COVID-19's Complicated Impact on E-Commerce: How to Deal with the Fallout and Adapt to the New Normal

How has the coronavirus pandemic affected e-commerce? It’s complicated. Even as more people shop online from the safety of home, some e-commerce categories are struggling. For some of them, the challenge is near-overwhelming demand. For others, sales have sharply dropped.

Consumer behavior and spending patterns changed dramatically as lockdowns took effect. Now, they keep evolving as new pandemic-related needs and habits arise. Through it all, fraudsters continue to target merchants. With all the disruption, it’s not surprising that in April, Forrester predicted that global e-commerce will stay flat through 2020, although e-commerce will be “more resilient” than brick-and-mortar retail.

What steps should e-commerce merchants take now to cope with this ongoing wave of change? It depends on your vertical, your product lines, the way your customers behave now and fraud protection that adapts to that changing consumer behavior.

Which e-commerce categories are struggling now?

At the moment, e-commerce verticals that are trending down include

  • some apparel, specifically eveningwear, dressy children’s clothing, suits and dress pants
  • beauty items, especially lip color and hair color
  • electronics, after a sharp peak in April as consumers outfitted home offices
  • luxury goods

Luxury merchants are having a tough time not only because of shop closures but also concerns about recession. High-end brands are forecast to lose between $450 to $600 billion in worldwide sales in 2020, according to Boston Consulting Group.

For merchants in categories with flagging sales, adapting to survive is the priority. For example, one supplier of upscale restaurant goods pivoted to making cloth masks earlier this year and has since had to bring on more workers to meet demand.

E-commerce categories that are in demand now

As people settle into long-term stay-at-home habits, some positive trends are emerging.

Casual and inexpensive clothing, for example, is doing well. Sales of comfort clothing, fitness wear, children’s and babies’ apparel, loungewear and fast fashion grew 21% from March to April.

Sales of self-care beauty products like skin care, hand creams and face masks are on the rise now. So are health and wellness equipment and virtual training services.

Online grocery sales shifted into high gear as soon as lockdowns took effect, and the category’s sales will grow 40% this year. A recent poll found that nearly half of consumers either started buying groceries online or are buying more online because of the pandemic. Other food categories in high demand are beverages, baking supplies and snack foods.

For these merchants, the challenge is coping with a surge in orders while delivering a good customer experience. That requires screening orders for fraud and manually reviewing suspect orders to prevent chargebacks and false positives that turn off good customers. We’ll cover that in more detail below.

How is the pandemic changing consumer expectations?

The habit of shopping primarily online instead of in person may persist even after stay-at-home orders expire. According to GlobalWebIndex’s April 2020 Coronavirus Research Report, nearly half of consumers say they’ll avoid physical stores for “some time”’ or “a long time” even after stay-at-home orders are lifted.

However, the marketing and merchandising approaches that worked pre-pandemic may no longer get customers to buy. Merchants need new strategies to earn and keep customers.

Consumers want to buy quality

As job losses rise and recession fears loom, consumers are more focused on quality. Survata found that 64% of US consumers are “rethinking their total spending” and 40% say the trustworthiness of a brand goes a long way in helping them make a buying decision.

Merchants who offer high-quality goods and excellent customer experience can win and keep these shoppers.

Consumers want to know what’s available

In the wake of hoarding and shortages, 72% of Survata’s respondents said they’re now more aware of product availability than ever before. Even now that the initial wave of panic buying has ebbed, 64% say “perceived availability’ of a product is a key factor in how they shop.

Real-time data on in-stock inventory, quick answers to customer inquiries and targeted marketing messages about available products can help merchants serve these customers.

Consumers want virtually everything delivered

Businesses that you might not expect are shifting toward delivery-based models. Even many car dealers have pivoted to offering fully online buying experiences.

Merchants that identify new options for online shopping may have a survival advantage. For example, when bars and restaurants closed and big events were canceled, at least one multicity catering service shifted to home delivery of cocktail kits.

How is the pandemic changing e-commerce fraud prevention?

Fraudsters are exploiting the disruption caused by the pandemic in many ways. Some have created phishing campaigns to steal people’s account credentials when they look for coronavirus information. Others are targeting e-commerce merchants who sell in-demand products like masks and disinfectants.

At the same time, consumers’ behavior has changed in ways that mimic fraudster behavior, like

  • Buying items in bulk with express shipping
  • Placing large first-time orders with unfamiliar merchants
  • Making several small purchases from a single merchant (or multiple merchants) in a short period of time
  • Shipping items to unfamiliar addresses, such as a parent or friend’s home

The persistence of organized fraudsters means that merchants can’t afford to let down their guard when screening orders. But the changes in consumer habits mean that pre-pandemic fraud rules are flagging more good orders as possible fraud. If those orders are automatically rejected that revenue is gone, and the customers may never return.

How can online sellers adapt to the new e-commerce landscape?

We’ve already covered the need to pivot if necessary, offer great customer experience and focus on product quality and availability. It’s also important to adjust your store’s fraud prevention processes to the new reality.

Smarter fraud prevention

As consumer behavior and shopping trends have changed, you should take extra steps to avoid frustrating customers who are behaving differently because of the pandemic. The way to do that is to combine machine learning-based fraud rules with manual review of flagged orders.

With this approach, AI still flags purchases as possible fraud if they meet certain criteria. But instead of automatically tossing those orders out, fraud experts carefully review each one. Orders that are fraud get rejected to avoid chargebacks. Orders that are valid get approved, which keeps your revenue stream and your customer relationships going.

That’s not the end of the process, though. The manual review team’s findings then go into the machine-learning algorithm, so it gets smarter about which orders are fraud and which are not. Over time, the entire fraud screening system becomes more attuned to the new normal and works more efficiently.

Real-time package tracking

Another option for better fraud prevention and customer service is adding a third-party service to validate shipping and delivery of your customers’ purchases. There’s been an increase in package thefts since the start of the pandemic. In one state, scammers dressed as nurses have been stealing parcels off victims’ porches. A service that lets customers their track orders offers peace of mind, may prevent thefts and could lower your insurance claims.

Chargeback dispute management

When fraudsters succeed, expensive chargebacks and time-consuming disputes follow. Third-party services that handle chargeback claims and disputes can help you reduce losses and save you time on those issues.

By focusing on what consumers want and need now, delivering the best possible experience and implementing smart, comprehensive fraud protection, merchants can adapt to the current “new normal” and to whatever changes follow in the months ahead.

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