It is well known that the pandemic has accelerated trends that were already bubbling under the surface as we headed into 2020. A clear example of this is ecommerce; the growing channel soared as necessity forced shoppers to dip their toe in the water of shopping for goods and services online. For retailers, the challenge of ensuring harmonious growth between traditional bricks and mortar and online channels has been high on the agenda for several years now, with no clear breakthrough in sight. The question now is: how much has the pandemic accelerated this trend, and what is next?
Back in early March 2020, our Worldpanel Plus data showed that online share of total retail sales was around 13%, with big variances in the levels of engagement with the ecommerce channel.
Previously, the motivations for shopping online were centred around the wider trends of convenience and managing household budgets. However, with the restrictions on non-essential retail forcing shoppers to use online out of necessity, more of us have been pushed to shop online for more items, more often. This forced behavioural trend has meant that the trajectory of online spend has accelerated, compressing years of growth into a matter of days. At the same time, the prolonged nature of the lockdown restrictions means that some of these new behaviours have become habits that will continue once stores reopen. The question is how many of these habits will stick?
Stick or twist
We can start to predict this by looking at the patterns emerging. Share of retail sales online has settled to 36% in the 5 weeks to 4 April, compared to 23% in the same period last year. Whilst this reflects the lockdown restrictions still in place during this time period, there is still a fundamental shift in spend through this channel. What we have seen is a progressive step up in online retail, with the dial moving further each time restrictions were imposed on non-essential retail throughout the pandemic.
This was more apparent in categories and industries where online was already an established route to market. Health & beauty and fashion both moved forward through 2020, with the lion’s share of sales being fulfilled online. As a result, new baselines of online spend are being established as consumers look to source goods direct from manufacturers, and retailers lean heavily on digital marketing campaigns to attract shoppers.
However, there are industries that lean more heavily on their physical store presence. Homeware and DIY categories saw share of spend going through online channels retract back to pre-lockdown levels after each period of restrictions, showing that there are some categories that are still best bought in store. As shoppers are increasing the number and range of products that they buy online, understanding why they prefer to pick up those items in physical stores or online, will help retailers and brands piece together a strategy to determine what products are best serviced online versus in a physical store environment.
Delivering the goods
Linked to this growth, we’ve also seen a substantial change in the shape of the delivery network. Previously dominated by a few key players and heavily reliant on traditional delivery providers, online as a channel was limited by the “last mile”; the network that brought the goods to consumers’ homes. The pandemic forced open the lid of this issue, and now delivery networks have expanded to meet the new demand, with more and more drivers up and down the country delivering packages to UK homes. With investments being made in delivery networks across the UK, and innovative solutions being tested at pace, this piece of the puzzle will continue to evolve as the new balance of online sales levels settles in the coming months.
For shoppers in the Capital, there’s now an expanding range of options for those looking for quick-delivery groceries. A new breed of delivery models have emerged, and are challenging the traditional players, either working in partnership with established retail (such as Snappy Shopper) or through their own network (Gorillas). A Kantar survey in February 2021 asked shoppers which categories they would consider buying through a rapid delivery network. Groceries came out on top by far, with 57% of respondents stating they would consider a rapid delivery method for ordering groceries, compared to just over a third considering it for clothing or beauty products*.
Key to the future of the channel will be what happens when workers who are currently based at home start to go back to offices. And now that stores and the hospitality sector are opening up again, how will that impact the fortunes of the channel for the rest of 2021 and beyond? Early predictions are that the share of online sales will continue to sit at around 30% this summer as the last of the restrictions are lifted, and shopping patterns settle again.
Looking to the future, the extent to which online sales hit the heights of the pandemic will really be determined by the shape of the delivery model and how rapid delivery networks evolve in the coming months. Expect a lot of changes in this area as convenience and speed continue to drive the shopping experience. Retailers will need to adapt to innovations in the delivery network, the growth of brands selling direct to consumers and cutting out the retailer entirely, and ultimately the technology that drives the experiences of shopping online.
The picture is not yet set for the online channel, but what’s clear is that there is further innovation to come, and a new baseline for online shopping has been established as a result of the pandemic. However, it is not one size fits all, and so understanding the suitability of your products for online and physical stores is key to winning shopper spend today and tomorrow.
Notes:
*Kantar Worldpanel Plus, LinkQ Survey, February 2021, sample n=15,386. Question – “Would you consider buying any of the following categories online/ with rapid delivery?”
