The shocking year of e-commerce 2020

E-commerce in a new light

People’s daily lives changed in the spring, when brick-and-mortar shopping stopped almost completely except for necessary everyday purchases. During the remote days, consumers found salvation in e-commerce – in the light of research data, 37% reported that the coronavirus epidemic had some or a significant positive effect on their attitude towards e-commerce.^{1 A Survey about the impact of the Covid-19 pandemic on the Brick and Mortar Store and E-commerce. The Survey was made to the Crasman's e-commerce customers by Joel Lappalainen, N = 5364}

The growth figures for the online stores implemented by Crasman support this. In the second quarter of 2020, user numbers, conversions and revenue increased compared to both the beginning of the year and the corresponding period in 2019. In the third quarter, net sales from online stores had increased by 82.4% and the relative number of purchasing customers by 50.6% when compared to 2019.

The average purchase and total turnover of online stores also increased significantly. For some online retailers, the shopping rush even posed challenges in the form of delivery problems from the suppliers. In the spring of 2020, more products, clothing and food were bought, especially in specialty stores. ^{2The Online business for food grows and renews rapidly in the middle of Covid-19 crisis (KESKO) https://bit.ly/37DStzG, Experiences about the change in the e-commerce during the exceptional period (Paytrail)}

Home delivery and a smooth shopping transaction were the main reasons for customers to order from online stores. ^{3 Making purchases has changed during the exceptional period (Finnish Commerce Federation) https://bit.ly/3mGfTuP (in Finnish)}

Indeed, the positive experience left a lasting change in customers' buying behaviour.

The competition for who will buy more in the future will take place in the field of customer experience offered by online stores.^{4A Survey about the impact of the Covid-19 pandemic on the Brick and Mortar Store and E-commerce. The Survey was made to the Crasman's e-commerce customers by Joel Lappalainen, N = 5364} Research on customer loyalty in online stores systematically flags customer experience as the most important factor in customer loyalty. Customer experience means a virtually smooth online store visit, fast delivery, free returns, loyalty benefits, quality communication and, for example, empathetic customer service.

B2B companies in the new situation

In the business-to-business trade, e-commerce has played a particularly important role since the spring, both as a direct purchasing channel and as an indirect factor influencing procurement.

The lack of sales encounters momentarily crippled many players who trusted the traditional sales organisation and created a rush to put digital sales channels in order. B2B shoppers especially value competitive prices, good availability, and comprehensive and high-quality product information in online shopping.^{5B2B e-commerce survey by the finish Posti 6/2020}

Some B2B operators who have traditionally used the resale channel responded to the coronavirus spring challenge by completely bypassing the resale portal and opening their e-commerce directly to consumers. ^{6Google: Retail Rethink Playbook 2020, s. 15.} However, 30% of domestic B2B companies stated in Posti’s survey that they are still completely without online stores or other digital marketplaces.^{7B2B e-commerce survey by the finish Posti 6/2020}

B2B e-commerce is growing exponentially, and the pace of consumer e-commerce is even faster. It may come as a surprise to businesses that the vast majority of e-commerce is specifically business-to-business e-commerce. Even in the Finnish internal market, about two thirds of all online shopping takes place between companies.

Over-55s discovered e-commerce

One clear change brought about by the coronavirus spring is shoppers over the age of 55 becoming active in online shopping. Their relative share of e-commerce revenue increased by 28% when compared to the first two quarters of the year.^{8Data from the online stores maintained by Crasman Oy} From June to the beginning of October, the share in net sales of this group of buyers increased further. Online shopping in the new age segment focused on pharmaceuticals and food. Significantly, almost all online food buyers over the age of 65 did so for the first time during the coronavirus epidemic.^{9A Survey about the impact of the Covid-19 pandemic on the Brick and Mortar Store and E-commerce. The Survey was made to the Crasman's e-commerce customers by Joel Lappalainen, N = 5364}

For an online retailer, this also means changes in customer requirements. There is a lot of purchasing power in the new customer group, but the ability to use digital services may not be so well possessed as by younger customers. Therefore, the accessibility of online stores becomes an important factor in increasing trade – large font sizes, colour contrasts that support readability, ease of use and accessible e-commerce are the expectation of this group.

According to a Swedish study, online shoppers over the age of 55 make a purchasing decision with less background research than younger age groups, expect to receive the product quickly, and are replacing brick-and-mortar visits with e-commerce. Thus, long delivery times and a slow purchasing process are a particular obstacle to capturing the hearts of this new customer group.^{10Klarna Shopping Report 2019} 

Looking to the future

Predicting the future is, of course, difficult, but preparedness is facilitated by considering possible scenarios. It’s worth to firstly acknowledge the facts: 2020 significantly accelerated the transition to a world where the net as a sales channel is at least as important as the traditional ways of buying and selling that require physical presence. Coronavirus will also inevitably be followed by some degree of recession, which will affect both the operations of companies and consumer behaviour.

