New challenges and opportunities for online retailers

As the COVID-19 pandemic is dramatically changing consumer behaviors worldwide, we look to the e-commerce business to understand how should retail companies navigate through the crisis.

Back in 2003, with the outbreak of SARS, many companies in China started looking at online operations as a growth opportunity. Alibaba got an important breakthrough by expanding its operation from business-to-business to business-to-consumer, with the launch of Taobao. Taobao was a success and today is one of the largest e-commerce platforms. While e-commerce was still on its early stage on those days, today it is an important channel in most markets, but the question lingers: can the boom that e-commerce experienced in China in 2003 be replicated?

 

We analyze the new challenges and opportunities that online retailers are now facing, along two axes: Marketing & Sales, and Operations.

 

1st axis: Marketing & Sales

The initial behavioral trends confirm that consumers will move massively to the online channel. This unfortunate crisis is an opportunity for e-commerce companies to scale. For many traditional retailers, it is actually a rare chance to finally shift volume to e-commerce, becoming less dependent on physical points of sale.

To unlock such growth potential, marketing and sales departments need to be creative and dynamic, defining and deploying innovative campaigns. Customer engagement must be tactful and empathic: the priority is to build loyalty, while avoiding aggressive approaches that can lead to reputational damage, specially in these delicate times. Additionally, customer experience must be stellar: certain operational glitches must be avoided, such as out-of-stocks not properly marked or erroneous product descriptions.

Despite this global opportunity for e-commerce, retailers that sell non-essential items may face a tougher situation, since consumers are likely to adopt a more conservative stance, delaying or avoiding such purchases. For such companies, the importance of putting assertive campaigns on the ground is even higher.

Besides campaign design, impact tracking is another crucial function in the current context. Analytics play a decisive role in the live monitoring of both regular and promotional sales performance, enabling timely actions.

 

2nd axis: Operations

From an operations point of view, increasing capacity is essential to face the expected rise in demand. For traditional retailers, moving capacity from physical retail to online operations is one of the internal opportunities. Increasing the efficiency of in-store picking, stock handling, packing and delivery operations should also be among the priorities of any operations manager.

Last-mile deliveries can benefit particularly from increased and less restricted demand. Usually, most customers prefer short time windows after working hours, which hinders the delivery operation. However, the increase in customers’ availability due to the quarantine period adds flexibility to the retailer’s operations. Segmenting deliveries geographically allows to significantly cut travelling times between consecutive clients, reducing last-mile costs.

Another possible step towards operational efficiency is to define a pricing policy adjusted to the customers’ willingness to wait. Offering or reducing the delivery fee to encourage orders with longer lead times, while increasing the fee for urgent deliveries, is a fair way to promote better planning.

Crisis periods tend to reduce the resistance to change of both organizations and individuals. Therefore, online retailers should seize this chance of improving internal processes and capturing the above-mentioned opportunities.

Still, there are also some challenges to tackle. It is paramount to assure the security of every employee and the full compliance with the updated health guidelines. Any failure related to health safety can seriously damage a retailers’ reputation.

Additionally, the lack of capacity of outsourced services can interfere with the ability to face demand. E-commerce players should book in advance delivery capacity while notifying customers on real-time of potential delays. Click and collect is also an option to reduce pressure over outsourced services.

Finally, quickly changing demand patterns also pose an operational challenge. Analytics is the key to successfully adapt the planning processes. For instance, a more reactive replenishment model might be the key to adjust inventory according to customers’ needs.

 

Takeaway

All in all, these unusual times present significant challenges for e-commerce. Such is also the case for almost all other business sectors. Still, perhaps no other sector currently benefits from the same growth potential. Is it the assertiveness of decision-makers that will determine if e-commerce companies will embrace such window of opportunity, thus creating value for society by helping citizens stay safe while catering for their basic needs.

Agility is paramount to navigate the uncertainty that companies face. Leaders must set autonomous multi-functional response units, from sales to operations, that can swiftly introduce the necessary changes to the business as usual planning process. Business and data analysts have a pivotal role in such units, bringing to the surface the new demand and supply patterns, and plotting different scenarios to support risk-aware strategic decisions.

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