It will take some time before we fully understand the impact of the COVID 19 pandemic - but history teaches us two things about the economic consequences of such events.
First, there have always been companies that managed to perform well in times of crisis. Second: a tense economic situation does not only lead to temporary changes such as a short-term shift in demand, but also ensures sustainable change. For example, the SARS outbreak in China in 2003 is often cited as the trigger for the local e-commerce boom, which paved the way for Alibaba and other digital giants to make a breakthrough.
It may be very early to make such positive predictions, as we are only at the beginning of the recession. However, now is the right time to assess the crisis from a business perspective and derive growth potential from real trends in consumer behaviour. There are great opportunities here, especially for e-commerce.
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1. Strong growth of e-commerce
Analysts estimate that e-commerce sales in the retail sector in the UK will increase by 19% this year, bringing the total to £79bn. This corresponds with an increase of £13bn compared to 2019. Also, 55% of e-commerce shopping in the UK is already conducted on a mobile device, a trend that has been boosted by COVID-19.
The reasons for this positive trend are obvious: stationary trade continues to suffer from restrictions, and the precursors of the second wave do not give reason to hope for improvement in the near future. The beneficiaries are online trade and the strong growth in buyers from new target groups, which is an indication that we are not only dealing with a short-term development but a sustained penetration of e-commerce in the UK market.
2. Dramatic decline in stationary trade
A sharp look at the local retail situation underlines the widespread shift towards e-commerce. According to an analysis by Green Street, for example, every second shop in US shopping centres is expected to close by the end of 2021. With Boots and John Lewis as two of the biggest names having announced cuts of 5,300 jobs and closing a considerable number of stores, a substantial decline in stationary trading can be expected for the UK as well.
If these forecasts come true, the appearance of the city centres will change drastically. A stroll along the high street or a trip to the shopping centre - what used to be a matter of course could soon become a rarity. Particularly as more and more jobs are being moved from the office to the kitchen table at home, potential buyers will therefore be less on the move and probably make even more purchases at the click of a mouse.
3. Growing sales opportunities for online retailers
Back in 2004, Chris Anderson described in his book The Long Tail how and why retailers can make money even in very small niches and how Google uses this fact to make money with exactly these entrepreneurs. 16 years later this constellation can be seen as a blueprint for the current developments around Facebook and Instagram. Facebook already has around nine million advertisers - and the launch of Facebook shops is an indicator that this area is set to grow.
In addition to its own growth efforts, Facebook is actually doing much to support small retailers. The easy access to the shop feature, which enables numerous new functions such as live shopping and the integration of messenger services for the most direct contact with the buyer, is just one example of how Facebook wants to make online commerce accessible to companies of all sizes.
4. Sophisticated technology solutions
New technologies have always enabled new business models for those who are courageous and recognise opportunities. One of these great opportunities currently lies in the direct-to-consumer market, which has been developing positively for several years. Experts expect further growth of more than 19% in 2021 - a forecast that dates back to the time before COVID-19, which is why the actual increase is likely to be much higher.
The D2C trend will be favoured by the constant development of technology solutions which - in addition to platform solutions such as Facebook, Amazon or eBay - enable small traders to independently build their own online business. A prime example of this is Shopify: in the second quarter of 2020, at the peak of the pandemic so far, the commerce platform was able to increase its sales by no less than 97%. This figure alone proves the potential for small and medium-sized e-commerce players.
5. Foreign markets as a crystal ball
For Europe in general and the UK in particular, the age of direct sales has arrived, and there is no going back. That this development would soon overtake us, you could guess - at least if you looked at the Middle Kingdom from time to time. Because as always, when it comes to digital trends, China is several steps ahead of us. After all, the country was the first in the world to feel the consequences of the pandemic.
In this respect, looking at China is like looking into a crystal ball, especially when it comes to e-commerce. TikTok became the preferred channel for traders during the big lockdown. In addition to consumer brands such as Lego or Dior, small businesses are also using the platform to sell their products live via video, grant real-time discounts and thus offer their community a completely new shopping experience. The hype surrounding TikTok is also growing over here, but the potential of the platform is far from exhausted.
Courage will be rewarded!
One thing is for sure: the "super-digitisation" that COVID-19 has set in motion is forcing every retailer to adapt to the new conditions and habits of consumers. Anyone who does not include the "online" aspect in his future strategy is doomed to failure, at least in the medium term.
At the same time, the increasing use of digital services in particular and the sharp rise in e-commerce sales offer great opportunities for those who have the courage to enter online trading now and prove themselves in this field. Amazon, Facebook or Shopify, Facebook: The tools are waiting for you. They just have to be used.
Jimmy Jakobsson, CEO and Co-Founder at Ingager
