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Retail is being impacted dramatically around the globe as a result of the COVID-19 pandemic. Since the UK government ordered the closing of all non-essential businesses on 26th March, consumers have had to shift their lives and purchasing patterns overnight. As they can no longer shop, socialise or partake in wellbeing activites the way they once used to, they are turning to digital ways of fulfilling these needs.

Across the UK, we’ve seen innovative brands come up with new ways to connect to consumers, from restaurants offering ‘cook at home’ kits, gyms delivering home workout content, and grocery stores becoming front line workers in the pandemic.  

The Salesforce Q1 Shopping Index, powered by Commerce Cloud, analyses data from the activity of more than one billion global shoppers. This data, which is analysed on a quarterly basis, not only shows a dramatic shift from physical to digital browsing and buying, but also a change in the source and device type of consumers as more people work from home and navigate their lives. 

In fact, according to the Q1 Shopping Index, the number of unique digital shoppers in the UK rose 17% year-over-year (YoY). The following provides a detailed analysis regarding digital commerce in Q1 2020. (Several factors are applied to extrapolate actuals for the broader retail industry and these results are not indicative of Salesforce performance.)

 

Ecommerce demand rises as brick-and-mortar traffic flatlines

A month on from the ordered closure of physical stores, Q1 even outpaced what was a very strong 2019 holiday shopping season. Digital commerce highlights in ther UK for Q1 2020 compared to Q1 2019 include:

 

  • 17% revenue growth (compared to 2% growth in Q1 2019)
  • 15% digital traffic growth
  • 7% shopper spend growth (reflects average amount spent by shoppers per visit)

 

While digital will not come close to offsetting the massive loss from brick-and-mortar sales, with 80% of revenue in 2019 from physical locations; it is helping to brace some of the fall. 

The increasing adoption and use of digital will continue even as consumers transition from remaining at home to a more unencumbered environment- whatever that may look like. This is why so many traditional retailers, digitally native brands, and consumer goods manufacturers are doubling down on digital to provide a seamless experience between virtual and physical shopping journeys.

The brands that will come out of this on top are the ones that have managed to remain connected to their customers and ethos wherever possible- whilst maintaining crucial cashflow. 

 

Essential goods purchases go digital

The Q1 Shopping Index demonstrates that demand for essential goods has spiked to unprecedented levels as consumers face financial uncertainty and grocery shortages in the UK. In fact, between March 10 and March 20, spending on essential goods via digital channels surged by a massive 200% — and remained elevated for the quarter.

Shopping digitally for essential categories, such as food and personal care items, has become commonplace more than ever before.

In addition to essential products, digital spending in some notable discretionary categories grew significantly in Q1. For example, home goods experienced an unprecedented 51% YoY global increase, active apparel saw a 31% YoY spike, and toys and games had 34% growth YoY. This is perhaps unsurprising, with many people at home finishing DIY projects, looking to entertain children or get fit and manage stress with exercise. 

 

Globally, COVID-19 cases were a leading indicator for digital shopping 

While the first quarter started fairly consistent with prior years — with digital traffic and sales evening out after the Christmas shopping season — things quickly changed once the virus began to spread. In particular, there was a 41% spike in global digital revenue during the final 15 days of the quarter. 

With the increase in demand, along with the shuttering of stores and distribution centres, some retailers struggled with the pick, pack, and ship of orders. Some scrambled to accelerate and retool supply chains to offer flexible delivery options for a contactless last mile. Flexibility and building up digital connections with your customers will be key to weathering this uncertain time.

 


 

Leisure and gardening will heat up Q2 revenues

Undoubtedly, many brands and retailers experienced a strong Q1 digital performance, but huge losses on physical channels took their toll. While it’s too early to tell the full toll from the loss of foot traffic over the long haul, early data suggests a significant shift in consumer behaviour — across demographics and categories — beginning to feel more normal for retailers. Innovative brands are getting to market with new experiences every day, and things feel like they are beginning to stabilise. 

As the demand for essential goods begins to level off and supply chains begin to stabilise, gardening and home improvement suppliers, craft stores, toys and learning, and athleisure companies will likely all see surges in April. As the weather improves, home improvement, gardening and outdoor leisure- BBQs, paddling pools, etc- are set to increase. And spending through digital channels will continue to soar, especially as older generations continue to acclimate to digital shopping.

 

Is this the “new normal”?

Yes. But how can we make this prediction? 

We can start by assuming that some consumers will continue to operate in a risk-averse mode once the lockdown policies are lifted. Britain is predicting a recession, and with millions of people furloughed across the country consumer purchasing power will be down. Monetary policy has already significantly reduced the interest rate, but it’s unlikely to ignite a surge in spending. From our many years of analysing consumer data, we know the following insights: 

During the holiday shopping season, consumers tend to adopt new behaviours that ultimately become the new normal moving forward into the new year and beyond. In times of change, people try out new behaviours- and some of them stick. In recent holiday seasons, for example, we’ve seen the following:

 

  1. More net-new shoppers turn to digital channels to complete purchases 
  2. Significant increases in mobile and social buying 
  3. Adoption of new omni-channel services like “buy online, pick up in-store”

 

Undoubtedly, this global crisis will shift consumer behaviour. And through the lessons we’ve learned from analysing many holiday shopping seasons, most consumers will continue to operate in this new digital normal long after this crisis subsides. 

The Q1 Shopping Index uncovers the true shopping story through analysing the activity of more than 1 billion shoppers across the globe, with a focus on 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.

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:

 

 

 

Q1 Shopping Index Methodology

The Q1 Shopping Index uncovers the true shopping story through analysing the activity of more than one billion shoppers across more than 34 countries powered by Commerce Cloud, with a focus on key 10 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.