Naji El Arifi presents on how Covid-19 is impacting where and how consumers are spending
Back in March 2020 Naji presented on the huge changes taking place in technology and it impacts on consumer behaviour at the inaugural One Step Beyond conference introduced by The Buyer. Following that, Naji was invited back post-Lockdown and facing a world that has moved on more than anyone could have imagined, to share Wunderman Thompson Commerce's insights into what impact Covid-19 has had on consumer behaviour and expectations. Naji looked specifically at how Covid-19 is impacting how and where consumers are looking to spend their money.
You can view the whole presentation here or below is an outline of what Naji had to say:
The first thing, to understand is that the Covid-19 crisis, according to our research is not forcefully changing consumer behaviour in its own right, but is more acting as a catalyst to accelerate existing trends that were already taking place.
To better understand what those trends are Naji broke them down into eight key areas:
- Digital commerce is on the rise.
- Amazon influence is increasing on the overall B2C market.
- Brands and DTC companies will increasingly have to fight it out on a “war of service, delivery, availability and returns”.
- Omni-channel – and what having a Covid-19 vaccine might bring.
- Products and services need to be digitised.
- Environmental concerns are a growing factor in online behaviour.
- Social media and social commerce – what next?
- Voice and zero user interface are going to be part of our future.
The Rise in digital commerce
For the One Step Beyond presentation, Naji focused in on the rise in digital commerce and how the battle for online sales is going to play out between classic brands and the growing DTC sites and economy.
Although we have seen an enormous switch to online retailing during the lockdown, that is only building on what was already happening prior to Covid.
Our research from April found that overall 65% of 14,000 consumers in UK, US, France, Spain, Germany, Netherlands and Australia all expected to spend more online in 2020. That was as high as 93% in China and 72% amongst 26-24 year-olds.
Covid spending trends
It then looked at online spending trends pre, during and potentially post Covid-19 and found that:
- Pre Covid 43% of UK and 38% of US shoppers were regularly spending online.
- During lockdown that went up to 62% in the UK and 56% in the US.
- Looking ahead when there is a vaccine and things are back to near normal then 51% of UK shoppers expect to shop online and 45% in the US.
- Lockdown has also seen 43% of UK shoppers feel positive about the experience and 47% in the US.
The lockdown experience, though, appears to have changed shoppers for good. Wunderman claims:
- 66% of UK shoppers said their purchasing behaviours have changed for good.
- Only 16% intend to carry on with how they were shopping and behaving before Covid-19.
- Habits and behaviours learnt in lockdown are going to be embedded for the long term.
- Particularly around using technology with 38% of consumers now saying they are comfortable with using it which opens up online for so much more business.
- The fact grandparents and grandchildren are now comfortable talking to each other via Zoom shows how far we have come so quickly.
Balanced e-commerce strategy
It is one thing selling online, it is another doing it well, which is why Wunderman Thompson Commerce places so much emphasis on companies having what it calls a “balanced e-commerce strategy”. This was particularly demonstrated during lockdown where those businesses that did not have a multi-pronged approach online missed out.
Wunderman calls on businesses to ensure they have these bases covered:
- Selling your products through marketplaces like Amazon
- Going through traditional online retailers
- Having a DTC platform and capability
- Developing a social commerce strategy to be able to sell through social media platforms
How to get DTC right
The one big area that is really driving e-commerce is DTC, but how do you do that right? Naji says it is about potentially thinking differently on how you work with traditional on and off-trade channels. The best DTC operators do three things right:
- They give their consumers what they want and are not focused on themselves. The main reason why products fail in DTC
- Get that right and those consumers will then be prepared to go out of their way to shop with you
- Concentrate fully on WACD – “What Amazon can’t do"
Wunderman Thompson Commerce has spoken to company chiefs of a range of online and DTC businesses to assess what it is that causes products and brands to fail online. Here’s what those chiefs say:
- 34% say it is down to “lack of alignment” with customer needs
- 29% admit to poor logistics not being able to meet demand
- 29% a lack of clear objectives
- 28% put it down to a lack of digital knowledge, skills and talent in the business
- 28% said they did not have a robust enough strategy to make it work
All of which is pretty damning, but also pretty quick to put right, with the right customer journey mapping online and focus groups with core customers to get your product offer right in the first place.
What does your consumer want?
Clearly, if you are going to get any of this right then you need to make sure you actually know what your consumer wants. That means getting these three right:
That is backed up by its research that shows the top 5 reasons a consumer will shop with one online retailer over another are:
- 61% Free delivery
- 57% Availability
- 53% Better prices
- 49% Fast delivery
- 47% Convenient delivery
Being good online is all about how good you are at delivering your products. Even if you are a well-known household brand it is not the fact buying direct will give you better access to you as a business (only 16% wanted more information about products), or you can get the full range online (28% of shoppers).
The number one factor that will dictate a consumer buying directly from a brand is:
- 77% Price
- 54% Free delivery
- 32% Fast delivery
- 32% Convenient delivery
When we look to work with a brand to help them improve their DTC offer it will look at all those factors individually to see how well they perform. But in general terms they can be broken down into how well a brand or business is able to achieve high scores for the following:
If you can perfect these areas you can really create an experience that is going to make people keep coming back to you and keep wanting to purchase directly from you.
The benchmark for how fast a product can be bought and delivered to your door is being set by industry leaders such as Amazon. It might feel unfair to be compared to what Amazon can do, but when it comes to delivery that’s what consumers will do.
The average online shopper expects to get a delivery within 2.85 days, which drops to 1.62 days for those who see themselves as “digital leaders”.
A fifth of all 18-24-year-olds won’t buy from any online retailer if they cannot be guaranteed next day delivery. Amazon has made it “almost normal” to have products delivered the next day.
In the first lockdown, there was a wider acceptance amongst 70% of shoppers that it would take longer than normal for products to be delivered, but that leeway has waned the longer it has gone on.
What consumers want online retailers to do better
One way you can get ahead of your competition is to do better in the areas that consumers want. Here are six key issues they want to see improve with returns and delivery key:
- 28% Free returns
- 25% Easy returns
- 24% Faster replacement of products out of stock
- 24% Faster delivery
- 23% Clearer signposting about products out of stock
A big wake up call for brands from our research is that although brands are still important in what products consumers want to buy (24% very important and 52% quite important) some 38% say they would swap to another brand if it meant they could get the product to them on time. And we think that number will increase in next year’s study.
The major takeaway was the need for brands to think less about what they stand for as a product online, but how reliable and trusted they are by prospective customers to get your brand to them when they want. Service, delivery and availability are what will define success online. Then how good you are at also dealing with and handling returns.
It’s all those ‘consumer service’ elements that are the most important when it comes to succeeding in DTC