No industry has gone untouched as we grapple with the novel coronavirus pandemic. In their immediate response to the COVID-19 outbreak, electronics companies have been true to their purpose of serving their customers and meeting their needs.
The ongoing coronavirus pandemic has taken a toll on the economy and incomes which has led to a decline in consumer discretionary spending. Meanwhile, Inflation Expectations in India increased to 10.2 percent in the second quarter of 2020 from 9 percent in the first quarter of 2020.
The pandemic has also led to unprecedented economic and public health concerns, which are transforming how businesses operate going forward. This transformation will be limited not only to how businesses operate but also to how they sustain and grow their brand and customer base. It has resulted in changes in advertising, marketing, promotional, and media spends, forcing businesses and brands to re-evaluate their thinking about current and future advertising and marketing campaigns to maintain a steady stream of income. A business’ advertising, marketing campaigns, and promotional practices are now a core focus of its ability to thrive in the future.
Consumer behaviors changed quickly at the start of the outbreak. Businesses shut their doors and consumers were told to stay home, and that meant no more non-essential trips to the store. Consumers shifted to e-commerce and delivery to get what they needed, including electronics, without having to leave their homes. This created new challenges for businesses. Retailers could no longer resort to in-store sales channel. Demand for many products and services dropped, starting with travel and non-essential products.
The acceleration of consumer trends and behavior that was already underway prior to the COVID-19 outbreak has taken another leap forward and will spark consumer-facing companies and retailers to reinvent the way they do business, proves PwC’s 11th consecutive Global Consumer Insights Survey, which is the result of two surveys made before and after the pandemic emergency. According to the data collected by PwC, 45 percent of global consumers say healthcare is one of the top three reasons for living in a city, 69 percent are more focused on mental health and well-being, and 43 percent expect businesses to be accountable for their environmental impact.
The survey results reveal that the pandemic and the ensuing social distancing measures put in place have led to fundamental changes in how consumers work, eat, communicate, and take care of their health. For non-food items, prior to the pandemic in-store shopping was still dominant compared to on-line shopping with 47 percent of consumers saying they shopped at brick-and-mortar stores daily or weekly compared to shopping via mobile phones (30%), computers (28%), and smart assistants (15%). Since then, on-line shopping for non-food items has seen a substantial increase (mobile phone 45%; computer 41%; and tablet 33%).
While certain trends have been on the upswing for quite some time, the pandemic has sharpened consumers’ desire for transparency, sustainability, and convenience. The companies that will reap the most rewards are the ones that have established trust with the consumer, invested in a seamless and frictionless end-to-end customer purchase journey and prioritized the consumers’ health and safety.
While consumer electronics, home appliances, and air conditioner brands currently seek to strike the right tone in this global health emergency, the future portends market alteration, increased competition, and a demand for creative and aggressive marketing practices. Around the world, many markets are planning and testing their exit strategies from living restrictions implemented to flatten the curve.
With no playbook in hand, each government is carving its own pathway to a new normal, complete with restrictions, health-safety protocol, and changed consumer behaviors, in hopes of restarting the economy while still keeping the virus under control. Governmental agencies are also closely monitoring potential unfair and deceptive business practices to protect vulnerable consumers, monitor aggressive marketing campaigns, and terminate COVID-19 scams.
COVID-19 tests brand resilience
The biggest challenge that the electronics industry is facing is dealing with the delays in manufacturing while addressing the rising demand on certain home-use products. Since the beginning of the outbreak in China, interruptions in manufacturing and shipping has had global effects. The delays had a domino effect on transportation, sales, prototyping and the launches of new products, and potentially increased the average costs.
The electronics industry faces the challenge of managing the supply and demand balance. Since nearly 20 percent of the world population continues to be under quarantine, there is a rise in demand for certain products that address the needs of people staying at home.
As part of their immediate response, most B2C and B2B companies that sell through retailers have already set up commercial war rooms with dedicated cross-functional teams headed by senior leadership. In addition, they have taken steps to help their channel partners rebound quickly. But in providing such support, companies have had to make some tough decisions on the basis of their own liquidity positions, appetites for risk, and competitive positions. Companies have also created minimum viable products that use digital technology to make their underlying processes more efficient and effective.
First and foremost, brands are finding ways to connect with customers about their needs in this time of self-quarantine. Needless to say, website becomes the most powerful tool in this uncertain period. A brand’s website is being filled with contextual and personalized content.
