Just when we thought that Covid was abating, and life getting back to some sort of normality, there seems to be a perfect storm brewing that could cause even greater frustration and confusion.
As of early October 2021, the next 3-6 months in terms of ecommerce, is going to throw up more challenges for retail.
Problem 1: Impact of Covid
As we all know during Covid there was a significant shift from physical store purchases to online. This accelerated what was a steady growth to one where companies moved to online in their droves.
With physical stores closed, they had no choice; there were customers with a mobile phone and time on their hands, constantly browsing the web.
With many governments supporting wages through furlough schemes there was the opportunity for companies to retain a level of sales, although somewhat reduced, to help cover their costs.
Not only did online start to flourish, but physical many stores were stuck in limbo and unable to trade, many businesses that could not adapt, went to the wall.
With confidence at an all-time low, and many companies unsure of the future, they tried to find ways to reduce their costs.
At the beginning of Covid, online sales represented a small proportion of their turnover, and many didn’t have the infrastructure to adapt quickly to selling exclusively online. So, many cancelled orders on their suppliers who themselves were challenged to supply anyway.
Here’s where the pack of cards starts to tumble. The manufacturers were having the same issues and they in turn cancelled forward orders on their suppliers and so it went on.
Now that we are exiting the pandemic, we are suffering from all those suppliers and manufacturers not having enough product to manufacture.
If we take an example of a car or a television, they both contain hundreds, if not thousands of components. If there’s a shortage of one of those components that make up the product, the goods cannot be manufactured.
Not every item will depend on so many components but even if you think of a lower cost item such as a jar of coffee, it needs beans, glass jars, metal lids, printed labels, and cardboard boxes to ship them.
With stretched supply chains and manufacturers unable to produce sufficient quantities of goods the problem is not going to go away quickly.
Problem 2: Increased energy prices
With oil and coal prices at levels not seen in years, costs of manufacturing and shipping are increasing. Especially as many goods are shipped across the globe from China and the far east.
Every component part of any item needs to be shipped from one manufacturer to another. Just to cite one example, during 2021 the cost of cardboard boxes has increased significantly over what they were at the start of the pandemic.
Problem 3: Delivery driver shortages
Whilst this problem may be geographically skewed, there are couple of reasons why there are too few drivers to meet the needs of the supply chain.
The primary reason here in the UK is that the HGV driving examination and training requires a learner to be accompanied by a trainer / examiner and during Covid, with social distancing, that was impossible.
This means that the number of new drivers available to replace those drivers that leave the industry were zero for many months.
The second reason is that many drivers were not UK nationals and had come to the UK to earn a significantly higher wage than they could in their native countries.
A combination of Covid, improved economics in their native countries and Brexit meant that many decided to return home and there’s not been significant numbers of new drivers to replace them.
This shortage has had a further knock-on effect as, because there is a scarcity of HGV drivers, many companies are offering golden handshakes to drivers to woo them to other industries.
Couple the increase in fuel costs with driver shortages and the only outcome is even higher prices as margins are thin and difficult for hauliers to absorb.
Problem 4: Technology changes
This one will have less impact in the short-term but there are several changes on the horizon that will impact the way marketers can attract new customers and retain existing ones.
Two years ago, Apple and safari removed third party cookies in their browsers. Third party cookies allow retargeting and are widely used by ad agencies to promote products ‘across the web’.
Google has resisted in following suite but has promised that it too will block the use in their Chrome browser. This was due to happen at the end of this year but today there is still confusion as to when this will take place.
Apple themselves have been very ‘pro-user’ and have decided that in iOS 15 they will remove email tracking functionality for all AppleMail users.
This will influence how marketers track open rates, a leading indicator of outbound interaction.
Many would correctly say that open rates are meaningless and click through is the most important factor. But a reduction of any tracking numbers makes for a less clear picture of how marketing is working.
Problem 5: Black Friday / Christmas
The festive season always starts early but with so many people feeling supply shortages, many will shop even earlier this year.
This could lead to stocks being wiped out even before Christmas. With the above problems its unlikely that stocks can be replenished in time, and you can be sure that if they are available, they will command a higher price.
So, what can you do to alleviate these problems?
Well with Black Friday / Cyber Monday fast approaching and Christmas not too far down the line, the biggest challenge facing retail, either off or online is getting hold of enough stock.
During the last 10-20 years, stock was never a major issue but when the supply chain has problems, then you must think more about the value of the stock you have.
In simple economics, when stock is plentiful prices are low because there is little scarcity value, but when stock is in short supply, prices go up if there is demand.
So, the stock you have in your warehouse is becoming more valuable by the day and therefore you should consider how you’ll sell it.
The demand will be high, expectations around Black Friday will be that goods are discounted but will 2021 start to break-down those expectations?
My advice is refrain from discounting if you believe that your products will ultimately sell, and especially if you can’t easily get hold of more stock.
This does not mean artificially increasing prices as you may lose trust by being seen as profiteering. A good reputation may easily be lost through being greedy.
Another conundrum to wrestle with is who is more valuable during this upcoming period, existing or new customers? We all know that nurturing first time buyers into repeat buyers provides more profitable business. But we are used to attracting new customers and spend thousands on PPC.
If you have stock, then letting your existing customers know is paramount and pull maybe pull back a little on your PPC budget?
The next few months are certainly going to be more challenging. You therefore perhaps need to look at how you sell online. It will soon become even more important to make the most of every visitor that lands on your website.
Because of the situation, visitors may be frustrated by the difficulty in getting hold of items that they want. So, most visitors will want a user experience that delivers honesty at this time.
Be more open about delivery times on products before they place items in the basket, it’s better to let people know up front rather than be frustrated further down the funnel.
If you’re expecting more stock, ask for the visitor’s email address so you can let them know when you’ve items back in. But make sure you do because this will start to build that trust from the get-go. Whilst you may not get the sale, your honesty may stimulate further purchases in the future.
This recent post by Reema Singh outlines 15 great examples of how you can optimise your customer experience when you're out of stock.
Good luck and if you need any help with anything related to managing your online customer experience please feel free to reach out to us.