Consumer Trends: Rise of e-Commerce and Direct-to-Consumer Shopping
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It’s no surprise that the at-home consumer is now shopping online. As states start to reopen, retailers are beginning to push consumers to come back in-store with cleanliness campaigns and limited capacity openings. However, some brands are deciding to remain focused on e-commerce and direct-to-consumer platforms rather than emphasize reopening, showing how the pandemic has pushed the inevitable shift to online shopping.
Apparel: Nike & Adidas
Back in 2018, Adidas set the goal of generating $4 billion in digital sales by 2020. At the time, in 2016, worldwide e-commerce was only generating $1 billion so it was considered an ambitious task but Sebastian Drews, VP for Digital IT at the firm said then, “The core belief that we have is that we need to behave in business like in sport. We need to think like an athlete. That means two things. Number one - we set ourselves clear ambitions and clear goals; second, we have a great training plan and we execute against that.” However with the pandemic, 60% of Adidas’ businesses have been at a standstill since mid-March and more than 70% of their global stores are still closed but the company’s vision has not changed.
"It's clear that the consumer is moving online and the importance of online will be immensely important moving forward … The one store that is open in the world is e-comm," Adidas CEO Kaspar Rorsted on how COVID-19 is accelerating a pivot to D2C.
Adidas has stated that they have surpassed their goal of $4 billion thanks to the coronavirus and have upped their goal for the year, a number that they have not shared. But with e-commerce revenues for the past three months as a whole was averaging around 35% year-on-year and saw a hefty uptick in March as the pandemic hit Western economies, topping 55% year-on-year, while April has seen triple digit levels it is not surprising.
Nike also reports less than expected foot traffic in reopening stores in China, but is being partially offset with a surge of new customer acquisitions online. To note, Nike shares were marked 1.5% lower at $85.37 as of May 15th, compared 0.6% pullback for the Dow Jones Industrial Average, making the stock's year-to-date decline to around 15.4%.
CPG: Pepsi-Co & Heinz
Until now, direct-to-consumer shipments have not traditionally been a major source of revenue for large CPG companies. But with shoppers quarantined or reluctant to leave their homes, e-commerce has become an increasingly popular way for shoppers to buy their groceries, seeing an uptick in over 160%. This is particularly true for PepsiCo whose portfolio contains many types of products that consumers are stocking up on, including chips and oatmeal.
Launched May 11th, PepsiCo created two sites for its direct-to-consumer offerings: PantryShop.com and Snacks.com, each focusing on consumers' needs rather than specific products or brands. Snacks.com presents individual products whereas PantryShop has bundled products that reach different consumers. For example, The "Rise & Shine" kit comes with Tropicana juice, Quaker oatmeal and Life cereal and the "Workout & Recovery" kit contains Gatorade protein bars, Muscle Milk and enhanced electrolyte water Propel.
“We started thinking about this even before COVID hit,” explained Frito-Lay Chief Transformation & Strategy Officer Michael Lindsey when asked about the origins of Snacks.com. “There have always been people who love products of ours that can’t always find them in their store.”
It’s not expected that PepsiCo will ever collect more sales from e-commerce than it does at the retail level but with more people purchasing goods online now, analysts have speculated that the push to buy products online has accelerated in recent weeks as consumers have gotten used to the convenience and simplicity. Even if some people go back to brick-and-mortar stores for a part or all of their shopping, e-commerce and direct-to-consumer shopping will undoubtedly remain a bigger part of consumers' buying habits.
Even quicker to respond than PepsiCO, Heinz launched its first-ever DTC business line last month, bundling staple items like beans, spaghetti, condiments and soup for home deliveries in the United Kingdom. Framed as a public service amidst the pandemic, British retailers have pushed back on Heinz because the DTC business will reduce availability in stores and have a cheaper price point. While Kraft-Heinz isn’t changing its overall marketing spend, paid media will grow by 30% this year, as it moves budgets from channels like retail trade, said CEO Miguel Patricio during the company’s Q1 earnings call.
CPG: Proctor and Gamble
Consumer goods corporation P&G has set out to make its e-commerce sites more natural and experiential to consumers with their new “Show Me My Home” campaign. With shoppers often overwhelmed with decision fatigue on an online site that lists products, the company has decided to launch a D2C site that is broken down into natural categories: rooms in the home. The microsite, currently only available in Asia, by Shopee, the leading online shopping platform in Southeast Asia, has seen positive feedback.
Ian Ho, regional managing director at Shopee, says:
“Even before the Covid-19 situation, we have observed that people want to do more than just shop online. Users are demanding greater engagement and social interaction while they shop... We foresee that this trend is here to stay as more online shoppers see e-commerce platforms not as a purely transactional experience but as a source of entertainment. Therefore, our focus in 2020 is to continue to make online shopping more engaging and social.”