News

June 3, 2021

How E-Commerce Fits into Retail’s Post-Pandemic Future

the future of ecommerce

If we have learned one thing from the past year, it’s that things can change in an instant — changes we thought we had years to prepare for, behaviors we assumed we’d stick to forever, expectations we have of ourselves and our organizations. This is true of the way we live, the way we work, and the way we shop and buy as consumers.

In early 2021, the EY Future Consumer Index (Index), which has surveyed thousands of consumers since the early days of the pandemic, found that 80% of U.S. consumers are still changing the way they shop. Sixty percent are currently visiting brick-and-mortar stores less than before the pandemic, and 43% shop more often online for products they would have previously bought in stores. One of the most significant effects of Covid-19 is the realization that, for many of us, geographical location has become less relevant — so long as there’s an internet connection. This flexibility allows more consumers to move away from urban centers; the latest Index data shows that 26% of respondents plan to live in less densely populated areas, up from 22% in April of 2020.

Using the EY Embryonic platform, we also saw, almost overnight, e-commerce strategies shift from a perpetual top priority on every retailer’s three-year plan to a desperately needed lifeline that could enable them to survive a global pandemic. We found that retailers made approximately $10 billion in e-commerce investments, acquisitions and partnerships from May to July 2020. These investments spanned logistics capabilities to enable last-mile, asset-light approaches like ghost kitchens (restaurants with a space for kitchen equipment and facilities, but no dining area for walk-in customers) and dark stores (retail distribution centers that cater exclusively to online shopping), as well as product portfolio investments geared toward digital capabilities in AI and blockchain.

For some retailers, this past year has accelerated previously existing efforts to innovate. But for many others, it has spurred a great reset of the way they think about consumers’ needs and the future of digital commerce.

What consumer experience do you want to create?

To be successful in e-commerce, you need to think bigger than e-commerce. The core question retailers must ask themselves first is not, “What e-commerce investments do I need to make?” but rather, “What consumer experience do I need to offer?”

This is a culture change for many retailers who’ve long had a mentality that’s anchored in brick-and-mortar stores. The consumer experience is rapidly evolving from one that’s built upon the transactional process of in-store shopping to one that’s rooted in deep, ongoing and enriching relationships. As a retailer, you need to create an interwoven journey that’s relevant to your target consumer — and structure your channel ecosystem, e-commerce included, in a way that provides value along that journey.

Considering the consumer’s entire journey is especially important in today’s environment, where people’s social needs, such as feeling a sense of community, will impact their buying habits as the conditions of the pandemic continue to change. While the shift toward online shopping will likely remain, the desire for post-pandemic social interaction will likely drive people back to stores. Case in point: The Index found that 38% of consumers intend to do more shopping online and visit stores that provide great experiences.

In order to offer consumers the journey they need, retailers must understand the future of experience-led capabilities. E-commerce is a key piece of that future. But it’s not just about being online — it’s about doing it right and continuing to consider how in-person shopping fits into the customer’s overall journey.

So, how can retailers think about this integrated consumer journey, and how e-commerce fits into it? Here are some core questions to help define investment and operating model decisions.

  • Do I have an agile, adaptive technology platform that understands that every consumer journey is different?
  • Is my organizational structure free of silos — which isolate e-commerce, merchandising, store operations, supply chain, and marketing — that interrupt the experience?
  • Have I considered my assortment congruity — what’s online and what’s in store and the logic behind channel exclusivity?
  • How can I be price-competitive and still maintain margin? For example, how can I introduce impulse purchases in an online environment? What role does store layout and merchandising play in this?
  • How do I orchestrate the consumer journey from digital to physical and back again?
  • And finally, how do I maintain the experience all the way to consumers’ doorsteps?

It all comes down to delivery.

E-commerce success depends on the last mile.

Today’s consumers aren’t keen on excuses, especially when it comes to accessibility, affordability, and convenience. The Index found that only one in five (21%) U.S. consumers say they are forgiving retailers and brands for service disruptions due to Covid-19. In other words, the pandemic is no longer a reasonable excuse for not delivering orders on time. Today, retailers are vying for limited shipping capacity in the last mile due to surges in online shopping. As many of us experienced after Black Friday in 2020, it took weeks for products to finally arrive on our doorsteps. Even the most advanced e commerce capabilities can’t conceal the importance of fulfillment, as delivery becomes a cornerstone of the experience.

The store as fulfillment center.

The Index found that 37% of U.S. consumers will buy online and pick up in store more often in the future. But buyer beware: curbside or in-store pickup can quickly lose its luster if consumers endure long wait times in a jammed-up parking lot, or if their local store inventory can’t accommodate their online purchases. So, while the store as a fulfillment center can be an effective strategy, it requires systems and business units that communicate with each other to deliver on the promise. As services scale, so must retailers’ ability to deliver a consistent experience.

Regardless of how consumer behavior continues to change, retailers must be prepared to continue to develop stronger deeper relationships with their customers — both online and in person.


Original article: Harvard Business Review