With the impact of COVID-19, 2020 stands out as the biggest year on record for organizations to change their channel strategy. This builds on a longer-term multi-year trend, with many already focused on growing their online channel business.
Online Share of Retail Growth Accelerating
While there are significant variations by category, along with B2C vs. B2B, the trend has been generally consistent for online purchasing growth in the past several years. For instance, one source shows that retail ecommerce sales grew from an estimated 8.9% share of total retail to an estimated 10.7% in 2019. With most retailers closed for several months, online became the only choice for many “non-essential” goods, and the initial 12.0% estimated share for 2020 will be exceeded.
3 Brands Rapidly Evolving Channel Strategy: Ulta, Starbucks and Zara
The pace of change has been dramatic: In one June day, for instance, the Wall Street Journal reported on:
- Beauty retailer Ulta’s clean slate approach to rethinking its store and online distribution
- Starbucks reconfiguring for more takeout business
- Fashion retailer Zara’s Chairman Pablo Isla calling for 25% of 2022 sales to be online.
Demand is Changing, and So Should Channel Strategy Approaches
New patterns of demand and consumption are emerging with the new WFH (working from home) and SFH (schooling from home) enforced environments for non-essential workers.
Grocery and mass merchandise stores experienced unprecedented demand shifts, with demand for more meals at home. Zoom video conferencing became a household word, and this can lead to shifts in demand for larger screens at home to see the “Hollywood Squares” better.
Even categories that have been relatively unpenetrated for online B2B, such as foodservice, are calling for increases in online purchases from 1% to 3%.
Structural Demand Changes
Quick services restaurant chains (QSRs) who have built businesses around off-premise consumption, with efficient drive through, are faring much better in meeting the evolving demand and addressing safety requirements.
Now that sit-down restaurants are reopened, they are facing demand and business challenges. Even if consumers feel safe to dine in, most restaurants were not built to be financially viable at 50% seating capacity. Beyond that, some customers can’t come back for sit down because their life structure does not allow it.
If a parent needs to continue to work from home, be the teacher, and provide babysitting, they aren’t in a position to have a sit-down meal, even if the restaurant is open. That same person may have enjoyed a sit-down lunch on occasion with coworkers when going into the office for work each day (while their kids were in school, camp or daycare).
An executive in the foodservice industry comments,
“With parents working at home, the family may be picking up several meals a week from quick service takeout restaurants, because they just don’t have time to prepare meals, be a teacher and get their work done.”
Rethinking Channel Strategy
With these types of structural demand shifts in place, it’s important for brands and leadership teams to rethink their channel strategy. Contact us to see how the channel strategy experts at Insight to Action can help.