Few industry sectors have been as disrupted by the Covid-19 lockdown as retail, with most UK merchants having to put their brick and mortar operations completely on hold for months. Predictably, this has led to ecommerce gaining in importance as customers still eager to consume are doing so online. In May, around a third of all retail sales were generated online, compared to just a fifth in January. Even as high streets have started reopening, online sales remain at levels unseen before 2020.
While the sheer amount of online sales we are currently seeing is unprecedented, it should be said that retail brands have been expanding their ecommerce offerings for years, both by developing their own portals or selling product through online marketplaces. Even retail giants like Ikea that used to say it would never do online shopping have taken it on in recent years, and the number of large brands shunning it, such as Primark, is shrinking.
Another trend that has been accelerating throughout lockdown is cross-border trading online, with online marketplaces such as Fruugo seeing a huge rise in merchants using such platforms, and increased consumer appetite for products from foreign markets. Again, this has been growing steadily over time, but accelerated due to Covid-19. By the time all major European countries had gone into lockdown at the end of March, our weekly sales had tripled compared to last year, with a majority relating to cross-border consumption.
No looking back
The reopening of non-essential physical shops since June has offered a much-needed respite to many businesses, ensuring many retailers can continue to trade. Smaller businesses with loyal, local, customers are especially benefitting. However, it is crucial for businesses to not lose sight of ecommerce and think they can simply go back to old ways of operating.
We as an industry are clearly in a period of caution, with the risk of further lockdowns being instated down the line, the challenges of the recession due to the pandemic piling on and the end to the Brexit transition agreement looming. Beyond that, many consumers continue to feel wary about entering shops for non-essential purchases, and even more shoppers who were previously sceptical have easily adapted to the ease and convenience of online.
In short, retailers need to do their best to expand their ecommerce offerings to maximise sales in both the short and long term. It is the clearest way forward to ensuring lasting success in an industry that will continue to deal with massive change for years to come.
A mixed approach
Even if retailers must adjust to continued declines in brick and mortar footfall, physical retail stores will not be going away anytime soon – most merchants will continue to operate under a mixed business model. However, this will require many to change their approach to their physical stores, where customer experience will become increasingly key. Shops need to be seamlessly integrated with online operations and act as a network of distribution centres that offer both ship-from-store or click-and-collect capabilities, and bespoke services need to be put in place to give customers further reason to visit.
For retailers, finding a dynamic mix between physical and digital is also a strategic move as it spreads risk to use multiple sales channels. This goes for ecommerce itself too, where online marketplaces can be used along with owned ecommerce portals meaning that if one starts to go down, there are other channels you can rely on.
Online marketplace growth
Capturing the growing online consumer base will require different strategies depending on the nature of a retailer. While many well-recognised larger brands will focus on generating traffic to their own ecommerce portals, smaller independent retailers are increasingly taking advantage of marketplaces as they massively simplify the process of identifying and transacting with customers.
For a small business, expanding online can be a very tall order as it requires resources and tools many do not have to deal with the complexities of ecommerce. For them, marketplaces are a saviour as they can take on a lot of the logistical work and help optimise marketing based on data-based insights. It is also risk-free, as they tend to only require a fee once they deliver a customer and a sale to the retailer. The role played by marketplaces in helping retailers maintain sales throughout the crisis cannot be overlooked, and in many ways, it has cemented their place in the ecommerce landscape over time.
Another category that gets little attention is wholesalers that sell their products through other retailers, many of whom where hit exceptionally hard during the initial stages of lockdown. One of the most successful retailers on our platform throughout lockdown was previously selling garden furniture through larger retailers such as B&Q and garden centres. In March, when its business disappeared overnight, it swiftly switched its business model to focusing on ecommerce and was able to generate six figures of turnover in just a few weeks.
2020 has been tough for retail, and the ongoing crisis has sadly tipped many businesses over the edge and will continue to do so. As Brexit now looms, marketplaces like Fruugo have a duty to continue doing their utmost to support retailers in the face of what is likely to become yet another major challenge facing them in the foreseeable future. Even if the UK becomes a ‘third country’ as far as the EU member states are concerned, platforms can help minimise the additional costs that will accrue for sellers and help them continue to trade across borders and benefit from the valuable revenue stream international sales can provide.
If the last few months have taught us anything, it is that it is crucial for all retailers to continue to digitise and start looking to international sales as a means to grow. Little is pointing to a significant retraction of online retailing, and as always, those agile enough to adapt to changes in the economic outlook and consumer behaviour will emerge strongest.
Tony Preedy is chief commercial officer at Fruugo