COVID-19 e-commence trends that are here to stay
While COVID-19 has hit many sectors hard, e-commerce is one industry where business has boomed. With quarantines and social distancing limiting people’s ability to maintain their purchasing and spending habits in the physical world, consumers are forced to shop online. Businesses are also having to respond to new, constantly changing guidelines that require modifying the services and products they have on offer. Here’s the lowdown on some of the main COVID-19-driven e-commerce consumer trends that are far from disappearing:
With people unable to gather in the streets, they have been gathering on social media. An April study that surveyed over 25,000 consumers shows that social media engagement increased by 61% during COVID-19 social distancing. According to the study, overall facebook usage has increased 37%. The increase has been most considerable in the 18-34 age group, with a 40% or above usage spike on Facebook and Instagram. Chinese social media has also seen a dramatic rise in use, with a 58% increase on the social media apps Wechat and Weibo.
This increased engagement in social media has translated into more online sales. Instagram reported a 76% spike in engagement on #ad posts, as well as a 22% rise in Instagram campaign impressions from Q4 2019 to Q1 2020.
Of course, many businesses made the connection between social media and shopping long before COVID-19. In November 2019, TikTok announced that it was launching in-app shopping in the US. At that time, Instagram already had an established shopping interface, allowing users to click on a featured item on a post, and be directed to the product purchase site. Facebook’s Marketplace, a classifieds service, allowed users to pay a fee to boost their listings.
In May 2020, Facebook and Instagram took e-commerce integrations on social media one step further. Both of these social media giants rolled out Shops (Facebook, Instagram), a service that allows Facebookers and Instagrammers to buy products and purchase services right from a business’s Facebook page or Instagram profile. Instagram describes Shops as a native shopping experience, “an immersive fullscreen storefront that enables businesses to build their brand story and drive product discovery”. Facebook CEO Mark Zuckerberg described Shops as a way to support businesses whose business suffered in the wake of COVID-19, although, he adds, he sees this trend continuing to climb even once we put COVID-19 behind us. “I do think we’re going to continue living more of our lives online and doing more business online.”
The for-profit sector is not the only market segment that’s taken a hit during COVID-19. Social distancing made it impossible to arrange physical fundraisers, or collect donations door-to-door. The income sources of musicians and other performers were hurt in particular, as concerts, tours and festivals were cancelled. Physical fitness professionals such as personal trainers and sports instructors also suffered at the hand of social distancing. These past few months have seen artists, trainers, and other businesses increase requests for donations online, via online payment services. Companies who provide infrastructure for these artists and small businesses have been supportive in accommodating these requests.
Just like social purchasing, online donations, of course, have existed before the onset of the pandemic. Amazon Smile is an established service that allows shoppers to donate half a percent of the amount of certain purchases to charity. Founded in 2013, Patreon is a subscription-based service that allows fans to make weekly payments to support creators they love. Awareness of online donation practices have existed for a while, but COVID-19 has given them a significant boost.
In April, Spotify launched Artist Fundraising Pick. Spotify artists can now add a donate button to their Spotify profile. Artists can choose to collect donations for their own work, or on behalf of a charity. In May, Spotify reported that “thousands of fans have already supported 10,000 artists through Cash App,” and that donations reached one million dollars. In addition to Cash App, artists can collect donations via PayPal and GoFundMe. Soundcloud is another major music platform that launched a donation button in April, allowing musicians to collect donations via Kickstarter, Bandcamp, Patreon and Paypal.
Fitness businesses and individuals are jumping on the donation wagon, too. ClassPass, a giant online workout platform, has set up a donation service that allows users to donate to their favorite trainers and studios. Love Sweat Fitness, a popular wellness platform, is also requesting donations for open-to-all zoom events. Individual trainers affected by COVID-19 social distancing have also incorporated donation buttons on various social media sites. Liz Crosby, a popular Instagram yoga teacher, is requesting donations for YouTube lessons via Venmo or PayPal.
Squarespace, who hosts over 2 million live websites, posted a list of COVID-19 resources for its customers, including instructions on how to incorporate a donate button into their website.
Buy now, pay later
COVID-19 has sent unemployment rates skyrocketing, and seen millions worrying about their financial resources and credit scores. Businesses understand that customers’ ability to pay is dropping, and so are making arrangements for consumers to pay for their purchases at a later date.
Veteran “buy now, pay later” (BNPL) payment services are seeing a spike in use. Klarna a BNPL service founded in 2005, has seen an 18% spike in apparel, footwear and accessory purchases among Gen Zers (ages 18–23). In one week in April, Klarna app users’ share of spending on home and garden items grew by 26% among Gen Zers. Klarna reports an overall increase in usage. “The number of daily active users peaked at the beginning of April and reached the all-time high so far this year,” Klarna said. Paypal, who also offers “buy now, pay later” in the form of PayPal Credit, also seems to be on a good path to weathering the pandemic with its assets intact, or strengthened.
