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What Does the New Lockdown Mean for eCommerce Businesses?

Today, new restrictions came into force for the next month meaning that all non-essential retailers – as well as pubs, restaurants and gyms – will have to close their doors until December 2nd.

While the British Retail Consortium (BRC) has gone as far as warning of  a “nightmare before Christmas” for bricks and mortar retailers, the outlook for eCommerce businesses is significantly brighter, albeit with some major hurdles to overcome.

Then and now

There have been few good news stories during the pandemic. eCommerce though is undoubtedly one, with overall volumes across the sector around 50% higher than last year, and growing. That the new lockdown comes at the height of the Golden Quarter – the most lucrative time of year for many sellers – is likely to be a further boost.   

Much has changed since March, too. The defining feature of the last lockdown was uncertainty. For months there was little clarity on when restrictions would be eased, or what this would look like. The frustration of not knowing what was happening – and when – was constant.

Yet as people returned to work the scale of the task at hand became clear. Many eCommerce businesses struggled with fulfilment initially as reduced teams, social distancing and overstretched delivery services took their toll. Some supply chains ground to a halt. Delivery times were extended at a time that demand was soaring.

This time though we have a much better idea of what to expect.

Speaking to the Financial Times earlier this week Martin van Dam, chief financial officer of Ikea’s parent company, described the upcoming lockdown as “incomparable to the first one”.

“The big thing is we don’t stop production,” he added. “There are slower sales [in store], but there is not the inefficiency of the first lockdown.”

This is a crucial point. Online retailers (and not just those of the size of Ikea) now have several months experience operating in this environment. Many have developed processes and trained staff effectively in how to manage under these new conditions.

Couriers and delivery networks have also adapted. Hermes is investing £100 million this year as part of a plan that will create 10,500 new jobs, stating that “the pandemic has expedited the already phenomenal growth of online shopping and we see no sign of this changing.” Meanwhile, Yodel is hiring 3,000 temporary staff for the coming peak season, while DPD is spending £200 million on boosting its next-day parcel capacity.

Under the strain

While these numbers are impressive, there is also the fear that much more is needed. In an interview with Retail Week, Yodel chief executive Mike Hancox said the firm had been operating at peak levels since March.

This, he added, was equivalent to additional 20% in volumes, with the Christmas period expected to account for another 20%. This, however, does not account for the latest lockdown.

In the same feature Kelly Askew, managing director of strategy at professional services giant Accenture, painted a worrying picture for the coming months.

“We’ve heard from big carriers that they’re out of capacity already. They’re informing their customers that the capacity they have is already spoken for.”

“And it’s not just the couriers that are operating at capacity,” he continued. “There are also challenges at warehouses. In the UK and Ireland, warehouses are by and large full. It’s not just down to eCommerce but pre-Brexit stockpiling. It’s a shortage of warehouse space we haven’t seen in the past.”

Forecasting and accuracy

In these circumstances, the challenges are clear. Yet while the amount of pressure delivery networks are about to face is unprecedented, there are measures that businesses can take to give them the best possible chance to weather the storm.

The first is communication. With capacity limited, it is vital that any forecast increase in volumes is relayed to couriers. Accuracy is important too – overestimating figures in order to secure space is a tactic that is unlikely to work more than once.

Now is a good time to be speaking to account managers and other representatives within your delivery network. Make sure they are aware of how your demand levels are going to change, and try and understand their own limitations and challenges.

“From a lockdown perspective, we are getting floods of requests from businesses to handle their eCommerce product warehousing, fulfilment and returns,” says Elliott Davidson of Parcel Master.

“This is fantastic, but we are coming into prime season, with of course Christmas and multiple sales, more and more parcels are going out the door. The pressure on couriers is high and those that are going to be served best are the ones that can forecast and communicate the most effectively. Just throwing huge volumes of extra orders on the table is not going to go down very well.”

Switching focus

Meanwhile, with delivery networks under pressure and the looming threat that the lockdown could be extended, is likely that many retailers will try and push forward Christmas spending to make sure deliveries can be made on time.

This means we will see promotions and other campaigns brought forward, with Black Friday deals in particular set to arrive much sooner than usual. Even though this will stress the delivery networks further, it does mean that many businesses will have no option but to compete or risk losing orders to the competition. If you are a retailer that runs promotions such as these, the earlier the better seems to be the case.

At the same time, there is likely to be added competition in the form of major firms with both bricks and mortar and eCommerce presences stepping up paid search budgets as footfall drops off. This was a key trend at the start of the last lockdown, and one that has continued since. More than ever, it is important to keep an eye on the competition as the usual schedule for marketing activity shifts.

All in all though, the challenges are far outweighed by the opportunities at hand. The eCommerce market is growing rapidly, and new habits are being formed. As Gemma Spence, CEO of OMG Transact, said in an interview with eMarketer, “there’s often reticence, certainly in the over-65s, to adopt new technology and to make changes in behavioral or consumption patterns.

“But we’ve found that it takes six weeks to make or break a habit. During the past three months of lockdown, there has been enough time.”


How to manage during the latest lockdown

  • This time around, the outlook is much clearer. The majority of non-delivery related supply chains and infrastructure should be unaffected, and staff should be used to working in this environment. That said, it’s important to maintain any systems and processes you have in place and continue with social distancing and cleanliness measures.
  • However, delivery networks are about to face enormous pressure. Communicate with your account manages and try to accurately forecast demand. If your suppliers don’t have additional capacity, the time to shop around for alternatives is limited. Be upfront about any possible delays on your site to avoid negative reviews and feedback.
  • Many retailers are bringing forward promotional campaigns, particularly around Black Friday, to make sure deliveries can be met before the holiday period. This is a sensible move, especially if your competition is taking this step.
  • Be wary of larger retailers refocusing budgets from their bricks and mortar stores to online during the lockdown, particularly around PPC. As every, keep a close eye on your own campaigns and adjust as necessary.
  • Be optimistic. The future is bright for eCommerce, and customers one during this unusual period may be ones that stick around.

 

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