According to a recent survey by Statista, there has been a curious rise in the pent-up demand of several electronics and appliances products during lockdowns. Consumer priorities are changing faster than can be foreseen. Keeping these shifting priorities in mind, brands are highlighting the related products on their brand’s range of products.
Being transparent to the customers has become of utmost importance about any disruptions on business. Sharing the current state of business continuity with consumers is driving loyalty and trust. Following the spirit of this strategy, brands are sharing with customers how they are reacting to the pandemic, the measures they are taking for the teams, customers, and the continuity of operations. A heartfelt but short message detailing the measures they are taking or a sincere letter from the CEO is going a long way in showing that a brand cares about its customers.
In the case of supply chain problems, promoting and highlighting available products is becoming a go-to market strategy, rather than emphasizing out-of-stock products. The world is going through a period of heightened online activity, where the engagement between brands and customers are increasing, and first-time users have the potential to become loyal customers. With personalized notifications they are keeping customers updated on their preferred products.
Brands are also offering promotions including free shipping, extended warranty, and free returns, among many others. Offering such deals is making them easy to find and see. Even a customer who is completely new to online shopping notices such offers. The lockdowns have increased the number of online shoppers considerably.
The pandemic is compounding subscale distributors’ growth challenges with higher costs of working capital and unfavorable economics. Bigger distributors grow faster and invest more in their businesses than smaller ones do. Once they get through this period of short-term distributor support, companies plan to evaluate the scale, architecture, and profile of these partners. They are also critically evaluating the role of the traditional distributor.
Companies will reassess how well their distributors are handling multiple activities like servicing and breaking bulk, secondary execution, retailer credit, collections, and local compliance, and whether other players in the ecosystem are able to do the work more effectively. Companies are also completely rethinking the payout structures for distributors, taking into account the role they want each distributor to play and linking payouts to performance.
BCG’s recent consumer research shows a systemic shift toward e-commerce. This shift is not surprising, given the highly transmissible nature of COVID-19, and it is not the first time that a health crisis has caused consumers to shop differently: there was significant and sustained growth in e-commerce after the SARS outbreak in China.
Companies are using this opportunity to develop their e-commerce 2.0 business strategies. Many leading companies have increased their e-commerce businesses considerably. Product assortment and packaging, digital marketing, merchandising, and customer service are the areas in which the companies have apruced up their capabilities to succeed in e-commerce in emerging markets.
To address customers’ expectations and new behaviors in the aftermath of the pandemic, a go-to-market approach that leverages digital technology is critical. Companies are creatively and carefully assessing partnerships with logistics and delivery providers, with B2C and B2B e-commerce businesses, with technology providers, and with companies in the broader ecosystem to unlock value through disruptive ideas. With reduced budgets and increasing cost pressures, strategic partnerships with other companies are proving to be beneficial to all parties.
The rise of B2B e-commerce players in emerging markets has been driven by the belief that technology can make some aspects of distribution more efficient for both the companies trying to sell products and their retailers. This is undoubtedly true. Allocating trade investments differentially will win in priority spaces. The idea here is to prioritize spends across SKUs and to analyze affordability, brand strength, market share, and competition on the basis of location.
In such times of quarantine, troubleshooting and technical help services are gaining importance. These types of services are being personalized or automatized to a certain extent. And a technical support team is made reachable since customers are not able to leave their homes to get their appliances fixed. As a result, there is an increased demand for such services since most home appliances are being used much more than usual in this period. Brands are following up on customers in a personalized way and reaching out to them.
COVID-19 will ultimately be defeated. The economy will reopen. But life and business must evolve to meet the demands of a changed world. Electronics companies that take prudent short- and long-term action now will be positioned to emerge from the current crisis stronger and more resilient. They are asking themselves what to build, who to partner, and what to acquire.
What is next for traditional retail?
Shelter-in-place retailers are grappling with the appropriate response to coronavirus for their employees, customers, and their businesses. For many, it is shaping into a once-in-a-generation test of business continuity planning, elasticity of digital ecosystem, and supply chain flexibility.
Electronics and appliances retailers are experiencing a significant decline in sales as footfall declines or comes to a screeching halt (stores still represent more than 80 percent of revenue for most retailers). The sudden shutdown of brick-and-mortar and uncertainty in consumer spending leaves the retail industry fumbling on how to best drive business forward. What retail marketers anticipate as the biggest challenge post-pandemic is in-store sales loss, inventory management, staffing/re-opening their stores, new customer acquisition, and online customer retention.
