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?

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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. 

Source: Booz & Company Fall 2009 Survey of Consumer Spending. Sample size n=2,010
Source: Booz & Company Fall 2009 Survey of Consumer Spending. Sample size n=2,010

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:

  1. Best case scenario – More businesses start subscription-based models as a method to generate more predictable revenue streams.
  2. Brave new world – Bigger companies are more resilient and smaller players are acquired or have a constant struggle to stay in business. 
  3. Sunrise in the east – Famous European brands are acquired by Chinese companies.
  4. 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.

Stretch prediction: Health and hygiene will emerge as the next digital. Source: Kantar
Stretch prediction: Health and hygiene will emerge as the next digital. Source: Kantar

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. 

Indicative impact on industry investment in tech technologies. Source: Gartner.
Indicative impact on industry investment in tech technologies. Source: Gartner.

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:

  1. 3D: AR, VR (maybe), virtual Sampling, virtual shows
  2. Video: Virtual shows, streaming
  3. Social commerce: WeChat, Whatsapp, TikTok, Instagram, Peer-to-peer selling
  4. AI: Logistics, loyalty, bots, security
  5. B2B digitalization
  6. 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. 

Innovation has been scaled-up along the entire fashion value chain and is here to stay. Source: McKinsey & Company
Innovation has been scaled-up along the entire fashion value chain and is here to stay. Source: McKinsey & Company

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. 

Now is the time invest in innovation & RnD
Now is the time invest in innovation & RnD.

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. 

eCommerce Trends 2019. Download free report >

Source data

  1. The impact of COVID-19 on the retail landscape Where do we go from here? Kantar, April 2020
  2. The world remade by COVID-19, Scenarios for resilient leaders, Deloitte, 6 April 2020
  3. QSR Retail COVID-19 Response, McKinsey&Company, 19 March 2020
  4. Quarantined business, Four future scenarios (Biznes po kwarantannie, Cztery scenariusze przyszłości), Kantar, 3 April 2020
  5. Shifts in the Low Touch Economy, Board of innovation, April 2020
  6. The State of Fashion 2020 Coronavirus Update, McKinsey & BOF, 8 April 2020
  7. Global IT Spending,Gartner, April 2020

Tom Karwatka

CEO at Divante eCommerce Technology Company. Leading industry voice who believes eCommerce can improve our world. Co-founder of Vue Storefront and Open Loyalty, angel investor, and founder of Tech To The Rescue. CEO at Divante eCommerce Technology Company | LinkedIn | Twitter

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