As I write these words, we are seeing the first lockdowns of European countries coming to an end. The main (and, hopefully, the only) wave of the coronavirus pandemic is starting to pass and now is the time to think about what comes next and what steps we should take. How will eCommerce look after COVID?
Some leading research and consulting companies prepared a set of scenarios of COVID crisis development. Based on that, I’ve prepared a comprehensive set of scenarios to predict how the future of eCommerce will look. This may help any Retail and eCommerce Executive to make the right decision going forwards.
The 4 major scenarios
Assumptions about the virus
| Best case scenario |
Brave new world |
Sunrise in the east |
Waves of disease rock the globe |
| No second wave. No panic. |
Second wave. No panic. |
No second wave. Panic. |
Second and subsequent waves. Panic. |
Consequences
| Best case scenario |
Brave new world |
Sunrise in the east |
Waves of disease rock the globe |
| One time outbreak. Consumers remain in control. At the end of summer, the worst is behind us. |
Governments struggle to handle the crisis after the second wave. Businesses step up to help seriously combat the virus. There is a vaccine against the virus on the market. The virus threat will expire in the coming years. |
Ongoing public panic is more severe than the pandemic itself. Asian countries are better at dealing with it. US and European governments and local administrations cannot prevent collective pandemic hysteria. China takes over the global leadership. Global recession. |
Severe seasonal outbreaks of the epidemic. Panicked reaction from consumers. Virus mutates and evolves. Healthcare is on the verge of collapse. Business is trying to adapt to the new seasonality, oscillating between sudden growth and decrease of demand. |
From today’s perspective, we see that only the best-case scenario will not change the world dramatically. In this scenario, economic activity rebounds in late 2020; recovery is slow at first and then accelerates at the beginning of 2021. We also assume that people are much more focused on health issues after the COVID crisis. A new balance between offline and online commerce is established and global digitization accelerates.
In any of the other scenarios, we see much deeper consequences, with at least two years of recovery needed.
Impact on the economy
| Best case scenario |
Brave new world |
Sunrise in the east |
Waves of disease rock the globe |
| Economic activity rebounds in late 2020. Recovery is slow at first and then accelerates at the beginning of 2021. People are much more focused on health issues. A new balance between offline and online commerce. Supply companies are introducing innovations and facilities to meet the increase in demand. The consumption curve takes the shape of a U rather than a V. |
Recovery starts in late 2021. Speeds up in late 2022. Despite the economic collapse in 2020, entrepreneurs and investors are quite optimistic. New working methods that eliminate restrictions associated with traveling and maintaining the rules of social distancing are well accepted. The food and hygiene industry adapts to seasonal demand peaks. Commercial and logistics infrastructure adapts to new epidemiological standards. |
Economic recovery starts late 2021 with much more robust recovery in the East. Supply and utility systems operate mainly due to low-paid employees exposed to the highest risk. This creates a lot of tension in the activities of retail networks and e-commerce. Non-home services are in severe troubles and the majority of these companies go bankrupt. These industries recover slowly after the pandemic has passed. |
Global economic recovery by mid-2022. Waves of disease rock the globe for longer than anyone was prepared for. Countries act separately. Globalization seen as a threat. Increased government surveillance. Restrictions in the organization of work. Consumer spending follows new seasonality. Traditional trade peaks such as returning to school or holidays become moments of stockpiling before the threat of periods of physical retreat. Pop-up retail becomes the norm. |
Impact on retail and similar industries
In the first scenario (which is happening right now), retailers are focusing on keeping their workers safe and keeping the supply chain working. they will then focus more on investing in 3P logistics, marketplaces, loyalty, and local supply chains.
In this scenario, we see some similarities to the previous crises. As statistics from 2009 show, the industries hit hardest were Food away from home, Consumer electronics, Apparel, and Clothing.
In any other scenario, the impact will be much more serious and last much longer.
Retailers without strong eCommerce will go bankrupt. McKinsey analysis approximates that 80% of publicly listed fashion companies in Europe and North America will be in financial distress.
