How E-Commerce Marketers Pivoted in Response to Changing Consumer Needs Post-COVID

“The only constant in life is change,” goes the ancient Greek saying. This sentiment has never been more true for retailers than right now. Even under normal market conditions, marketers in the e-commerce industry are constantly course-correcting their plans based on shifting customer needs and trends. It’s part of the job. This adaptability has served brands and retailers well as the global pandemic continues to upend our daily lives.

To better understand just how deeply the pandemic has impacted marketing priorities in the retail industry, CommerceNext conducted a study that polled senior-level retail marketing executives in January 2020, and again in June. The report shows that in just a handful of months, many marketers have reacted quickly to disruption, reorganizing their spending priorities to meet consumer needs and with an eye cast to the near future.

Marketers Scaled Back 2020 Budgets (Except Digital-First Retailers)

The pre-pandemic data from January shows a healthy increase in marketing budgets compared to 2019. However, the June poll tells a different story: 32 percent of all retailers indicated a “significant” decrease in 2020 marketing budgets, and 21 percent indicated a “modest” decrease compared to budgets in January 2020. Forty-two percent of traditional retailers, compared to just 15 percent of digital-first direct-to-consumer (D-to-C) retailers, said their budgets had "significantly decreased" due to COVID-19. And a surprising 19 percent of digital-first retailers said they had secured a significantly higher budget to help them remain competitive during the pandemic.

Messaging/SMS and Other Emerging Platforms Get a Second Look

Looking at where retailers are making more significant investments provides insight into the adjustments made to cater to consumer behavior changes. In January, 51 percent of retail marketers listed SMS/text messaging as a top tech priority; in June, this number had increased to 56 percent. Why the change? With consumers turning more frequently to e-commerce due to store closures and stay-at-home orders, they seem to be more open to receiving personalized text messages from brands. Time will tell if this channel has staying power as some regions start to reopen physical stores, and consumers are venturing outside again.

Augmented reality (AR) and virtual reality (VR) for online stores is another area where spending has increased vs. initial expectations in January. Pre-COVID, just 8 percent of retailers had AR at the top of the priority list; in June, that number leaped to 22 percent. Artificial intelligence (AI) was already a priority before COVID, with 42 percent of marketing executives earmarking funds for this technology in January. Despite budget cuts, 41 percent still planned to invest in AI in June.

Retention Comes Into Play Post-COVID

Acquisition marketing will always be a top investment for retailers across all business models. However, retention marketing is playing a more significant role in our “new normal.” Pre-COVID, more than 30 percent of retailers surveyed said they planned to allocate more budget toward retention in 2020. Post-COVID, that number increased to 37 percent.

One way to interpret this trend is that smart retailers are tapping into the relationships they’ve built with new customers who are flocking to e-commerce websites during the pandemic. With smaller budgets, it makes more sense to focus on retaining customers than investing more in the acquisition of new ones.

A Surge in E-Commerce Demand Prepares Retailers for Holiday Shopping

Looking ahead to the ever-important holiday retail season, brands that have experienced an increase in demand due to COVID say they feel more prepared for what lies ahead. In fact, 32 percent of brands say they're “much more prepared” for the holidays this year, thanks to current conditions. And 78 percent say they expect holiday online penetration to exceed current COVID-accelerated sales.

How are brands preparing for the frenzy of the holiday season, especially when the weeks and months leading up to it are like Black Friday every day? One might assume that retailers haven’t a moment to prepare for the expected increase in demand around the holidays, but data shows that marketers are thinking ahead and making adjustments to holiday spending priorities based on COVID’s long-term effects.

When asked, “What are your investment priorities as compared to the 2019 holiday shopping season?” notice the difference in how retailers responded in January compared to June.

As this chart illustrates, mobile optimization (56 percent), omnichannel marketing (48 percent), and unified customer data (47 percent) all got a second look in June. Retention took a slight dip in June compared to January, but it still remains a top priority.

One notable change from January to June is investment in brand marketing. In January, nearly 50 percent of marketers were putting more budget into brand marketing, seeking balance between brand and performance. Post-COVID, the pendulum appears to have swung away from brand marketing, at least for now. There’s a chance that once we reach an era of sustained recovery, retailers will revisit their plans for more investment in brand.

Staying Positive

One theme that came through loud and clear from this survey is that despite the many challenges of the pandemic, retailers are optimistic about the future. While we may not know what the future holds, especially for retailers that rely on physical stores for revenue, we know that retail marketers will continue to be nimble and adapt to more changes as they come. It’s just the nature of the industry.

Retailers have shown time and again that they can step up, make meaningful change, and find new ways to be there for their customers. This latest disruption is no different, albeit on a global scale.

Scott Silverman is the co-founder of CommerceNext, a community of retail marketing executives committed to helping their peers grow and succeed. He's also the co-founder of the Global E-Commerce Leaders Forum, a community and conference for cross-border and international ecommerce.