COVID-19, the novel coronavirus has impacted nearly every aspect of business from supply chain to fulfillment to marketing & advertising. A global threat that arose in late 2019 that presented with symptoms of an average flu soon grew into an overwhelming force that has put the entire world on high alert. Currently present in over 150 countries, it’s highly contagious and poses a significant health risk to the aging and immunocompromised population.
As it spreads, it has invariably altered the lives of nearly every person in the United States. Line cooks, personal trainers, CEOs, and hedge fund managers have felt the economic and social burden of coronavirus.
Social distancing has become the norm (and often the mandate). Emergency orders have been put in place so that workers and businesses have a safety net to cling to when lost revenue and wages are a certainty.
The fallout from this crisis will be vast, however, it can be mitigated. In the midst of this disaster there is an opportunity, especially for businesses that can be agile and grow new channels out of necessity. The capacity to innovate is what will win.
E-commerce and direct-to-consumer (D2C) brands are positioned to overperform during this period of economic and social upheaval (as long as their supply chains remain intact). With the advent of quarentines and shelter-in-place orders, most people have shifted from doing a daily commute into an office to working from the comfort of their couch or home office.
The average “digital consumer” owns 3.2 connected devices and with more time in isolation it stands to reason that people will invariably spend more time on each device. Quantified, the numbers show that 32% of people are leaving their homes less and 52% are avoiding crowds according to a Technomic study. While many have been affected by the economic downturn, there are those who continue to work remotely, have disposable income, and want to shop.
So, companies that can maintain stock and can assert their relevance during this crisis have the opportunity to tap a market that has been wracked by change. Brands that offer everyday essentials and/or a low- to no-contact delivery experience stand to benefit the most, like, consumer packaged goods, food service (UberEats, Postmates, Grubhub), health & wellness, alcohol, video games, streaming, home comforts, cannabis/CBD, adult products & entertainment, and office supplies.
Large online retailers stand to benefit the most from the new consumer climate. With a large swath of the population now ordered to work from home, companies like JD.com, China’s largest online retailer, Walmart and Amazon (and by extension Amazon sellers) are in key positions to wrest market share away from brick and mortar stores.
It Already Happened in China
JD.com saw a massive spike in online purchases of everyday essentials. As coronavirus took hold of the nation, JD saw sales of items like rice and flour quadruple compared to this time last year.
To handle this increase in demand, JD increased their workforce by offering 35,000 new jobs, which doubles as an effort to lessen the impact of coronavirus on employment. JD also took measures to combat price gouging and committed to stable pricing on all of the goods they produce.
Companies like Meituan Dianping and Ele.me have seen similar spikes in grocery orders, with orders doubling for the former and tripling for the latter.
There are similar stories across a number of verticals in China. Perhaps one of the most interesting being Cosmo Lady, China’s largest underwear and lingerie retailer. The underwear company shifted its focus to selling on social media using WeChat in response to the coronavirus, even going as far as to institute a company-wide sales ranking that included top executives.
Amazon has instituted many of the same measure as JD.com. The large online retailer has committed to hiring 100,000 more employees in the wake of the coronavirus and giving existing employees a temporary raise of $2 an hour in the US. In total they’re planning to invest $350 million in their effort to keep up with the demand and opportunity presented by the coronavirus.
Amazon has seen demand for essentials surge, with some sellers attempting to price gouge during the early hysteria from the pandemic. Much like JD, Amazon took swift action to curtail the inflated pricing of items like hand sanitizer, which at one point was being offered at $100 for a pack of two.
Unlike its competitors Walmart and Costco, Amazon’s business model was designed to further the “stay-at-home” economy. With over 150 million Amazon Prime subscribers globally, the company has a built-in cohort of shoppers that already prioritize shopping for some essentials on Amazon.
While other retailers will likely see an increase in online sales and low- to no-contact delivery/pick-up orders, Amazon holds a distinct advantage.
It’s clear that many retailers will have trouble meeting demand for highly sought after essentials because (even Amazon) purchases their stock from wholesalers, however, Amazon has a vast network of third party sellers that don’t rely on the same network of wholesalers. This isn’t a fool-proof advantage because at some point third party sellers may have issues keeping up with demand as well.
Here’s What We’re Seeing
In the midst of crisis you can always find opportunity and there’s a pretty big opportunity here. We’re seeing food and beverage sales as well as companies in the wellness category skyrocket on Amazon. Their average return on ad spend (ROAS) has gone from 4.5x to 6x–an almost 30% increase!–in a week.
Amazon is prioritizing the distribution of household essentials until April 5th, 2020. This might impact a lot of sellers, but it also leaves the door open for sellers who can meet that criteria and demand. Categories classified as essential will include: baby, health, household, beauty, personal care, grocery, industrial, scientific and pets.
A number of products categories are seeing a massive spike in sales. Including bottled water (up 78% week-over-week) and vitamins/supplements (up 78% week-over-week).
Other Responses to COVID-19
This industry in particular was likely one of the first (outside of travel, hospitality, and medicine) to feel the sting of the coronavirus. Virtually all major events and many more on a local scale have been canceled.
This left companies reeling, especially those that rely on conferences to generate significant lead flow to their businesses. This reality led to many companies taking their events online.
Hawke Media decided to pivot our event presence to digital as well, with the advent of Quarantine Conference.
On April 7th, 2020 Hawke Media will hold a full day of programming aimed at helping businesses navigate the complicated landscape marketing and selling during and post-coronavirus.
Featured speakers include Brandon Webb, former Navy Seal, New York Times Bestseller, Entrepreneur, and pilot.
In a traditionally high-contact environment where agents meet with potential clients in-person, real estate could see a big dip because clients will be more reluctant to participate in showings.
One real estate company is getting ahead of this by training its agents to do virtual showings and reach potential customers on social media. Evergrande Real Estate Group, has implemented a digital-first strategy that could help propel it through these uncertain economic times.
The legalization and normalization movement for cannabis and CBD have led forward-thinking nations and states to it becoming one of the most talked about and fastest growing sectors.
Coronavirus would seemingly curtail this, however many dispensaries and brands are weathing this by offering a more conscious approach to safety restrictions. For example, LA Kush, a Los Angeles-based dispensary is offering customers the option to pick up or even have their orders delivered.
This coming as no surprise in an industry where retailers have always been quick to adapt out of necessity because of changing regulations, with California legal cannabis sales skyrocketing 159% in a single day.
Big online retailers like Amazon will own the day during this crisis because their supply chain and fulfillment infrastructure is optimized for this scenario, but e-commerce will still be pushed to its limits as online sellers will have to prove they can keep up with demand.
The success of online retailers gives other businesses a framework for how they can pivot to digital-first models in order to survive what is sure to be a proving ground for lots of businesses worldwide.