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Weathering Uncertainty: How Retailers Can Connect With Digital-Only Customers
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Shopping Index Revenues Grow 20% in Q1 Amidst Shelter-in-Place

Retail is being impacted dramatically around the globe — read our detailed analysis regarding digital commerce in Q1 2020.

This is the first 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.

Retail is being impacted dramatically around the globe. As we all adjust to our new normal in light of the COVID-19 global pandemic, governments, businesses, and consumers are changing the way they operate nearly instantly. And with brick-and-mortar locations closing or limiting operations, people across nearly every demographic are turning to digital for their social, wellbeing, information, and shopping needs.

The Salesforce Q1 Shopping Index, powered by Commerce Cloud, analyzes data from the activity of more than one billion global shoppers and shows a dramatic shift from physical to digital browsing and buying.

Brands and retailers that were not already effectively weaving together their digital and physical operations for a unified consumer engagement across touchpoints are adapting quickly. Agile companies are accelerating or retooling operations to market their brands with empathy, fulfill orders safely, and serve consumers with convenience. Whether it’s creating digital services, launching curbside pickup, or providing virtual customer service, much of the innovation is happening overnight — literally.

In fact, according to the Q1 Shopping Index, the number of unique digital shoppers rose 40% year-over-year (YoY). The following provides a detailed analysis regarding digital commerce in Q1 2020 given the current situation. 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

As governments asked non-essential brands and retailers to shutter their physical stores, consumers had no choice but to turn to digital channels for discretionary categories. As a result, Q1 even outpaced what was a very strong 2019 holiday shopping season. Digital commerce highlights for Q1 2020 compared to Q1 2019 include:

  • 20% revenue growth (compared to 12% growth in Q1 2019)
  • 16% digital traffic growth
  • 4% 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, it is helping to brace some of the fall. The increasing adoption and use of digital will continue even as consumers transition from shelter-in-place to a more unencumbered environment we had become accustomed to before the pandemic. 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.

Global digital revenue growth

Essential goods purchases go digital and deep discounts drive splurging

Demand for essential goods has spiked to unprecedented levels with cities around the globe implementing their own versions of shelter-in-place policies. 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.

Essential good revenue by day

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 increase, active apparel saw a 31% YoY spike, and toys and games had 34% growth YoY.

This surge in digital spend comes with a caveat. Brands and retailers alike turn to high discount rates to drive demand and liquidate inventory. Discount rates in the U.S. surged to 34% in mid-March — well above discounts seen during Cyber Week. This trend was mirrored globally as March became a critical month in containing the virus across the world.

Despite economic uncertainty, it’s clear people want to make themselves more comfortable as they transition to work and personal life at home. Whether it’s arts and crafts or items to make their home environment or work-from-home attire more comfortable, consumers are spending beyond the essentials and scoring great deals while they’re at it.

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 holidays — things changed once the virus began to spread. In particular, there was a 41% spike in digital revenue during the final 15 days of the quarter.

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

Q1 2020 digital revenue and COVID-19 cases by day, global

Leisure and gardening will heat up Q2 revenues

Undoubtedly, many brands and retailers experienced a strong Q1 digital performance. 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 behavior — across demographics and categories — beginning to take hold.

As the demand for essential goods begins to level off and supply chains begin to stabilize, gardening and home improvement suppliers, craft stores, toys and learning, and athleisure companies will likely all see surges in April. And spending through digital channels will continue to soar, especially as older generations 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 shelter-in-place mandates are lifted. But, far more compelling is what we know from our many years of analyzing consumer data.

During the holiday shopping season, consumers tend to adopt new behaviors that ultimately become the new normal moving forward into the new year and beyond. In recent holiday seasons, for example, we’ve see the following:

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

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

In the meantime, register for our webinar to learn how consumers are changing in response to COVID-19.

The Q1 Shopping Index uncovers the true shopping story through analyzing 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:

Subscribe to our blog newsletter to get the latest in Leading Through Change.

Q1 Shopping Index Methodology

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 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.

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