COVID-19: Retailers scrambling to respond to a surge in e-commerce orders during pandemic
Retailers have been left either struggling with a surge in demand for online ordering and delivery or ruing their lack of a web shop
Cannabis retailers in Ontario exhaled a collective sigh of relief earlier this week when the provincial government threw them a lifeline by finally — albeit temporarily — allowing them to offer online sales after shutting down their physical storefronts last weekend.
Previously, only the government-owned Ontario Cannabis Store was allowed to sell cannabis online, a “silly and misguided” policy, according to the Consumer Choice Centre, a consumer advocacy group. Now, for the time being, cannabis stores can offer delivery and curbside pickup.
Curbside pickup also seems to be the mechanism of choice for other retailers, including Canadian Tire, whose website urges customers to phone in orders after its brick-and-mortar presence, too, lost its “essential” business designation on April 5.
Taking orders by phone and getting customers to pick them up them up may seem a strange way to operate more than than two decades into the e-commerce revolution, but the coronavirus crisis has many retailers either struggling with a surge in demand for online ordering and delivery or ruing their lack of a web shop since most people are trying to stay home and practice social distancing measures as much as possible.
Almost three in 10 people are shopping for things online that they normally would have bought in-store, according to a survey of more than 30,000 Canadians by Chicago-based market research firm Numerator.
Even the biggest, most competent e-commerce players such as Amazon.com Inc. have been forced to make adjustments.
“They’re so backed up from an increase in demand, if you’re buying non-essential products, they’re not shipping that out to you for, like, a month,” said Ygal Arounian, an equity analyst at Wedbush Securities covering e-commerce companies.
Many smaller retailers, of course, still don’t have a web shop, often due to either the cost or logistics of setting one up, a shortcoming the coronavirus-related downturn has only emphasized.
To that end, the City of Toronto and the Toronto Association of Business Improvement Areas is offering a program called Digital Main Street to help businesses develop their online footprint through one-on-one consultations.
One midtown Toronto business improvement association has created a $15,000 Digital Support Fund. The Yonge + St. Clair BIA will hand out $500 on a first-come, first-serve basis to up to 30 members to help them transition or grow an existing online presence.
But how the coronavirus-related downturn exactly affects various retailers will differ a lot, Arounian said, primarily based on what they’re selling.
For example, even though the conventional wisdom is that e-commerce activity is at an all-time high, Ottawa-based Shopify Inc. had to issue a message to investors that the global pandemic had thrown off its financial forecasts.
Arounian said Shopify’s business in the short term is likely suffering because the company serves a lot of independent merchants selling lifestyle products — makeup, clothing and watches — things that are not top priorities right now.
Investment house Piper Sandler’s biannual Taking Stock with Teens survey conducted in the United States in February and March found that spending on cosmetics had fallen 26 per cent from spring 2019, marking a 10-year survey low.
“In the near term, I think that the consumer focus has shifted completely to non-discretionary products,” Arounian said. “In the near term, we’re likely in a recession now. Ten million people in the U.S. filed for unemployment in the last two weeks, and that’s going to put some pressure on non-discretionary spend also.”
That hasn’t stopped people from shopping at Indigo Books & Music Inc., which has long had a substantial e-commerce presence, though most of its business still came from in-store purchases. Its online sales are up more than 300 per cent since its physical stores closed.
“We provide the things that will lower the stress level at home,” chief executive Heather Reisman. “I think after food, we (sell) the things that people would value at this moment. We do have educational and creative things for kids. We do have lots of things related to wellness and well-being. We are related to reading.”
She said the company has been able to easily absorb the increased online business since volumes during the Christmas period are 10 times what they are now.
“We always have a very significant surge, so we have capacity,” she said.
Reisman said the biggest constraint is taking steps to limit volume, because it’s necessary to keep workers healthy.
“We have to meter it, because we have implemented extreme social distancing in our fulfilment centres,” she said.
But not every company is handling the massive shift in consumer behaviour without hiccups.
For example, customers visiting Canadian Tire’s website on Monday were greeted with the famous red triangle and green leaf logo at the top of the page, and a plain text message that advised customers that should avoid using the site between 9 a.m. and 5 p.m., because those were the busiest times.
“Due to these unprecedented times, we are experiencing a higher than normal volume of traffic to our website. We want you to know we are here for you, and to assure you that we’re working hard to bring you the essentials you need.”
If there was a simple way to order merchandise on the site, it wasn’t immediately apparent. Instead, the company suggested customers place their orders by phone and offered a Google link to find the closest locations.
By Tuesday, the company still wasn’t accepting online orders, but the page was updated with a drop-down menu that allows customers to find store phone numbers without going to Google.
Canadian Tire did not respond to requests for comment from the Financial Post, but industry watchers have long held that the retailer is behind its peers in terms of e-commerce abilities (though Sport Chek and Mark’s, its sister banners under the Canadian Tire Corp. Ltd. umbrella, are more robust).
In some cases, companies that are heavily focused on physical-world interactions need to change on the fly. Jessie Wilkin, founder and partner at Toronto-based Pilot Coffee, said before the pandemic, the coffee maker and chain’s business was almost entirely focused on wholesale coffee sales and its eight cafes in the city.
“March 16, we closed all our retail locations. We were unsure at that point how long they would be closed for, and we immediately started seeing an increase in sales from our online orders,” she said.
“From March 16, we’ve had almost a 300 per cent increase in online orders, and probably about a 350 per cent increase in online customers, and about 10 per cent increase in our online subscriptions.”
Wilkin said Pilot has been forced to change its workflow to respond to the flood of smaller consumer orders, holding roasted beans in inventory instead of doing roast-to-order wholesale batches.
The company is also looking at expanding its delivery capabilities, because they’re having problems dealing with Canada Post and FedEx with all the disruption.
Wilkin is looking forward to reopening Pilot’s cafes once it’s safe, but she said the pandemic will likely change the business significantly.
“We’re sort of seeing an expansion into an untapped market”
Jessie Wilkin
“I believe that our customers are going to come back to our cafes, and it’s just going to take some time,” she said. “But I think as well, consumers that hadn’t previously ordered our products online or ever made coffee at home are now feeling more empowered to do so. We’re sort of seeing an expansion into an untapped market.”
Running Room Canada Inc. founder and chief executive John Stanton is thinking in a similar way. Before the pandemic, his chain of stores heavily relied on in-person shoe sales and organized running groups.
Now, he is encouraging workers and customers alike to embrace innovation by, for example, hosting virtual running events where people use smartphone apps to record solo weekend runs. The company is also trying to offer “gait analysis” of customers through FaceTime to help pick the right shoes for their stride, something they normally do in-store.
Stanton said he doesn’t know what the post-pandemic running scene will be like — will people still want to gather in big groups for event races? — but he’s confident his business can endure, because people want what it has to offer.
“I get that mental release as well as a physical release, and I don’t have that interconnection with people at a time when it’s probably not a good idea to be around a big group.” Stanton said. “I think you’re probably going to see a return to that solitary run.”
Originally published here.
The Consumer Choice Center is the consumer advocacy group supporting lifestyle freedom, innovation, privacy, science, and consumer choice. The main policy areas we focus on are digital, mobility, lifestyle & consumer goods, and health & science.
The CCC represents consumers in over 100 countries across the globe. We closely monitor regulatory trends in Ottawa, Washington, Brussels, Geneva and other hotspots of regulation and inform and activate consumers to fight for #ConsumerChoice. Learn more at consumerchoicecenter.org