Regardless of the scenario, several truths are beginning to become clear for retailers as they look ahead to conquer challenges in a post-COVID-19 world. There is a profound shift in sales. While there is no crystal ball to see how the demand for consumer electronics, home appliances, and air conditioners will be impacted in the near or distant future, there are certain strategies retailers are employing now to successfully keep customer experiences as convenient as possible and increase retention and loyalty, long after this all settles.
Retailers are investing in digital channels as the primary mechanisms of collecting orders and delivering those orders. Stores will shift to being employee-only dark stores or fulfillment centers supporting click-and-collect mechanisms of meeting customer demands. Majority of retailers are also activating online and offline strategies that not only get product to customers fast but also to those that are most in need.
Many retailers are facing inventory struggles of all kinds-from excess products to not enough. Whether they are trying to keep up with product demand, push seasonal items, and/or keep high-margin products top of mind, triggered alerts have become a simple yet highly effective way to notify customers in real time. Fear of uncertainty is driving retailers to revert back to blasting their customers with generic messages and deep discounts. Personalization is key right now, even for mass sends.
Businesses in the non-essential retail category are vulnerable to oversupply. Retailers’ main goal in the short term is to make sure they are not sitting on cash held up in inventory or deadstock. Even well-run companies can have 20-30 percent of inventory as deadstock, so now is the time to address it. They are reducing carrying costs by selling off C-grade products. They are considering heavily discounting, bundling, or even selling these products to liquidation other retailers in the competition. This might seem counter-intuitive to business, but it is providing them much-needed cash flow and leaving room for stock that moves.
The other side of cash flow is reducing expenses. One way to hold onto working capital is to take longer to pay suppliers. To preserve the integrity (and longevity) of supplier relationships, retailers are working with their suppliers to establish an agreement, both can live with, in the short term.
The retailers who will survive through the COVID-19 crisis are the ones who look at the current situation as an opportunity, regardless of which scenario they face on the road to recovery. Leveraging data and technology to accelerate innovation of digital channels, supply chain optimization, and in-store capabilities will help retailers develop strategies that address challenges head on, while transforming their organization for the future.
Wake-up call for e-commerce strategies
As many are going through passive times in their homes, home entertainment products are gaining popularity. Similarly, small appliances that improve the quality of life at home are gaining importance as the lockdowns last. Since many brands had to shut down their shops, the continuity of many businesses continues online. And there is much to do! Online retail has become a vital sales channel for the electronics and appliances industry.
Over the last few years as e-commerce’s prominence grew, brands and e-tailers focused on bringing their catalog into a digital setting, maximizing advertising and promotions across distribution and social media channels, and adopting a few nice to have customer experience solutions. However, as lockdowns, travel restrictions, social distancing, and other measures stemming from the COVID-19 outbreak kick in, it is revealing the cracks in e-commerce.
At a time when consumers need reliable e-commerce experiences, COVID-19 is exposing underprepared e-commerce strategies, poorly designed websites, and the lack of guidance and assistance offered to online shoppers. It has become evident that e-tailers need to adopt new strategies to effectively support the surge of new customers and reliance on e-commerce.
Actions e-tailers are taking during the pandemic. They are improving the search experience to reduce consumer stress. Prior to the COVID-19 outbreak, consumers believed that e-tailers need to do more to guide their purchase decisions online and preferred visiting a physical store to decide on a purchase. Why do they prefer the in-store experience? They are accustomed to receiving support and guidance from sales associates and product experts to find the right products for their needs. Hence, e-tailers are now focusing on to deliver a stress-free shopping experience that is always available to help customers navigate through purchase decisions.
They are taking stock of what products they currently sell that are the most relevant to consumers today. While essentials and grocery items are seeing unprecedented digital growth, there are a plethora of industries like electronics and appliances that are experiencing increased demand online due to COVID-19. For example, e-tailers that sell consumer electronics, are focusing on supporting consumers in finding the right products for them: work-from-home accessories to maintain productivity, TV sets to entertain, or technology to stay connected. It is not the best time to promote the latest and greatest home entertainment center that needs an expert to come in and set it up at their house.
Consumers who previously shopped online occasionally are turning to be more comfortable with purchasing products online after the world weathers this trying time, and they are highly likely to remember which retail channel supported their purchase decisions most effectively. Online channels are using this time to improve how they support the customer’s buying journey, and be a reliable, trustworthy source to purchase from.
In a time of uncertainty, it is important to remember: the last thing consumers need to deal with is struggling to make a purchase decision online. Consumers need guidance and assistance online to mitigate this extremely stressful time. As an e-tailer, it is their responsibility to support each individual customer’s needs and wants to remove shopping anxiety.
