Coronavirus will permanently change shopping behavior – online share in retail sales will be bigger than offline

We do not gaze into the crystal ball but we operate with an online ads budget worth over 100 million dollars a year and we want to share our knowledge of the current situation in the Internet market and thereby help the companies to bridge the difficult period which probably awaits us all. However, it is necessary to look one step ahead.

Current quarantine is a great opportunity for the online ads. Many people, thanks to home office, isolation and the need to stay informed about the latest development of events, spend significantly more time browsing the internet, which is in the end being noticed even by network operators or videoservices. Because of that the amount of ad slots is growing and the prices of impressions are falling. It is not affecting all accounts without an exception but we are seeing that our clients’ price per impression has fallen approximately by a third on average. So the price for online ads is lower and concurrently the brick and mortar competition is temporarily out of the game. That drives the rising online sales and you can use it too.

However, you should target the marketing for the goods you have in stock at the highest profit, not the revenue because the goods in stock can be your biggest competitive advantage. We are part of a retail research group at Harvard and from the data which are available, we can see that the supply chain is paralyzed. The main reason is that up to 30 % of businesses are dependent on China (raw materials, direct or indirect production) and it is forecasted that its recovery could take around half a year. So it is highly recommended to connect the marketing with your warehouse data now and do not advertise products which are not sufficiently profitable (big discounts, low margins,…) or products which are not in stock and are not easily available at your supplier. With the help of marketing data, correctly evaluate which goods are hard to sell (ideal advertising investment for every product versus total gross margin from given product) so you can make the right orders from your suppliers.

But this applies just these days  – more important will be to look in the future, after things calm down. After a devastating economical outage, the GDP will surely fall. In a Goldman Sachs Investee conference call it was mentioned that the stock index S&P 500 is predicted to drop between 15 and 20 %. At the same time a big transformation of retail is expected. Online sales are accounting roughly for 15 % of whole retail and until now, the YoY growth was predicted at around 2 % before the coronavirus. New predictions are showing jumps up to tens of percent even after the offline restrictions vanish – see the self explanatory picture

The big change in customer shopping behavior is supposed to happen due to newly created shopping patterns, specifically that people will now get used to buying things online, which they prefered to buy earlier only offline. The willingness of the companies to invest in online advertising just at this moment can hugely influence how big their piece will be in the future. At the same time, according to research by MIT university, offline limitations like services or free movement restrictions are going to last at least a year and a half, therefore online retail will soon be the new norm.

With our experience, we are able to help companies with using their data so they can formulate the right strategy of their online advertising for the upcoming time. Currently, with internet giants Facebook and Google, we are negotiating a financial support of this activity for chosen clients.

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