March 2020 will go down as the month that things changed forever.
The world’s response to thwart the spread of the coronavirus sees markets trembling, travel halting, businesses closing, mass layoffs, and many who are still employed working from home. We’ve been thrust into a new normal with no real idea how long it will last.
Closer to home in our industry, we see shoppers storming stores to stock up, even hoard, household essentials. Some is excessive buying as a result of panic. Much is the result of shifting our distributed consumption from restaurants, hotels and the workplace to home. As consumption shifts to home, households must source more of this product from retailers. As a result, retailers that sell essentials – mass, chain drug, grocery and pureplay e-commerce – are seeing record volume levels.
Across our companies – CEP, Ideoclick and Replenium – we’ve spoken with several retailers, manufacturers and technology partners about their recent experiences. To accommodate the increased load and to keep customers and employees safe, retailers have dramatically stepped up sanitation, regularly disinfecting surfaces throughout the store, adding plexiglass between employees and shoppers, and have modified hours to promote restocking and safety. It has been a remarkable effort for which the industry should be proud.
The common challenges relate to the volume surge, supply chain stresses, workforce and customer safety and e-commerce capacity and performance. While all businesses are stretched, we are seeing that those retailers, technology companies and service partners that are further along in their digital transformation are faring better than those that are not. They were more ready for the crisis, are bending but not breaking, and are powering though to come out the other side even stronger. However, for others, this crisis is a wake-up call that they should not let go to waste.
An E-commerce Inflection Point
Retailers are seeing massive e-commerce volume as shoppers look to keep distance from workers and each other. They are doing their best to keep up with the volume and accommodate the surging delivery and pickup business. As e-commerce volume rises and shoppers take to this new way to shop, retailers realize that the shift to e-commerce has accelerated and will forever be a larger and more important portion of their sales.
On the pureplay e-commerce side, we see Amazon with total daily volumes rivaling holiday season levels. The demand for certain categories is so excessive at Amazon that they have temporarily halted ordering and receiving of products in most categories outside of household essentials and medical supplies. They are hiring 100,000 additional workers to handle the demand.
Instacart, a preeminent e-commerce grocery delivery retailer, is seeing triple digit increases in downloads and crushing levels of demand. They recently announced the hiring of 300,000 shoppers to pick and pack from retail stores in order to serve their growing customer base.
A Surge in Customer Purchase Data
Behind this increase in volume, there is something happening that may not be obvious to many. Along with surging demand, there is a massive surge in the volume of data that retailers are collecting. The product and brand preferences of consumers are being demonstrated and being captured in droves. This is a precious asset being produced real time.
This recent surge in shopping data will widen the gap between best-in-class retailers and others. Retailers that have their e-commerce shop in order and are adept at leveraging data to enhance customer relationships and service will increase their lead over retailers that either do not leverage their data or allow third parties to collect and own the data.
Amazon’s Automated Shopping Lead Widens
Already building a very large CPG and Grocery business, with a significant portion on automated programs like Subscribe-and-Save and Alexa Reorder, Amazon is doing massive new volumes across household consumables. As Amazon makes these sales, they capture the data to use in personalization and to move customers into their various automated programs. Based on Amazon’s increase of billions of dollars per month in household consumables volume, we estimate Amazon is capturing new, incremental retained replenishment volume approaching $1 Billion per month. This new volume to Amazon’s automated programs takes even more volume out of the traditional channel which retailers will struggle to get back.
Others Fight to Keep Up
There will be other retailers, too, that are able to capitalize on this data surge. They will recognize the importance of leveraging this data to help customers purchase these and other items going forward. They will include the products on lists and include them in personalization. The most strategic retailers will prompt shoppers to move these products into AutoReplenishment programs like Replenium, which helps customers with easier repeat shopping, provides the retailer with better retention and larger baskets, and benefits brands by fostering loyalty for their products.
As shoppers put these products on Auto-Replenishment, algorithms determine which other products they might want based on their past purchases, aggregated shopper data, and manufacturer data. More products are recommended for replenishment and more are added to the replenishment list. Shoppers have total control with great tools and, over time, move dozens of regularly purchased products into Auto-Replenishment. And in times of surging demand, these products are prioritized for customers in the program, which is a great reward for their loyalty.