Klarna and PayPal aren’t the only BNPL services who benefited from COVID-19. Other BNPL services report an increase in their average order value, or AVO. An April 30 article cites an AVO increase of 85% for Affirm, a San-Francisco-based APNL company. Australian-based BNPL AfterPay boasts a whopping 1M new users due to the COVID-19 pandemic. Reportedly, the platform attracted “over 15 million app and site visits,” and “its retail partners got nearly 10 million lead referrals from visitors to Afterpay’s Shop Directory. These numbers put Afterpay among the fastest-growing eCommerce payment companies on the market.” According to AfterPay, there are upward of 15,000 brands and merchants that either offer Afterpay or are in the process of joining its services. These brands include, among others, American Eagle, Birkenstock, and Marc Jacobs Beauty.
SplitIt, another APNL credit app who saw a 20% AVO increase, is calling out to businesses to adjust their payment offerings in the wake of COVID-19. In a June Facebook post, The New York-based company wrote that “24% of consumers do not expect to return to shopping malls for more than six months following post-covid-19 reopenings”. Because spending habits are changing, they say, there is a “rising demand to spread costs via interest-free instalments. Online retailers need to revisit their product portfolios to include payment options that are reflective of this new buying culture.”
Even Apple has joined the Buy Now, Pay Later revolution, launching the Apple Card Monthly Installment Plan in June. The plan allows consumers to receive an iPhone immediately, paying off the product’s full amount over several interest-free installments.
Brick-and-mortar converts to online
Ask anyone with access to electricity and an internet connection, and they’ll be able to cite at least one example of a brick-and-mortar business that was pushed online during the pandemic. Physical stores saw drops in store visits as steep as 90% in one month. In the early days of COVID-19 social distancing, the grocery and food sectors were most significantly affected. 14% of shoppers in one poll reported that they started shopping for groceries online due to social distancing. The difference between 2019 and 2020 in terms of online vs. offline sales is striking: one source reports that eCommerce sales accounted for a whopping 30% of total retail sales in the US in 2020, as opposed to 11% in 2019.
Shipbob, an e-commerce fulfilment solution company, aggregates data from over 3,000 merchants who “collectively ship out millions of items every month” via the company’s fulfilment center. On June 11, Shipbob reported rolling month-to-month unit volume increases in the following categories:
- Nutrition: 49% increase
- Beauty: 48% increase
- Apparel and accessories: 96% increase
- Food and beverage: 16% increase
- Electronics: 25% increase
- Toys and games: 44% increase
- Household goods: 72% increase
- Jewelry: 13% increase
Who are the businesses behind these increased online sales? Food delivery companies are one notable example, with restaurants being closed for sit-and-eat services due to social distancing. According to Second Measure, a company that analyzes billions of purchases, as of the end of April, meal delivery service sales nearly doubled year-over-year. People magazine compiled a list of restaurants that deliver nationally in the US, in honor of the COVID-19 epidemic. These include New York City’s iconic Milkbar, Lou Malnati’s Chicago deep dish pizza restaurant.
Innovation and diversification
There is no question that the COVID-19 pandemic has created a new reality. For some, social distancing has necessitated a change in socialization habits. For most, the virus floated health concerns to the top of the priority list. For many businesses, the pandemic meant that they had to change modes of operation, or risk going under. According to CBS news, 722 US companies sought bankruptcy protection in March and April, a 48% increase for the same period of the previous year. Large companies that succumbed to bankruptcy during this period included Hertz, J. Crew, J.C. Penney and Neiman Marcus. But other companies have managed to keep their head above water by innovating and diversifying.
Wolt, a Finnish food delivery service that operates in 22 markets, took advantage of its delivery infrastructure to deliver beauty products on top of its existing restaurant meal offerings. Wolt subsequently partnered with grocery stores and pharmacies to offer deliveries from these businesses as well, and was able to substantially grow their online payment business.
Nextdoor, a California-based neighborhood social networking app founded in 2011, saw an 80% month-over-month increase in daily engagement. Nextdoor was able to respond in a timely and sensitive manner to COVID-19 needs such as supporting struggling local businesses and providing aid to health care workers. A Google Marketing report explains that Nextdoor created new features to address specific pandemic-related needs, but made core features easily discoverable to draw in users and retain them. Help Maps is one such feature; it allows users to indicate when they’re available to help a neighbour in need.
Businesses in other sectors have been ingenious in responding to the pandemic’s needs of the moment. Alcohol sales in Switzerland dropped by up to 25%; in Ireland, a drop of 35% was recorded in April 2020, compared to April 2019. US alcohol sales were also affected. Distilleries across the globe responded to the changing fiscal and health reality by producing alcohol-based hand sanitizer. One website lists over 800 distilleries in the United States alone that are producing hand sanitizer. Many of these distilleries sell both hand sanitizer and their core product, spirits, online.
Other sectors have shown endless creativity in responding to the pandemic. Airlines turn from transporting people to transporting cargo, with some airlines removing seats from their aircraft to create seatless jets. Huge companies like Ford and General Motors are manufacturing Personal Protection Equipment such as masks and protective clothing.
An Online Revolution
Whereas physical retail took a huge hit during the pandemic, e-commerce has benefitted from a broad spectrum of exciting opportunities. Businesses that had only existed offline have capitalized on the accessibility and simplicity of online shopping. Simultaneously, businesses that previously thrived online are doing even better, and the future looks good. A study of over 1,000 consumers predicts that by the end of 2020, market penetration for online grocery shopping will be 12%. Companies that have undergone a digital payment transformation, migrating to e-commerce or expanding their digital offerings, have no reason to go back; experts are optimistic that these trends are here to stay.