The COVID-19 pandemic has led to tremendous growth in certain areas of e-commerce. Online retailers, however, must resist complacency and premature feelings of success.
Instead, they must grasp the unique opportunity before them. That does not just mean maximizing profits in the short term. Rather they must invest some of those gains to establish an e-commerce strategy that strengthens customer satisfaction and loyalty for many years to come.
The government-imposed lockdowns have led to two significant changes in consumer behaviour. First, consumers are prioritizing different products. Many have deferred outlay on discretionary spending on items such as clothing and gadgets, instead buying products that can make quarantine easier, such fast-moving consumer goods, groceries, medicines, educational products, and toys.
A marked shift
Second, many consumers are shifting from brick-and-mortar to online shopping. Globally, there is a spike in online orders. While there has been an upsurge in online shopping for groceries and fast-moving consumer goods, seasoned e-commerce users are also purchasing a range of online products.
Meanwhile, new segments — notably, older consumers — now use online retail in unprecedented numbers.
Developments in the GCC region have mirrored global patterns. E-commerce penetration had previously been limited — comprising less than 4 per cent of retail sales (compared to 28 per cent in China and 15 per cent in the US.).
However, the pandemic has prompted a rapid migration of consumers to online shopping. For example, the Saudi retail group Bin Dawood reported a 400 per cent increase in downloads of its shopping app, and a 200 per cent increase in online sales in the space of just ten days in March.
Wave of launches
The regional market has been responding swiftly to this demand. New platforms, such as Dubai Store in the UAE, are emerging. Simultaneously, existing retailers are expanding to meet consumer needs. At the end of March, Saudi Arabia’s start-up online grocery store Nana Direct raised $18 million to fund ambitious plans to capitalize on this rapid change in shopping culture.
Food ordering apps are aggressively marketing an increased number of restaurants and cafés. Platforms such as Noon are introducing new cashless payment methods to safeguard consumers and delivery workers.
Capture the moment
This is the moment that many retailers have been waiting for. They can now reach new customer segments, use more data to develop tailored marketing, and reduce costs. Moreover, changes in demand may be structural and long-term.
While some current online shoppers could revert to their old shopping habits when the crisis is over, others will have permanently overcome their inhibitions about e-commerce and will remain comfortable with digital purchasing.
Rather than be complacent, e-commerce retailers should use this windfall to develop winning strategies for the short- and long-term. There may be some easy pickings right now, with grateful consumers willing to overlook delays and service imperfections. However, as things return to normal, retailers will need a robust online proposition to succeed in what will then be a much more competitive and less forgiving climate.
Given high consumer demand and tolerance for problems in the delivery process, there has never been a better time for offline retailers to take the plunge into e-commerce for the first time. They can quickly build their online platforms, actively market their e-proposition, and in the meantime set up, test, and refine their logistics capabilities.
Experienced online retailers should act to extract maximum benefit from increased online shopping traffic at the moment, while boosting their resilience in the face of uncertainty. They should invest in marketing, targeting business-to-business and business-to-consumer segments.
They need to relieve pressure on their supply chain by prioritizing the sales of essentials, managing the availability of stock and especially boosting their fulfilment and delivery capabilities.
Investments to secure customer satisfaction and loyalty for the long-term should be a parallel priority. There are several elements to this strategy, including designing convenient and seamless online customer journeys.
Keep reaching out
Companies should consider the different needs of existing and new customers, invest in data analytics solutions for tailored content and experience, while simultaneously pursuing aggressive customer acquisition strategies. They can also improve operational efficiency with cashless payments, drop-off points, notification of exact delivery times, and automated and flexible location tracking of deliveries.
There will also be long-term gains from focusing now on robust and agile supply chains, with effective and flexible stock management, fulfilment, and efficient and flexible last-mile delivery capabilities.
One of the major obstacles to the growth of the GCC e-commerce market — the reluctance of many consumers to shop online — has crumbled, almost overnight. Online retailers will never have a better chance than now to consolidate their gains and build a solid platform for sustained success.
- Dr. Ulrich Koegler is partner and Maha Raad a principal at Strategy& Middle East.