As e-commerce merchants, it’s important to be tuned in to the shifts in markets to understand the sentiments of our customers and be ready for fluctuations in sales activity. If we do this well, we can use tactics to minimize the downside in bad economic times or even maximize sales when the economy is booming. With the Coronavirus crisis very much front of mind for many all over the world, we asked ourselves: what will the impact be on e-commerce?
So far, the biggest impact to us has been the cancellation of Adobe Summit / Magento Imagine – the latter traditionally being one of the largest e-commerce trade shows of the year. But with a growing sense all around that we’re just at the proverbial tip of the iceberg of this thing, and with global financial markets reeling from the uncertainty, we feel compelled to weigh in on what we believe we will see happening in the world of e-commerce this year.
So here are some key questions about the crisis and e-commerce and how we are currently answering them
Q: Is the Crisis Going to be Good or Bad for E-commerce?
A: It will be the same as it will be for the economy as a whole; e-commerce is such a pervasive part of the global economy… we’ll see the good (innovation) the bad (short term pullbacks, hesitations and postponements of business initiatives) and the ugly (increasing risk, and a lot of “out of stock” notices). As of the week of March 9, we’re in the “shock” phase where the virus is just spreading in the US. It’s hard not to push the pause button on initiatives but those who have the fortitude to keep going and to keep innovating are going to come out on the other side of this in great shape.
Q: Will B2C Retail E-commerce Sales Benefit from the Coronavirus Crisis?
A: There’s a theory that the growing fear of being in public retail settings and crowds might bolster e-commerce sales as people opt for the online alternative to high streets. This isn’t necessarily true. The problem is that e-commerce, which reduces time, distance and touches between the factories and consumers, may actually have the capability of exacerbating the supply chains that are interrupted by this crisis. There is less friction in the economy with e-commerce. So although it’s easy for consumers to sit home on their couch and order on their phones, the products might not be available because a lot of the resources in the supply chain that produce the items are not working and producing as they normally do.
Q: Is the E-commerce Industry Going to Change Based on this Crisis?
A: We think there are going to be a lot of opportunities for marketplaces, apps, extensions that help companies avoid supply chain disruption. This will essentially point to solving the need for supply chain diversification from a company’s vendors’ manufacturing floors right through to inventory on their (b2b) customers’ shelves.
- Affiliate programs
- Make-to-order manufacturing
- Customized manufacturing
Also more controls on inventory and shipping will be in demand in order to account for future economic events where scarcity comes into play.
Q: What E-commerce Verticals Will Benefit From the Crisis?
A: It’s pretty clear that the industries in e-commerce that will benefit from the crisis include entertainment software and just about anything that streams or is downloadable. We expect gaming and entertainment to see the most lift over the next six months. We also think there might be a bit of a run up in demand for other types of products that support entertainment at home. As long as they can be produced, speakers, home theater products will get a boost from people moving their money from vacations to STAYcations. It’s obvious that travel is getting killed short term but assuming this is a 6-12 month problem in an economy that is overall performing quite well get ready for travel to explode in 2021.
Q: With a Temporary Downturn in the Economy, How Will E-commerce Software Platform Companies Fair?
A: The larger platform companies like Adobe-Magento, Shopify and Big Commerce are pretty much flush with cash right now. They have plenty of money to continue their marketing efforts to take on new clients who are also looking beyond this crisis. We don’t see any long-term effects from this crisis although everybody’s going to take a hit in the short term to some degree. Hopefully the “hit” is just short term stock price devaluation and some hesitation not cancellation of initiatives.
Q: How Will Service Firms Like System Integrators, Digital Agencies, Placement Firms Fair?
A: Assuming this is a 6 month problem, everyone is going to be fine. We have not heard of companies modulating or changing plans yet. Sales cycles are long and the larger e-commerce projects are long and take time. Digital agencies may see some spending reductions if companies see short term demand pullbacks but we anticipate that it will lead to pent up demand in Q4. If there’s a vaccine and / or systematic controls in place in the economy by Q4, look out demand for services will far outstrip supply for both technology and marketing services.
Q: What Innovations Might Be Driven By This Crisis?
A: First, diversification of supply chains as mentioned earlier – there’s going to be some new software helping companies accomplish this like in the e-commerce world, Marketplace technologies are going to expand with new features and offerings as a result. There will be other areas of innovation and there will be acceleration of some trends that have already begun – we believe it will be prudent to keep an eye on:
- AI and shopper experience software developments both inside (core) and outside (extensions, 3rd parties) of the e-commerce platforms. You’ll be wondering how a site knew exactly what you wanted.
- PWAs and Mobile shopping – like 2019 it’s going to be another big year as merchants’ share of purchases from mobile devices increases – especially in B2B
- Headless shopping experiences were already making huge strides before the crisis; we see an acceleration in the reliance on shopping content and so the number of headless experiences occupying the Internet 1000 e-commerce sites will increase.
The Bottom Line
E-commerce is going to track with the rest of the economy during the crisis. But don’t bet on a slowdown for long. E-commerce is growing so quickly, especially in B2B segments, that it may rebound even faster than any other part of the economy.