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How the Pandemic Has Changed the E-Commerce Industry

The e-commerce market had been growing long before the pandemic. However, launching an online store back then remained a personal choice of every business owner. Those running successful offline stores often saw no sense in going with the flow. Now, e-commerce is no longer a choice but a necessity for any business owner who wants to stay afloat.

In this article, we’ll review how the pandemic has changed the e-commerce industry. We’ll also share some astonishing stats and identify newly emerging trends to follow. Keeping up with the times is crucial for business success, and our guide should help you find the right development path.

Supply Chain Disruptions

Supply chain disruptions have affected both offline and online stores. With strict safety measures implemented worldwide and borders closed, each step of order fulfillment has become more complicated than ever before. Companies have also experienced an involuntary reduction in human force utilization and sudden consumer behavior changes.

Many employees justifiably refused to work, threatening to strike and stage walkouts due to companies not implementing the safety measures properly. Some factories and warehouses had to shut down completely for economical or COVID-19 outbreak reasons. Finally, the logistics industry has experienced significant changes in documentation requirements and mandatory quarantines, especially at the start of the pandemic. This led to numerous delays with global shipments, especially those ordered from smaller stores.

While many small businesses dependent on external warehouses had difficulty adapting to the changes, enterprise-level companies and manufacturers have quickly responded with action. Here are some of the measures businesses have undertaken to solve the supply chain disruption issues:

  • Transferring stock to non-quarantine areas and closer to ports and airports where it’s more accessible for shipping.
  • Ordering more stock in advance to prevent shortages.
  • Opting for raw-material substitutes and pre-approved parts in cases when the primary supplier has been impacted by the disruptions but the secondary supplier wasn’t.
  • Ensuring availability of local suppliers instead of international.
  • Redesigning products where adequate raw material or part replacement wasn’t possible.
  • Introducing products initially meant for other markets for general offers.
  • Offering discounts on available non-seasonal product classes when supply was short for seasonal inventory to optimize the average revenue.

As large companies and primary manufacturers have managed to respond to the changes, new order fulfillment methods emerged and were adopted by many businesses: D2C and Amazon Fulfillment. Let’s take a closer look at both.

D2C

Before the pandemic, primary manufacturers used to sell their products through distributors and retailers. Such a multiple-step model is called Business to Customer, or B2C, where “business” is a retailer. However, because of shipping delays, new safety rules, and lack of human resources, manufacturers had to come up with a better way to supply their product to the end consumer. Plus, more people have started purchasing essential items online, such as groceries and cleaning products, which weren’t common in e-stores at that time.

Thus, the D2C business model was invented, where goods are supplied from the manufacturer directly to the consumer via the company’s own channels. Such a model allowed manufacturers to gain independence in terms of marketing and supply, though it also caused new challenges.

Manufacturers had to find new ways to reach the audience, and e-commerce was an apparent method to do so. The Global Brand Shopper Survey has shown that 55% of respondents are willing to shop directly from the manufacturer rather than a distributor. That’s good news for businesses running their own production facilities, but what does it mean for existing e-commerce retailers? Increased competition. Distributor e-commerce outlets must find new ways to attract customers or shift to the D2C model themselves.

Amazon Fulfillment (FBA)

Naturally, Amazon was among the first companies to take action against supply chain disruptions. Instead of gaining profit from reduced competition, the enterprise has introduced a new order fulfillment method to help smaller businesses, Amazon multi-channel fulfillment. It gives companies access to a large distribution center network of over 175 facilities worldwide. Here’s how the model works:

  1. A company sends their products to one of Amazon’s warehouses.
  2. Amazon’s team conducts the inventory check and assesses damages.
  3. From the moment stock arrives at Amazon’s warehouse, the company takes care of all supply processes. The orders continue to be placed via the primary business’s website.
  4. When an order is shipped, the primary business receives a tracking number which can then be shared with the customer.
  5. Amazon handles all refunds and returns.

Such a model enabled businesses that struggled with their warehouses closing down to continue operation. Furthermore, many newly launched companies have adopted such a logistics model. With FBA, there’s no need to pay for your own warehouse and spend money on supply chain middle-stage labor costs. Finally, FBA provides peace of mind to businesses, ensuring reliable and fast delivery, no matter the restrictions.

