Reimagining Retail With Patch Plants: Will The Uplift In Online Shopping Last Post-COVID?
It’s no secret that brick-and-mortar retail has been struggling for the past decade.
Industry analysts initially took a hard line with predictions for the high street - touting the total ‘death’ of offline retail - before scaling back and forecasting a more integrated commerce future. One where omnichannel retail reigns supreme, and offline and online channels come together to deepen brand experiences, boost availability and build long-term loyalty.
Many offline retailers are yet to have e-commerce operations that are sufficient to support an omnichannel reality, but long-standing consumer barriers to online adoption have worked in their favour, and arguably, bought them some time.
At least that was the case, until the lockdown. The closure of all non-essential retail led to an unprecedented acceleration of online e-commerce. Mental barriers to shopping online weakened.
With the impending re-opening of retail next week, we’ve got one question on our minds. Will the online penetration uplift be short-lived? Or will it be maintained, and present an exciting long-term opportunity for e-commerce startups? (And abrupt awakening for the high street?)
The acceleration to an online world
The C-19 crisis has forced people to change how they interact with the everyday world. During lockdown, consumers were left with the choice between waiting or venturing online. This resulted in people in the UK spending £450 million more online every week in the month of April.
As a result, the lockdown has been a catalyst for a great digital migration - online sales in the UK reached 30% of total retail sales (a level we did not expect to see until 2028).
Average weekly online sales | Internet Sales % Total Retail Sales | Source: ONS
The increase in online shopping has not been uniform, with the biggest winners during lockdown being medical, food, household goods. Fashion and apparel have struggled.
eCommerce Consumer Sales (COVID-19) by segments | Source: Common Thread
The trend toward online is likely to persist throughout the lockdown easing period with many consumers still apprehensive to return to normal life. The longer-term impact will depend on how quickly and effectively retailers are able to respond to adjusted customer needs and behaviours.
Nearly normal - a headwind for offline experience, but a tailwind for online
As we have previously written about, a return to normal life will not happen overnight.
In light of increased restrictions and regulations, many of the strengths offline retail had over e-commerce - namely that it is a social, recreational, interactive experience - will be eroded. Lining-up to enter stores, lower levels of staffing and forced strategic distancing will seriously damage the customer experience and could call the commercial viability of high street stores into question.
94% of people believe that adjustments of their routines will be impacted for more than two months (and 46% of respondents believe it will last >6 months).
For consumers, this means that the gap between the offline and the online will dramatically widen, and present an interesting opportunity for online retailers to confront the pervasive beliefs that have slowed the adoption of online retail to-date.
Online retailers looking to benefit long term can consider the following simple mental model which highlights the interplay between sales growth vs. retention:
Source: Forward Partners, Mckinsey
The critical opportunity is for the start-ups to move from the “Crisis Bump” segment into the “Accelerated Shift” segment. To achieve this, they'll need to focus on how they have designed their customer journeys and user experiences to address the four barriers to adoption - convenience, experience, trust, and advice. Patch Plants' approach uncovers some interesting insights.
How Patch intends to use a short-term spike in demand to fuel long-term success
Patch, the online gardening brand, has been one of the businesses that has rapidly adapted to the new environment created by COVID-19. The horticulture market has been totally upended; garden centres have been shutting due to classification as 'non-essential retailers' across many European countries. This caused a massive shift in demand to online channels, with the peak season for gardening coinciding with the crisis.
Patch's sales were over 500% greater than pre lockdown levels in the peak weeks of the crisis. Since UK garden centres reopened on May 13th and customers have more choice, sales have settled, but are still over 300% greater than pre-crisis levels.
In horticulture retail, Patch are expecting much of the online demand to persist long term. There are two key drivers:
- a persisting degradation in the offline retail experience,
- and the removal of first-time buyers' reservations about online purchases.
Whilst many garden centres have reopened, they are not the same as they were. These changes include:
- queues to enter,
- social distancing measures between customers and staff,
- closure of concessions such as café's,
- and stores encouraging customers to make quick purchasing decisions and leave.
Or as one North London garden centre sign put it: "PLEASE BE EFFECTIVE AND DECISIVE WITH YOUR SHOPPING. REMEMBER – WE ARE NOT OPEN FOR A ‘DAY OUT’".
The leisurely family trip to the garden centre is no more. With so much lost, online retailers like Patch are a more compelling option: Browse at your leisure, discover information about the products through rich product pages, and make decisions aided by educational video content and live chat on the Patch website.
Secondly, first time online plant buyers, and especially those who do not typically buy other products online can be apprehensive about ordering online for the first time. Reservations include product images not being representative, a potentially difficult returns process, fears on 'legitimacy' of retailers and losing money or personal information to fraudsters.
However, having been 'forced' to choose the online channel for the first time, new Patch customers experience a very positive online retail experience they would then be delighted to repeat. This means many customer missions that were previously offline permanently shift to companies like Patch.
Learnings from Patch
Patch has therefore been profoundly impacted by the crisis, and the way it has responded and continues to do so has important learnings for other retailers.
Firstly, agility has proved to be a huge differentiator. Patch as a fast-growth company, has been much more able than it's peers to flex its capacity up to meet the online demand. Other online retailers such as Waitrose garden, and Crocus.co.uk stopped taking orders for periods of time to throttle demand. Many garden centres attempted online retail for the first time, and were besieged by operation issues in running pick-pack operations. Primrose.co.uk, an online retailer of 12 years, continued to take orders at huge scale, but did not increase capacity quickly enough and disappointed a large number of customers. The ability to remain agile will continue to be important as regulations and behaviours will remain hard to predict for the foreseeable future.
Secondly, Patch's customer experience has differentiated them from offline retailers during the peak of the crisis. In order to fully exploit this, Patch is further prioritising initiatives to become a head and shoulders leader in customer experience. The imperative for other online retailers to do so is the same.
As offline retail re-opens, startups looking to ensure long-term success will do well to take a leaf out of Patch’s book by focusing on operational agility and superior customer experience. With these in mind, the categories most likely to benefit from a long-term uplift - and move from crisis bump to accelerated shift - are the categories that rely heavily on:
- Social interaction - those where consumers tend to shop in a less functional and more recreational way, i.e. Horticulture.
- Customer experience - those where advice or a concierge service is required, i.e. luxury fashion.
- Proximity - those that rely heavily on low-intent, spontaneous purchases, i.e. confectionary.
Even across categories, retail in a post-COVID19 era is unlikely to ever return to pre-lockdown dynamics. The shock to consumer behaviour could also accelerate the penetration of other more nascent technologies that we're yet to consider, such as conversational and social commerce, and tip the scales even further away from a traditional retail environment.