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This is the third in a four-part weekly series, a deep dive into our quarterly Shopping Index to tell the story of shopping through more than one billion shoppers across the globe.
In the absence of most brick and mortar stores, online commerce grew 20% year-over-year in Q1, well above digital growth seen during the holiday shopping season. Much of this growth was due in part to an increased demand for essential goods on digital channels. Online purchases for essential items grew by 200% between the beginning and end of March. Despite this success for digital commerce, we still face a stark reality. All aspects of the global economy are upended. From demand, supply chain, to the retail business model itself, nothing is the same. Shoppers are adjusting to the realities of a world dominated by digital, and brands and retailers are racing to serve their customers throughout all these changes.
Amidst these changes, the challenges are varied and the stakes are high. Forecasting demand amongst this economic uncertainty, managing supply chains that are experiencing historic strain, and making up for the loss of foot traffic are a few of the realities brands and retailers are managing in real time. Now more than ever it’s important to benchmark your performance.
Benchmarking is an important practice for all organizations to improve processes and encourage innovation. Comparing your performance to your peers is critical. But how do you benchmark yourself during this pandemic? What metrics are important to track when the “normal” way of doing business is upended?
Looking at last year’s numbers or any year as a benchmark isn't going to be helpful right now. The U.S. Department of Commerce reported that overall retail sales declined 8.7% in March — the largest one-month decline in retail sales since the Commerce Department started tracking them. For retailers’ to get a better sense of their footing, it’s more useful to benchmark against your industry peers today, in real-time if possible, across different metrics. Using our Q1 Shopping Index, we’ve identified three metrics critical to more effectively managing margin, increasing efficiency of fulfillment, and attracting new advocates — ultimately driving loyalty and revenue during this new normal.
In an attempt to attract especially price-sensitive consumers, many retailers are in a race to the bottom and trying to clear inventory and squeeze revenue out of cautious consumers. But consumers are savvy. The result of such practices is a game of discount chicken — when consumers hold onto their wallets and brands and retailers continue to discount deeper. The consumer wins big in this outcome, but brands and retailers are left with diminishing margins. And during a recession this could bring big problems. While discounting is a very practical tool to encourage consumers to buy amidst economic uncertainty, when do you know how much is too much?
The average discount rate in Q1 was 22%, only a 5% increase over Q1 2019. But when we drill down into March, a key month for the COVID-19 pandemic, discount rates begin to accelerate rapidly by mid-month. The average discount rate surged to 29%, a high typically reserved for Cyber Week deals. In the U.S., these averages surged to a remarkable 33% in March.
Deepest daily discount rates in Q1 by region:
France: 45%
Canada: 43%
Nordics: 42%
USA: 33%
UK: 30%
ANZ: 28%
Spain: 27%
Japan: 26%
Germany: 24%
Netherlands: 23%
The antidote to discount chicken? Personalization — driven by artificial intelligence (AI) — is critical to deliver the right product at the right price at the right time. In fact, shoppers who clicked on a personalized product recommendation average a 26% higher average order value. Tracking the success of your personalization strategy with AI through conversions per offer is key to positively impacting margin and revenue.
Purchasing and fulfillment are a major challenge during this pandemic. Consumers and organizations alike are learning in real time what it looks like to purchase essentials from a distance. The result? Various last mile delivery options are surging. This includes curbside, drive-through, and in-store pickup, along with same-day delivery — typically fulfilled via third-parties like Uber, Lyft, Instacart, and Grubhub.
While this trend saw traction last year, it’s now one of the main ways consumers are interacting with brands and retailers in the physical retail space. The Salesforce Shopping Index discovered that sites offering BOPIS (via various forms of pickup) grew their digital revenue by 27% in Q1, compared with 13% for sites not offering buy online pick up in store (BOPIS). Between March 10 and March 20, digital revenue for sites offering BOPIS — via curbside, car, drive through, or store pickup — grew by 92% compared to 19% for sites not offering BOPIS over the same time period.
Tracking your customers' receptiveness and measuring their level of satisfaction with these emerging options will be key in determining appropriate solutions. Tracking customer usage will also be critical to train and schedule associates, forecast product demand, and regulate store traffic. This will also help prioritize investments in certain last mile approaches — including determining the need for dark stores? Stay tuned for the fourth and final installment of our Q1 Shopping Index blog series where we will dive into this topic in even greater detail.
Have you attended a social workout or cooking class during your quarantine? You’re not alone. Millions of consumers are flocking to their social channels to stay connected with friends, families, and favorite brands. In fact, traffic to ecommerce sites from social channels grew by 41% in Q1. Social platforms are the virtual shopping malls of 2020, but the ante has just been raised, given the absence of physical contact. It is really now the only way for brands to deliver experiences and gather social responses simultaneously in a digital channel. As social becomes our main line of contact to the outside world, the lines between social and commerce are increasingly blurred.
But measuring social success is no longer just about followers and likes. Below we’ve outlined four new social metrics you should track:
New social metrics:
Average number of new weekly pieces of content (Instagram live, how-to videos, social media crossovers/takeovers)
Engagement: number of views, comments
Percentage of orders from social referred channels
Social conversion rate
Less than four months ago we wrote about the future of shopping at the edge. Retail is now living on the edge thanks to COVID-19. Once you fine tune your social strategy and build a robust tracking program, the next step will be to tackle social commerce — placing orders without ever leaving the social platform.
The Shopping Index has been Salesforce Commerce Cloud’s main benchmarking tool for the past six years. We are keeping our eyes on the numbers and our fingers on the pulse of commerce during these uncertain times. We continue to crunch the numbers and analyze the data to provide you with the most accurate and timely insights to guide you through this period in history.
To keep up with consumer needs now, try free resources like Quip or Salesforce Care for Commerce Communications as you develop new work-from-home processes. Also, access free online guidance for keeping it together despite the crisis.
To learn more about the changing habits of American shoppers along with those in other countries in the face of the pandemic, visit the Tableau public dashboard that merges publicly available COVID-19 data with Salesforce Shopping Index data.
Our Leading Through Change series provides thought leadership, tips, and resources to help business leaders manage through crisis. Check out some of our most recent articles:
Understand How to Keep Your Commerce Site Running in Time of Crisis
Provide crisis support with Salesforce Care for Commerce Communications
Read the Salesforce Connected Shoppers Report
Subscribe to our blog newsletter to get the latest in Leading Through Change.
The Q1 Shopping Index uncovers the true shopping story through analyzing the activity of more than one billion shoppers across more than 34 countries powered by Commerce Cloud, with a focus on 10 key markets: U.S., Canada, U.K., Germany, France, Spain, Japan, Netherlands, Australia/New Zealand, and the Nordics. This battery of benchmarks provides a deep look into the last nine quarters and the current state of digital commerce. Several factors are applied to extrapolate actuals for the broader retail industry and these results are not indicative of Salesforce performance.