Retailers and their strategic partners must re-evaluate their strategy and introduce more sustainably and omnichannel experiences.
The following industries, in particular, need to rethink their strategy:
- Luxury goods
- Travel / Tourism
- Automotive / Mobility (sharing)
As the situation progresses, shopper attitudes will continue to shift from sick care (seeking remedies for illness) to self-care (taking measures to prevent illness) to well care (investing in themselves for the greater good). That change will manifest itself in a new set of purchasing behaviors.
Retail will invest less in physical openings and much more in eCommerce, new channel-mix decisions, prediction tools, and local supply chains. They will focus on converting clients from being anonymous off-line customers to on-line targeted accounts.
Impact on eCommerce
We will see new Direct-to-Consumer brands and new Sustainable Brands and, of course, a mix of these two.
Companies lagging in technological maturity and connectivity will decline in prominence or go out of business during the extended periods of shutdown.
When we think about differences in these four scenarios, we will see:
- Best case scenario – More businesses start subscription-based models as a method to generate more predictable revenue streams.
- Brave new world – Bigger companies are more resilient and smaller players are acquired or have a constant struggle to stay in business.
- Sunrise in the east – Famous European brands are acquired by Chinese companies.
- Waves of disease rock the globe – Local eCommerce players (DTC, Marketplaces) are stronger and safer than ever. It’s hard to compete globally.
As we see in the report “The impact of COVID-19 on the retail landscape. Where do we go from here?” by Kantar, Health will be the new leading growing industry.
Starting from China, we see hundreds of ongoing “A/B business experiments” globally. Best practices will be copied to other regions and industries.
Simultaneously, with retail struggling and looking for new strategies, there will be a lot of technological innovation to fill the need for new tools.
We will see an explosion of innovation in the areas of streaming, VR, AR, AI, and 3D Printing. The growth of platforms enabling peer-peer market exchange will contribute to market stabilization.
Impact on retail and eCommerce
| Best case scenario |
Brave new world |
Sunrise in the east |
Waves of disease rock the globe |
| More businesses start subscription-based models as a method of generating more predictable revenue streams. |
Bigger companies are more resilient, and smaller players are acquired or struggle to stay in business. |
Famous European brands are acquired by Chinese companies. |
Local eCommerce players (DTC, Marketplaces) are stronger and safer than ever. It’s hard to compete globally. |
Impact on the eCommerce tools and services market
In the best-case scenario, which is happening right, we see that all retailers without eCommerce are implementing SaaS eCommerce platforms super-fast. The time to market for such a shift needs to be a maximum of two to four weeks. We also see retailers with eCommerce investing in logistics to scale-up their capabilities.
To quickly digitize as many sales as possible, companies also invest in marketplace integrations, product information management systems, and logistics systems.
Some companies start their own marketplaces to adapt to supply chain challenges and maximize their ROI on online consumers.
In this scenario, the clear winners are:
- SaaS eCommerce platforms
- SaaS PIM platforms
- Marketplace integration tools
In all other scenarios, we will see more significant changes. Some retailers will decrease their IT investment for a while; however, in the long term, this is the only option to grow.
Retailers with strong eCommerce will invest in SaaS tools to help them scale-up their business. They will invest in loyalty, subscriptions, and digital products. We see more and more fast projects with easy-to-predict ROI.
The SaaS market is growing, too. A lot of new SaaS tools for eCommerce will emerge and a plug-and-play approach will become the new norm.
All eCommerce platforms will try to decrease Time to Market, eliminate intermediaries, and mostly sell cloud versions. As access to capital is hard, all eCommerce platforms will introduce consulting services as a way to earn extra cash and remain profitable.
All these trends will not help agencies and some small agencies will disappear from the market. The No-Code trend will grow, as will SaaS and self-service.
