E-commerce sales were boosted massively during stay-at-home orders in the wake of the coronavirus pandemic, but whether they can be sustained in a profitable way remains to be seen.
Global revenue from online sales in the second quarter of 2020 skyrocketed 71% year-over-year, according to data from Salesforce’s Shopping Index.
“In the first two quarters of this pandemic, many retailers weren’t as concerned about profitability: They were more concerned about product availability and getting it to the consumers’ doorstep,” Rob Garf, vice-president of industry strategy and insights at Salesforce, told CNBC by phone.
“One of the most common questions I get from our retail customers is: How do we sustain this new shopping behavior in a profitable manner?” he added.
While the increase in online sales is remarkable, the cost of e-commerce shouldn’t be underestimated. Aside from picking, packing and delivery costs, return rates can also be high, with one expert suggesting that people return 15% to 40% of what they buy online, compared to 5% to 10% for in-store shopping.
Curbside pickup is one option, Garf said, because it means the retailer doesn’t have to cover the last-mile delivery cost, and it’s something stores such as Target benefited from during lockdowns (Target reported profits up 80% during the quarter ending August 1).
But beyond that, there is much retailers and brands can do to improve the online shopping experience and become more efficient with sales. While in-store environments are often designed to provide a sense of discoverability, many e-commerce stores are simply lists of products and prices, searchable via filters — and therefore not always inspiring.
“To succeed in e-commerce, you need to have the right assortment, then make things easy to find, purchase and get delivered. This is the genius of Amazon. But there are definitely opportunities to make online shopping more ‘fun’. Livestreaming is one. AR (augmented reality) and other means of enhancing utility is another,” Michelle Whelan, CEO of commerce agency Geometry U.K., told CNBC via email.
Whelan cited Kanye West’s new Yeezy Supply website, which lets shoppers choose products for 3D models to put on in an attempt to make the internet more “humane,” according to an interview with West’s creative partner Nick Knight.
Providing better service is another way to enhance online shopping, Salesforce’s Garf said. “We’re seeing retailers embrace … the idea of bringing the physical store to digital. And specifically, … unleashing your store associates and more readily enable them to engage consumers while they’re shopping online,” he continued. “The challenge with store associates (is), they’ve been so hard wired for the (physical) store.”
Making use of images and video made by shoppers is another way to make e-commerce sell, Garf added. Google introduced this function to shopping reviews last year, and claimed that 50% of online shoppers said pictures helped them in the buying process.
“Western retailers can learn a lot from China and what a product detail page looks like. And that’s going to be one of the major transformations in digital shopping, is the reinvention of the product detail page to really lean into user-generated content,” Garf said.
Livestreaming, where influencers (known as key opinion leaders, or KOLs) sell products during live online demonstrations, is taking off in China. Taobao Live, the livestreaming arm of Chinese e-commerce giant Alibaba, saw a 719% increase in merchants selling via the platform for the first time in February, compared to the previous month, as the coronavirus locked down parts of China.
While it hasn’t yet caught on in a major way in the U.S., Garf sees selling via platforms like TikTok increasingly being used, with people potentially becoming more likely to buy something they see an influencer wearing on the platform than going to a brand or retailer’s website for inspiration.
And although the figures trumpeting the rise in online shopping look impressive, there are many parts of the world where e-commerce is still developing.
Global Fashion Group, which runs apparel and lifestyle retail websites such as Zalora in Southeast Asia and Dafiti in South America, said it saw 2.5 million new customers shop from its platforms during the pandemic, making a total of almost 15 million people in the past 12 months.
“We’re really going through an inflection point in e-commerce all around the world,” Global Fashion Group’s co-CEO Christoph Barchewitz told CNBC’s “Squawk Box Europe” last week. Barchewitz said that for the company’s markets, which also include Russia and eastern Europe, online fashion and lifestyle shopping is around a decade behind more developed markets.
And how will sales look for the forthcoming holiday season? It’s a mixed picture, according to Geometry’s Whelan. “Money is likely to be tight for many, but there will also be a pent-up desire for release and celebration. This is the nerve retail needs to hit: promising those little moments of joy and luxury that people will crave after what will have been a really hard year.”