Change in Consumer Behaviors

Consumer shopping behavior and spending patterns have undergone significant changes during the pandemic, too. A survey conducted by UNCTAD shows that the number of online purchases has jumped by 6-10% in most product categories during the pandemic. In other words, more people have started shopping online, though overall consumer spending has fallen. That’s related both to the rise of unemployment and to a reduced need for some products during the lockdown. The largest decrease in spending was seen across tourism, travel, entertainment, fashion, and the luxury goods industries. Let’s take a closer look at how a change in consumer behavior has affected e-commerce and which trends emerged because of it.

Change in Consumer Behaviors

Alternative Payment Methods

As the largest part of shopping has moved online, convenience, data security, and speed have become more valued. People seek alternative payment methods to replace traditional credit card payments. The popularity of digital wallets and “buy now, pay later” options has surged.

Forrester indicates that almost 36% of US consumers are interested in the “buy now, pay later” payment method. It’s provided by such companies as Klarna and Afterpay, but despite growing interest, isn’t yet widely available.

Digital wallets, in turn, offer a safe and quick way to pay, eliminating the need to enter card details and providing consumer protection. It’s the leading payment method worldwide and second-leading in the US. However, only 15.4% of businesses offer Amazon Pay and 11.7% Apple Pay payment options.

The offering doesn’t quite meet the demand, so e-commerce businesses can gain a significant advantage by implementing alternative payment methods even now.

Click and Collect Is Here to Stay

Statistics show that click-and-collect sales have surged from 5.8% of all purchases in 2019 to 9.1% in 2020, more than doubling in overall revenue in just a year. It’s an efficient and cheap way to receive an order and support local outlets. Increased demand for click-and-collect has led to more offline outlets launching e-stores and offering this delivery option. The same stats predict that the share of click-and-collect purchases in e-commerce will grow to 17.3% by 2024. Therefore, the trend isn’t going anywhere.

Augmented Reality Visualization

The main reason many consumers refrained from shopping online before the pandemic was the inability to touch the product and try it on. That’s especially relevant for the interior design, fashion, and beauty industries. Augmented reality technology erases the border between online and offline outlets, enabling consumers to visualize the product as if it was real. Statistics show that 61% of consumers prefer outlets offering AR experience, if only 1% of retailers utilize the technology. It’s the perfect time for e-commerce businesses to develop new AR-based applications and web tools.

Rise of Sustainability

The fall in average consumer spending due to economical factors and the change in demand for specific product categories have led to increased interest in sustainability. People are searching for more cost-effective and environmentally-friendly products manufactured following fair labor practices. Furthermore, “fair labor” during the pandemic has received another important boost – employer compliance with COVID-19 safety measures. E-commerce outlets must now pay extra attention to the traceability of their production and its quality, as well as recyclable packaging.

New Marketing Challenges

The “stay at home” order and rise in e-commerce competition have resulted in new challenges for marketers. It’s harder than ever to stand out from a crowd of other online stores, even for enterprise-level companies, not to mention small businesses. Some of the trends that emerged from e-stores trying to attract audiences include:

  • Product identification as “for home use”. Businesses in the leisure, office, game, beauty, and other industries tailor and advertise their products for home use to attract customers during the lockdown. Even after the quarantine period was lifted, many people preferred to spend most of their time at home, so the trend is here to stay.
  • Engaging content advertising. Influencer marketing, video ads, and personalized approach are the new promotion norm.
  • E-mail marketing is more important than ever. Marketers take advantage of common technology to send out “back in stock” and discount alerts paired with merchandising triggers.

Long-Term Effects

The pandemic won’t be here forever. However, the changes it has brought to the world and the e-commerce industry, in particular, will certainly have a long-term impact. It isn’t too late to adapt your online business to a new working model. Our team can provide the necessary support in implementing new technologies and analyzing the results. By keeping up with the progress and putting your trust in professionals, you ensure that no external factors will cause disruption to your business operation.

By interactivated • on September 10, 2021

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