How COVID-19 Will Affect Australian E-Commerce This Christmas

To say this year has been a tough one on retailers and e-tailers would be an understatement. It makes sense to go into this golden quarter with a solid understanding of how the COVID-19 pandemic has affected e-commerce and will continue to affect e-commerce as we move into Christmas.

I covered this in a lot more detail in my Christmas E-commerce Marketing Essentials workshop last week in Brisbane, but I can’t help myself from sharing some of this intel with you now. Psst! If you want to know more you can register your interest for the online version of this workshop here.

The coronavirus pandemic is predicted to affect e-commerce and retail sales at Christmas in a variety of ways but there are three main ways that I’ll dive into here (gotta save some of the juicy stuff for my workshop attendees!)

Importantly, I’m specifically looking at Australia. This is important because the e-commerce industry in Australia is still relatively juvenile compared to its global counterparts.

For example, e-commerce penetration (AKA what % of all retail sales happen online) was just 9% vs the UK (one of the world’s most developed e-commerce markets) which at 22% of the mix is almost double the penetration. See below.

Australian e-commerce graph

Source: KPMG

.1. Australians are starting to shop online for new product types due to Coronavirus.

As someone who emigrated from the UK not too long ago and would order a single lightbulb on Amazon with same-day delivery within a couple of hours (yup) I always struggled to understand that online shopping for everyday essentials like groceries and household goods wasn’t a ‘thing’. I’d begrudgingly drive to my local Woolworths to buy these dull AF things when I could have just ordered them in my lunch break back in London.

Traditionally Australians have always erred towards purchasing non-essential items such as clothing and electronics online and avoided shopping for groceries. From the way people discuss it, it’s still a novelty to order your groceries online outside of the major metropolises. The coronavirus pandemic has opened up Australian consumers to the potential for ordering their groceries, liquor, pharmacy products and household goods online. This was proven by the unbelievable uplift on online grocery orders when we first went into lockdown, forcing Coles and Woolworths to suspend their online delivery service for all but essential customers. In short, they weren’t prepared and didn’t have the infrastructure in place to support demand. 

The current growth opportunity for you online this Christmas is substantial if you are an e-commerce retailer in the health & beauty sector or the groceries, food and liquor sectors. Be excited!

2. Your customer may not be spending as much due to the socio-economic fallout from COVID-19.

54% of Millenials and 41% Gen Z have reported that Coronavirus has impacted their purchasing decisions due to their worries about job security, general feelings of doom about the state of the economy and the world (yup, I hear you!). This is only going to be heightened as Job Seeker and Job Keeper payments are changing over the coming weeks and months.

Conversely just 23% of Boomers think that Coronavirus has affected their spending at all. So if your majority customer is slightly older you may see less of a fallout.

By the way, this isn’t a new phenomenon. Gen Z were just 11 when the last GFC arrived and so they’re acutely aware of the impact of the economy on their spending power, but this has been heightened as people from these demographics have been currently impacted by job insecurity more than other generations.

Who is your customer? 

If your majority audience is Millennials or Gen Z you may struggle with decreasing AOV (average order value) and AOF (average order frequency) over this Christmas period.

Now, you may think that “It’s OK, we have AfterPay”. But, if you read my previous post about BNPL providers in Australia you’ll see that Gen Z specifically rarely use AfterPay as a line of credit. So unfortunately that won’t help you here. (Sorry!)

In order to overcome this lack of fluidity for your consumers you are going to need to really push home the value message to your customers. This doesn’t necessarily mean discounting (and I’d always be wary of encouraging a mindset of discount-driven purchasing), but just remember that you don’t ever sell a mattress you sell a good night’s sleep. 

3. (More) Aggressive discounting is predicted at Christmas in Australia thanks to COVID-19.

This is going to be a tricky tightrope to tread because, as I’ve just mentioned, you don’t want to condition your customers to only shop with you when there is a promotion or a sale and we already know that Christmas is a season of silly sales.

This year we are expecting to have one of the biggest Black Friday sales on record.  Larger retailers who can afford to slash their prices significantly, will offer impressive deals in order to shift surplus stock not purchased during the height of the pandemic. Whereas consumer mentality is even more thrifty, for reasons previously mentioned, meaning there is going to be discounting fever.

As an independent business owner with tighter margins and less flexibility to discount (plus a need to avoid damaging your brand by doing so) it’s going to be a hard one to overcome, but the biggest thing I can suggest for you is to lean on is brand loyalty. Engage with your existing and most loyal customers over this period and give them the personalised marketing experience that will encourage them to choose you over those shiny savings offered by the big brands. Ensure that every single touchpoint that your customers have with your business is unbelievably awesome.

Why? Because, the biggest thing to take away that may just get you one advantage over those seasonal savings:

86% of buyers are willing to pay more for great customer experience (PWC)

Sources: PWC, KPMG, Business Insider

If you want to know more about how you can improve your marketing strategy, just get in touch with Dear Charlie today.