The future of e-commerce – is now the prime time to go online?

By Amelia Darbro

The onset of Covid-19 has exacerbated existing difficulties faced by the retail sector. In the UK alone, online shopping accounted for 30% of retail sales in April, increasing 8% from March, forcing more and more retailers to reengineer their business models to open themselves up to the opportunities of having a digital presence.

Tapping into a saturated market

The pandemic-fuelled digital surge quickly transported Amazon into one of the world’s most essential companies, as the ability to order anything (cheaply, easily and quickly) online became a lifeline during lockdown. However, even e-commerce heavyweight, Amazon, could not withstand the soaring consumer demands, causing it to sell out of many “household staples” (such as toilet paper, soap and…chocolate) when the pandemic initially hit. Amazon also failed to meet its Prime delivery promises, revealing operational fault lines.

Whilst a boom in online demand plays to Amazon’s strengths, it also revealed gaps in the market. Although stock shortages were a temporary issue, Amazon also lacks, for example, the ability to satisfy consumer demands for local products (e.g. through box schemes), or in buying from local retailers. Therefore, even if competing with Amazon is not a retailer’s goal, the unique online offering they can provide to their customers should not be overlooked.

Shopify, one of Amazon’s biggest competitors, has been key in supporting local, independent businesses to create an online platform. Shopify’s services empower retailers through utilising technology to set up an online store front, connect into market places (such as Amazon, eBay and Etsy), and provide discovery tools to promote a digital channel. Whether a retailer opts for such services, or simply decides to set up an online store, there is scope for a digital transition of retail at all levels, and such investments will likely generate a lasting advantage in serving customers going forwards.

Retailers should, however, be aware that adapting to these large platform providers’ standard terms and ways of working can, at times, be challenging. Although, the recent introduction of the EU Platform to Business (P2B) Regulation may, in the medium to long-term, help to address the imbalance in bargaining power between the likes of Amazon and smaller retailers who increasingly rely on them.

Time for change

The digitisation of traditional retail generates huge opportunities for both established brands and start-ups. Despite the added complexities around monitoring consumer trends, adapting business models and business continuity planning, successful digital channels will benefit from their increased reach and reduction in costs from in-person sales. It is also likely that, for the foreseeable, consumers will exercise caution in returning to crowded stores, and therefore footfall to physical retail locations is expected to take some time to return to pre-pandemic norms. As a result, several high-street names have been forced into administration, with others confirming store closures. Retail giant, John Lewis, recently announced plans to close 8 stores, as it estimates a 20-30% increase in its online sales over the coming years, demonstrating its increased reliance on e-commerce. 

The shift in consumer behaviour appears to be one that will last, as new demographics move to online shopping and existing users increasingly become more dependent. Now is the time for businesses to adapt their operations to match new digital expectations.

Many e-commerce providers have also supplemented their retail services by providing digital experiences in order to connect with customers, as consumption habits continue to evolve. Examples of these include virtual cookery classes, virtual try-on, virtual gyms and virtual wine-tasting. With customers being able to access convenience-focused virtual services from the comfort of their homes, will they ever go back to the traditional retail and leisure alternatives?

Legal considerations

For businesses that are reinventing themselves through an online platform, it is vital to consider the legal and regulatory implications of transitioning to a digital offering. Depending on the complexity of the business, and what it is intending to achieve online, it is worth reviewing existing contracts and seeking advice in respect of:

Terms and conditions of sale;

Compliance with the strict Consumer Regulations;

Distance selling and associated cancellation rights;

Website / app terms of use;

Website / app privacy policies;

Electronic marketing consents; and

Compliance with advertising codes.

Conclusion

Covid-19 has reinforced the demand for businesses to diversify their retail offering. It is likely that “disruption” will remain a trend for 2020 and beyond; with the world recovering from the pandemic, a risk of a second wave, and, of course, the end of the Brexit transition period looming. It is clear that reliance on e-commerce is not a short-term phenomenon, so if businesses have not done so already, now is the prime time to reap the rewards of going online.