A digital-centric or fully digital future?

We can assume that we have permanently moved into a digital-centric world. Online activities are an important part of everyday life, but alongside them, experiences are also sought from safe close encounters. We will continue on this path if the worst phase of the epidemic is overcome by vaccines in the near future. At least the disease will not go away in an instant nor will there be a return to the old, but vaccinations can ease restrictions, allowing for freer movement.

People get used to the new normal and adapt their activities to take into account hygiene recommendations, necessary events and close encounters. With the pandemic experiences, e-commerce and remote shopping will become an even more important channel for companies, which will perhaps only be complemented in the future.

The fully digital world is based on a vision of the future where people live with the virus for a long time or people decide to change their daily lives inspired by the new situation. Repeated movement restrictions, telecommuting and mask recommendations, and appointment restrictions reduce activity outside the home. People function online for both consuming and encountering. Because most of the work is done mostly from home, there will be a need for more spacious living. The focus of housing may shift further from the growth centres, which in turn will create demand for fast and efficient home delivery services.

Restrictive measures also challenge people’s own coping capacity. This increases the need for remote services that improve mental wellbeing. Coronavirus is possibly the first of many future virus pandemics and superbacteria, which is why companies are already basically 100% focused on online business. Business models based on brick-and-mortar transactions are being completely redesigned around e-commerce.

Regardless of which future vision is closer to the truth, success can be bolstered by actors who understand building business resilience in exceptional situations by putting online transactions at the heart of their business. The ability to be flexible with changes in the external operating environment while doing profitable business online may be the most important hallmark of a successful organisation in the coming decade.

What role will e-commerce ultimately take? Are online stores being invested in more than before because they need not only serve, but also convey experience to the customer? The rarity of a brick-and-mortar visit would undoubtedly make it an exclusive and even luxurious experience that complements online shopping.

If we move fast towards a fully digital world, all will become online retailers.

The winners and losers of the future 

The future looks bleak for operators who are not ready to shake their business up to be compatible with the new operating environment. Market shares will certainly be redistributed, especially in traditional B2B industries, where past commercial success has been based on encounters such as trade fairs.

Some companies are likely to cave in to approaching e-commerce as only an additional sales channel that complements brick-and-mortar, facilitating in exceptional circumstances such as a pandemic. The fraud of this approach will be exposed if the exceptional situation is prolonged and poor e-commerce becomes the backbone of the entire business. Strong competitors have gained an edge by investing in an experiential, reliable and extensive e-commerce package.

The change also creates new types of business opportunities. Consumer e-shops are emerging in new areas and more services can be bought online. The demand for remote hobby, cultural and educational services is growing. The need for B2B companies to redesign their sales and delivery processes also creates a need for specialised service design.

The coronavirus year made people move – also in online shopping

In March, the striking of coronavirus was followed by a paralysis. However, it was very momentary, as already two weeks of staying at home made people move and it was also visible in sporting goods e-commerce. Growth in Intersport's online store during the coronavirus year has been twice as fast as before, says Ilkka Saastamoinen, Head of E-commerce at Intersport, about the spring events.

Intersport is the market leader in sports retail in Finland. The role of e-commerce in the chain is to act as one of the store locations and to support the brick-and-mortar business. The advantage for competing players in the industry is the delivery speed made possible by Intersport's own warehouse and the ambitious service experience. The role of e-commerce has been growing steadily since 2014, but the coronavirus time has doubled its typical annual growth.

How, then, did the coronavirus year look in Intersport's online store?

The biggest sales in Intersport's online store comes from clothes and shoes. “The sales of the coronavirus year reflect well the bigger trends of our time and behaviour, as it emphasises the outdoor boom, day trips and remote work – comfortable casual wear such as college pants have done well. Outdoor activities have been on the rise, group exercise has been declining, ”says Saastamoinen.

When coronavirus hit sales, products with lower unit prices were highlighted, but soon the average purchase rose higher than before. The surprising challenge was to meet demand when suppliers had to close factories and cancel or postpone orders to a later delivery date due to coronavirus.

The new era also brought new customers to the online store. The largest customer segment of Intersport's online store is 35–45 years old, but growth is also visible in the older customer group. People aged 45–65 have now bought more from Intersport's online store than ever before, and there have been clearly more first-timers.

What does the future look like after coronavirus?

Long-term development work and new applications enable a better service experience online as well. For example, Intersport's online store can already recommend suitable cross-country skiing equipment to the customer according to their size, weight and skiing style. In its first year, the recommendation machine tripled its sales of skiing equipment, which was a strong sign of success in a winter of little snow. The next plans are to help the customer choose the most suitable running shoes online as well.

According to Saastamoinen, the competition is successful with a good and smooth service experience. It is created, for example, with good product images and information, convenient access to product categories, a clear purchasing path and various automation and personalisation of customer communication and marketing.