COVID-19, E-Commerce and the Black Swan

E-commerce and COVID-19

Empty city streets, padlocks set firmly over metal bars. Covered windows at shops and cafes that were until very recently buzzing with patrons just a couple of weeks ago. Now they’re all deserted. No, this is not a zombie apocalypse movie scene…it is a dark moment in time but it is also our new reality…at least for the next couple of weeks if not months.

COVID-19 is analogous to what Nassim Taleb referred to as the Black Swan. As any Black Swan, it is suddenly and intensely changing our daily lives and the world around us. Early signs already show colossal market impacts, the world over. Germany currently projects a major drop in their GDP, by as much as 5.4% due to COVID-19 and the US Federal Reserve forecasts unemployment skyrocketing to 32.1%

This is certainly not the first Black Swan we have experienced in our Magento community, however this moment is arguably set to affect us more than, for example, the financial crisis of 2008. What makes this crisis unique and most impactful specifically for ecommerce is that people are now forced to stay at home for an extended period of time, left with internet-based retail as often the only viable alternative to shop, buy and receive goods, services and supplies.

It is natural to understand how hand sanitizers, gloves and masks sales surged 817%, as Adobe’s Analytics data suggests. It is also easy to comprehend how food and consumable goods categories are experiencing sales spikes. However, I was surprised to learn from a Mexico-based Magento menswear retailer that their online sales increased 2.7x. Neither of us could explain this spike in behavior. We both agreed that refreshing a wardrobe would not seem a priority in the current situation.

The net effect of COVID-19 on the developed world’s purchasing power is still underknown. Governments are just now rolling out unprecedented stimulus plans. Countries like Germany and the UK are committing to pay 80% of worker’s wages for those otherwise losing their jobs. However, one shift is becoming very clear – sales across all channels are now almost entirely transacted via ecommerce.

This shift, coupled with the physical distancing atmosphere around us, changes the landscape maybe forever, but without question, quickly and dramatically. We will see a rising share of customers who rarely used to order online, overall website traffic increases across verticals, bulk ordering, and higher and more personalized customer service demands. (Think about the last mile of delivery and how it must now include contactless delivery and often times store to curbside and store to home service.) 

What exactly does all this mean to present day e-retailers? How for example do merchants ensure that their business continues to operate and grow in this new highly unusual reality. If I were to predict the key points, they would be-

  • Simple and intuitive user experience is going to be even more important, with first-time users onboarding and engaging sites. Whether a visitor will become a customer or not will heavily depend on their personal experience. An end user persona review, and a UX and accessibility audit could be smart areas to invest.
  • Merchant’s ecommerce platform’s ability to scale and handle increased load will be tested and become a major consideration to support broadened business operation and overall growth. Performing a load test on your store can help verify its limits.
  • Site speed is going to be as important as ever for the conversion rate and SEO ranking, especially with traffic increase. Frontend performance can be tested using Google’s PageSpeed Insights or a Magento specific Performance Check Tool. Backend Performance Audit should provide even more insight, but it is usually done manually.
  • All business processes will be tested, starting from upstream supply chains to downstream customer support. Seamless operations that now must grow to support additional and increased service level agreements will be critical. Making a business operations checklists and mapping the business processes out on a flowchart can help identify potential weaknesses.

Sooner or later – I very much hope sooner – the Coronavirus crisis will be over. Certainly, the moment it is yielding will leave a long-lasting footprint. I believe it will only accelerate where we were already headed – online. Commerce will grow as people and businesses who never shopped, bought or sold anything online will now be forced to go online out of necessity…and stay online because of experience, convenience and options.

For present day ecommerce, this moment is an optimal opportunity to stress test business models and to refine tools and processes in use. Those that use the time wisely will very likely emerge stronger than ever before.

What COVID-19 challenges is your business dealing with? Please reach out. I’d enjoy learning about it and hearing your perspectives.

Stay safe and healthy!

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