If we think about general technology trends that will be hot in eCommerce, I think we will see a lot of new things in these areas:
- 3D: AR, VR (maybe), virtual Sampling, virtual shows
- Video: Virtual shows, streaming
- Social commerce: WeChat, Whatsapp, TikTok, Instagram, Peer-to-peer selling
- AI: Logistics, loyalty, bots, security
- B2B digitalization
- Marketing automation: Communication, CRM, offer management
Small and medium companies will look for SaaS platforms that are easy to buy and use. At the same time, large companies will seek out flexibility and low TCO. As a result, we will see more flexible microservices architecture, projects which are easy to start and stop, and remote specialized teams.
Trends which are important for bigger eCommerce companies:
- Headless
- Microservices
- Serverless
- REST/GraphQL
In the long term, we’ll see some companies that are able to win the situation with their offering:
- Winners: Out-of-the-box, short time to market, and low TCO platforms
- New category winners: Tools using a headless approach
- Strong performers: Specialized SaaS tools
I also believe that large platforms with a high total cost of ownership and a long time to market may lose some clients.
Impact on the eCommerce technology market
| Best case scenario |
All other scenarios |
| Retailers without eCommerce rapidly implement SaaS eCommerce platforms. Retailers with eCommerce invest in logistics to scale up their capabilities. Marketplaces integrations. |
Retailers with strong eCommerce invest in SaaS tools and modules to help them scale up their businesses. They invest in loyalty, subscriptions, and digital products, as well as fast projects with easy-to-predict ROI. The SaaS market grows. A lot of new SaaS tools for eCommerce appear and businesses take a plug-and-play approach. Innovation and adoption appear in areas like: 3D, video, social commerce, AI, B2B digitalization, and marketing automation. Bigger clients turn to trends such as headless eCommerce, microservices, serverless and REST/GraphQL. |
Innovation is imperative
To cope with the new situation, all companies need to introduce innovative digital tools across the value chain.
For example, the fashion industry will digitize not only the retail part of it but also the supply chain itself. 3D AR and VR will be implemented from the design stage to consumer engagement. Starting design with a 3D model will allow retailers to decrease both time-to-market and waste; for end customers, the use of virtual showroom functionality will be a way to promote products even if physical stores are closed. This just an example of how meaningful these technology-driven changes can be.
There are a lot of interesting studies showing that strong brands which invest during the crisis are able to win a much bigger market share after the rebound.
In their recent report entitled “Shifts in the Low Touch Economy”, Board of Innovation showed how eCommerce Pure Players will act. This is a good inspiration for all companies that want to be digitization leaders.
| Board of Innovation scenario (added by the author) |
Best case scenario |
Brave new world or Sunrise in the east |
Waves of disease rock the globe |
| eCommerce. Benchmark is mildly negative. Sustained revenue loss of 0-15% in Q2-4 2020. e.g. Consumer Goods. |
0.5-year impact V-curve/U-curve rebound. Effective pandemic control and economic stimulus. Ride the wave and boost supply to keep up with demand surge. Push through and prepare for a fast back-to-normal upswing. |
1.5-year impact with a U-curve recovery. Social distance measurements prolonged, economic stimulus eases damage. Push for growth and market share. Defend or improve competitive position and find new growth. |
3-year impact with an L-curve recovery. Failed pandemic control and wide-spread bankruptcies and credit defaults. Aggressive push for growth and market share. Defend, improve competitive position, and find new growth. |
Regardless of the real scenario of the crisis, I’m sure the winners will be those ones who will digitize their business fast.
Source data
- The impact of COVID-19 on the retail landscape Where do we go from here? Kantar, April 2020
- The world remade by COVID-19, Scenarios for resilient leaders, Deloitte, 6 April 2020
- QSR Retail COVID-19 Response, McKinsey&Company, 19 March 2020
- Quarantined business, Four future scenarios (Biznes po kwarantannie, Cztery scenariusze przyszłości), Kantar, 3 April 2020
- Shifts in the Low Touch Economy, Board of innovation, April 2020
- The State of Fashion 2020 Coronavirus Update, McKinsey & BOF, 8 April 2020
- Global IT Spending,Gartner, April 2020
Published April 17, 2020
