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With COVID-19, online shopping has been put to the test

Business Insider article, by Bethany Biron, Apr12, 2020

Assistant store manager rings up groceries from behind a plexiglass barrier in Los Angeles, California.Lucy Nicholson/Reuters

Though some experts have warned of the second coming of the retail apocalypse, others are saying that the coronavirus outbreak is proving that brick-and-mortar is more vital than ever. 

The unprecedented shuttering of major retailers around the country has shifted the way American consumers make purchases of everything from groceries to athleisure. While online shopping has allowed for consumers to order essential items right to their door and avoid leaving their homes to prevent the spread of the virus, it has also highlighted the limits of e-commerce, as companies struggle to respond to increased in demand. 

"Research suggests that people still need physical stores in their lives," Raydiant CEO Bobby Marhamat wrote in a post for Forbes this week. "I believe the in-store experience defines retail for people. Touching products is part of that experience, but helpful staff, well-organized showrooms, unexpected activities, smart technologies and other components all combine to create exceptional experiences."

With major limits on physical retail, online retailers struggle to keep up 

As online grocery orders surge across the country, companies like Amazon and Walmart are fighting to keep up with a barrage of orders from homebound consumers.

This week, customers took to social media to complain about a lack of available time slots for grocery pickup and delivery, highlighting how even the biggest e-commerce companies in the world weren't prepared for a cataclysmic event like the coronavirus. 

"Even an e-commerce giant like Amazon has been struggling to provide the essentials for people — including toilet paper, hand soap, etc. — indicating how strongly people rely on their traditional stores for supplies," said Mark Zamuner, CEO of growth consultancy agency Two Nil. "Something as simple as being able to freely go to the grocery store or the drug store and trust that there will be available inventory is something that many Americans took for granted until now."

Jim Hull, senior director of retail industry strategy at Blue Yonder, said he's heard from several consumers who said they attempted to place orders through Instacart or similar delivery services, only to find that the next available time was more than six days out.

"With people spending so much time at home now, they are still trying to figure out what their consumption patterns truly look like," he said. "People that used to buy lunch and eat out two to three evenings per week are now running through basics like bread and milk much faster than before. A two-to-three-day wait for the basics will be unacceptable, which will trigger a trip to a brick-and-mortar location."

Many consumers are turning toward a hybrid version of online and brick-and-mortar shopping in the form of curbside pickup, allowing them to make selections online and collect their purchases in one fell swoop at the store. Some local grocery stores have even opted to move strictly to this model to allow for increased efficiency and safety. 

"Brick-and-mortar retail has proven critical to the retail landscape far before coronavirus," Jonathan Treiber, CEO of the offer management platform RevTrax, told Business Insider. "The economics and efficiencies afforded by physical retail are still a pipe dream for many e-commerce businesses. However, it's not an either/or equation. The right interplay between physical and digital business for a company provides the best possible customer experience and economics."

Consumers spend less online

While consumers are spending more online, they're spending less in general. According to a consumer survey conducted by digital fulfillment platform Blue Yonder, 59% of respondents said they are purchasing less than they normally would "because they are avoiding going out in public and cannot purchase things in-person."

Of course, there are several other factors contributing to reduced spending — namely rising unemployment rates contributing to less disposable income, as well as requests to restrict the purchase of nonessential items from major retailers like Walmart. However, Blue Yonder researcher JoAnn Martin wrote that retailers seeing a boom in e-commerce should be cautious in banking on this continuing in the future.

"The wild card is trying to predict how much of the consumer shift toward e-commerce will stick and further increase market share," she wrote in the Blue Yonder study. "There is no doubt that companies that have established online capabilities will take business from those that have not in the short-term, but once the quarantines are lifted, it is anticipated that there might be a rush of consumers to go out and support local businesses, dampening the need for increased online support."

Studies from before the outbreak have continuously shown that while e-commerce has become a major destination for browsing, search, and discovery, purchases still largely take place in stores. According to a November 2019 report from Eagle Eye, a digital retail marketing company, brick and mortar "still dominates" in conversions, with 90% of global retail sales completed in stores. 

Renewed respect for brick and mortar

According to Philippe Lanier, principal at the retail real estate firm EastBanc Development, the rapid shift to e-commerce has overwhelmed many companies and pushed them to the brink, allowing for a renewed appreciation for physical retail. 

"I'm confident that by the time stores are allowed to reopen, brands will appreciate the limitations of the e-commerce funnel, the associated costs on digital marketing, the strain on the logistics involved, and will welcome incorporating and paying renewed attention to refining their brick and mortar strategy," he wrote in an email to Business Insider. 

Lanier said he anticipates that as the coronavirus outbreak wages on, online shopping will "have lost some of its charm," particularly at larger retailers. At the same time, the outbreak will help influence smaller, independent companies to refine and improve their digital presences moving forward, he said. 

"I strongly believe this tug-of-war under the pressure of quarantine will lead to some very positive synergies between [physical and digital retail], while cementing in everyone's mind the critical role a brick-and-mortar strategy is for success," he said. 

Zamuner of Two Nil echoed Lanier's comments and said the coronavirus has demonstrated the limits of the internet, causing online shopping's convenience and speed to lose some of its luster. 

"With COVID-19, online shopping has been put to the test," Zamuner said. "As brands deal with unpredictable demand, fulfillment and delivery issues keep piling up. Buying online is not any easier now than buying at physical stores. The convenience promise, one of the historical differentiators of buying online, is not being fulfilled."

Further, Treiber of RevTrax said he anticipates that negative experiences with online shopping, particularly grocery, may discourage some consumers from using these online services after the coronavirus crisis ends. 

"I have no doubt that this pandemic will create a step change in consumer usage of grocery delivery because many have been forced to modify behavior and try it, and many will continue to use it long after coronavirus dissipates," he said. "However, many customers will have a bad taste in their mouth with e-commerce due to uncertain wait times, product unavailability and shipping delays."

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