, whether it be with certain brands or certain methods of shopping.”

“This is temporary, massive growth for e-commerce [but] resulting in what I think will be a permanent baseline shift upward for e-commerce,” said industry veteran Sri Rajagopalan, former e-commerce executive at Revlon, Johnson & Johnson and Frito-Lay, during an April 6 webinar conducted by Path to Purchase IQ sister publications RIS News/CGT.

Executives are suddenly paying more attention to their e-commerce capabilities, such as their Amazon-specific marketing strategy, as they make plans to sell during and after the pandemic, Rajagopalan said. Online sales growth that wasn’t expected to be gained for another three to five years may already have taken place permanently as e-commerce became a far more attractive way to shop. Larger CPGs will lean into this trend, and the most digitally savvy brands will thrive, he suggests.

Cunningham concurs, noting that the acceleration is forcing brands to rethink their timelines for developing e-commerce strategies. And brands that previously didn’t have an e-commerce plan are now working on digital assets to ensure that shoppers can find their products online.

“We’ve seen some brands that have been exploring or ramping up efforts into direct to consumer [sales],” she says. “A lot of brands that had not traditionally done a lot of digital commerce, that might have had it in the pipeline for, say, 2025, have really had to shift their priorities. That’s just based on demand and what their shoppers are wanting.”

Brands “that were already up and running on e-commerce are doing just fine,” said April Carlisle, vice president of shopper marketing for national retail sales at Coca-Cola Co, during a March 31 virtual roundtable hosted by the Path to Purchase Institute. Consumers who “were very traditional brick-and-mortar shoppers are finding themselves exploring all the new options. I think this will be the turning point for click-and-collect, as well as for sustained e-commerce behaviors.”

Cunningham agrees that click-and-collect will be the ordering option most likely to experience increased utilization as shoppers begin feeling more comfortable leaving home. That’s partly because a number of shoppers reported dissatisfaction with direct delivery options due to the long wait times they were forced to endure as the pandemic strained the operational capabilities of retailers and third-party services.

As one example, delivery times on Instacart were in high demand and short supply during March and April, and incidents of out-of-stocks (which aren’t evident when orders are placed using the third-party app) often resulted in shoppers having to buy substitutes or not getting any product at all in some categories, according to reports. Numerator surveys found that 65%-69% of shoppers experienced shortages at stores they were trying to buy from during April. Fortunately, retailers with strong online inventory systems have been able to make sure that customers know exactly what’s available to buy and make pick-up times more widely available.

“We believe that more people will continue to use click-and-collect rather than switch to buying online and having their products delivered,” Cunningham says. “Being able to get what you need within a certain time frame while minimizing contact is a good solution for many shoppers.”

Heather Campain, customer leader for omnichannel strategy & activation at Johnson & Johnson, believes shoppers who’ve felt compelled to try click-and-collect or other online options during the pandemic will realize the benefits of the services, and that could have a lasting impact. While online grocery shopping previously had been driven by Gen Xers and Millennials, analysis of recent activity has found all demographic groups picking up the practice out of necessity, she notes.

“We’re years ahead in terms of what the [e-commerce] projections were,” Campain says. “I think it’s going to settle out somewhere between pre-COVID and peak COVID [levels]. Even as in-store comes back, we’re likely to see more of that behavior.”

That could be a benefit to some retailers, since omnichannel shoppers historically have spent more money than those who only visit brick-and-mortar stores. In response, retailers should rethink their marketing strategy and focus more on digital advertising, social media like Pinterest, and working with influencers, Campain suggests.

“As e-commerce becomes more and more popular, it’s going to be interesting to see what retailers do with their circulars,” she says. “This may give them the opportunity to reinvest. I expect people will still shop in stores, but digital influence will become more important.” (A test-and-learn of sorts may have just taken place, as many leading retailers scaled back significantly on circular distribution in March and April at the height of the crisis’ panic-buying phase.

Even as sections of the U.S. begin to reopen, retailers seem to understand that shopping behavior might continue to look different as health and safety concerns remain high.

“I see a lot of retailers talking about all the different ways you can shop and making it right for shoppers in whichever way they are comfortable,” Campain says. “I’ve seen a lot more advertising driving to dot-com.”

Cunningham thinks the crisis might also transform the types of trips shoppers take. They might divide their products into the ones they need immediately from the physical store and the less-essential ones for which they can wait and have delivered.

“People are going to have to run through a new set of questions in their heads based on, ‘Is it worth it?’” she says. “When you think about putting on a mask on, putting on gloves, maybe potentially waiting in line – people are going to think twice. We believe there will be new types of trip drivers.”

However trips might evolve, the industry’s journey into the future may have just begun.

We’re working with our brand and retailer clients to create marketing plans that are not necessarily anchored on specific dates or quarters but on stages of the pandemic.
Sarah Cunningham, TPN

Celebrating in the Time of COVID-19

As shoppers settle into a new normal and state governments start easing social restrictions, brands and retailers that had slowed promotional spending or directed it almost entirely to cause programs are now considering new marketing tactics based on rapidly changing realities.

“I think that everyone is focused on trying to understand how shoppers are going to behave as they prepare for re-entry,” says Sarah Cunningham, chief growth officer at TPN. “We’re working with our brand and retailer clients to create marketing plans that are not necessarily anchored on specific dates or quarters but on stages of the pandemic. I think the big questions right now are who’s going to come back and what does that look like?”

Retailers have started modifying their messaging for big events on the seasonal calendar. Easter, Mother’s Day and Memorial Day campaigns focused on celebrating at home by promoting brands used for cooking meals or making crafts, and it’s very likely that marketing around the Fourth of July will continue that approach.

“People are definitely talking about Fourth of July, particularly brands [for which] summer is their busiest time of year,” Cunningham says. “A lot of them saw sales in March that were similar” to what they’d normally experienced during the summer holidays as consumers stocked up on various products. “Not knowing what the limitations will be on the Fourth of July and when people are going to be able to go out in public, they’re talking about how to help families have celebrations at home.”

Now that the initial panic buying of paper products, shelf stable foods and other essentials has subsided, shoppers are pivoting toward purchases that will help them have fun at home. Colorful chalk has become a popular way to share encouraging messages with the neighborhood, while backyard pools and floats have become an alternative to a trip to the beach or public pool.

Brands like Hershey’s that typically have been driven by impulse purchases are positioning themselves as a way to provide happiness at a time when those things are in short supply, according to Cunningham. Helping families create moments at home to spend time together or hold small celebrations is a sound strategy. “It’s talking about that, giving them solutions and ideas,” she says. “A lot of brands have done really well reminding families about different ways they can use products to create moments of joy or positive experiences during a very troubling time.”