COVID-19 Impact Report: Ecommerce
On March 13th, American consumer confidence experienced its largest single-day drop in over two years as measured in a daily survey by Morning Consult. This occurred following President Trump’s declaration of a national state of emergency to combat COVID-19.
According to Windfall’s Arup Banerjee, “With major indices (Dow Jones, S&P, and NASDAQ) shedding ~30% of their value in three weeks, there is a rightful concern for most businesses and nonprofits to believe that consumer spending will become strained.” However, by analyzing the underlying data as it relates to consumer wealth, they saw the impact (especially to the affluent) is “much more muted than the overall stock market fluctuation.” Considering this, retailers in the US and abroad are pushing to get consumers shopping online during the quarantine, and it’s not a bad idea.
Nielsen has already identified six “consumer behavior thresholds,” mapping out the expected timeline of purchase behavior as the COVID-19 crisis unfolds:
- Proactive health-minded buying
- Reactive health management
- Pantry preparation
- Quarantined living preparation
- Restricted living
- Living a new normal
There are signs that spending behaves in a comparable way which makes it possible to understand what might happen next, country to country. While in-store traffic may be slowing down, merchants are taking action to inform consumers that they are taking the necessary measures to keep shoppers and staff safe.
As physical stores close or reduce hours of operation, consumers are shifting their shopping habits online, according to the latest research from Ipsos. At Causal IQ, we believe that e-commerce will emerge with a bigger share of overall commerce after the crisis ends, with effects extending well into the future. In 11 of the 12 national markets surveyed by Ipsos, consumers said they were purchasing products online more frequently than they would normally buy in-store, the US included. Ipsos also asked: Compared to now vs. 6 months ago are you more or less comfortable making household purchases? The US is currently indexing at a 15, compared to the global average of negative 13.7 (-13.7). Similarly, Americans are also more comfortable making large purchases.
According to Adweek and R29, the coronavirus has brought something of a “Black Friday in March,” across a slew of industries. Some brands are even coupling discounts with donations to charities. But the news isn’t all rosy. Wayfair reported quarter-to-date revenue growth well below expectations due to "some disruptions in the supply chain," 50% of which includes goods sourced from China, as first reported by Bloomberg at the end of February. Brands that rely on supply from China and abroad are expected to be the most impacted.
What Do Consumers Demand?
Based on their survey of consumers in Beijing, Shanghai and Guangzhou), Zectr projects household goods will be in demand despite the current outbreak, with travel being the hardest hit.
How Should Brands Respond?
According to WARC, luxury brands have responded quickly to the COVID-19 crisis by adopting three best practices in brand communication, customer engagement, and digital marketing:
- Increase brand affinity with cause marketing
- Sustain business by moving events and sales online
- Convey brand image with timely, positive messaging
Brands that fulfill a need and those that speak to cause marketing should be focused on increased consumer attention and digital inventory right now. We recommend travel, OOH entertainment, and services requiring consumers to leave their homes shift toward branding (in order to maintain market share) or focus messaging on ecommerce. In some cases, they might consider pausing their DR programs to reserve media budgets for 2H 2020.