Many e-tailers are seeing a spike in web sessions. To help recover any lost in-store revenue, it has become imperative to be able to identify as many visitors as possible during this time period. This will help them down the road in better understanding how their behavior is changing and will change as the crisis continues.
Pivoting digital marketing strategies
The spread of the coronavirus has resulted in sweeping changes to the norm, impacting everything from education, to employment, to how we work. Similarly, smart digital marketers are rapidly adjusting their long-planned strategies in response to COVID-19’s cultural impact. Bottom-of-the-funnel tactics in a COVID-19 world just will not work like they once did. During times of crisis, marketers are focusing less on pushing sales and instead on building trust with their audience and on leveraging generosity and empathy. Currently, there is a huge opportunity for digital marketers to thrive, by meeting their audience where they are online and building a strong foundation for long-lasting customer-brand relationships.
Sending an email to the base about how businesses plan to operate during COVID-19 has become a great way to start. Transparency is key. Brands and retailers are explaining how their production/operation cycle will handle sanitary guidelines. They are upfront about any expected changes in the supply chain or in delivery time and offer solutions to customers that might be impacted by delays. If companies are doing anything extra to help hospitals, charities, or businesses in the wake of the virus, they are feeling free to share that as well.
Brands and retailers are reaching the community in a new way and becoming more responsive to the base. Instagram Live usage alone has doubled during coronavirus. As a result, marketers are finding ways to engage more frequently with consumers where they are, from following relevant hashtags to starting discussions in online communities. Many companies are getting creative with their online marketing strategy and connecting on a much deeper level with their base. If it was not already obvious: content is king, especially if it keeps consumers reengaging regularly with the brand.
Writing content that the audience cares about at a time when they are more likely to consume it (and derive value from it, even if it is just entertainment) is a great way to build brand trust and awareness. Blogs are being repurposed in numerous ways as a key marketing strategy. In addition to building SEO value and online search discoverability, a blog posts are used across all of channels to engage with the audience. Promoting blog posts is additionally an extremely low-cost way of driving new top-of-funnel traffic to a website and, therefore, a great way to test and optimize mid-funnel conversion tactics like pop-ups and landing pages.
When struck with a cultural shift as massive as that caused by the COVID-19 outbreak, brands and retailers are taking a hard look at where they are spending advertising dollars. If they were previously relying solely on bottom-of-the-funnel product ads, this tactic may no longer be suitable in a period when consumers are guarding their wallets from any discretionary purchases.
Similarly, a top-performing ad from just few months may not resonate in the world of social-distancing. Brands are entirely pausing ads that focus on gathering with others or feature imagery of physical connection. There are now 27.4 percent fewer ad images and videos that display physical human interaction. Instead of product ads, they are leveraging the increased social media usage from COVID-19 as an opportunity to fill the top-of-the-funnel by promoting content ads. Paid content promotions typically drive traffic at a cost up to 90 percent lower than industry averages and is, therefore, being used as a cost-effective way.
Instead of focusing solely on product or sales promotions in email marketing, brands and retailers are pushing email communications with content to entertain the consumers and keep their mind off the constant slew of COVID-19 news. They are creating a welcome drip and abandoned cart series that focuses not just on sales, but also on introducing a potential customer to the brand. They are testing new subject lines, call to actions, segmentation tactics, and templates too.
Many large businesses have turned to mass discounting in an effort to sell off excess inventory from their closed retail stores. This is not a recommended tactic for online businesses, as this could impact the brand perception over time, cheapening a product will make it harder to sell at full price later.
Preparing for an uncertain future
Like every industry, electronics too has been affected by the outbreak. However, there is much more to do while adapting to the circumstances and navigating through these rough times. Once the crisis has receded enough for businesses to start bouncing back, emerging markets will experience a reset in demand. However, there will also be a dramatic change in the shape of demand on the front line. COVID-19 has already significantly disrupted sales teams’ traditional activities. There are many unknowns ahead, but one certainty is that go-to-market approaches are fundamentally changing.
Responding quickly to unique and unusual market demands, building momentum early through quick wins, and demonstrating early success will be critical for sustained performance. They must, therefore, become more effective in how they respond to evolving consumer and customer needs, in navigating the competitive landscape, and in controlling the costs of doing business. Nimble organizations that can innovate and adapt digitally will be the ones that shape the new reality.
As traditional brick-and-mortar businesses suddenly cannot rely on foot traffic to fill their store fronts, now small businesses will focus on their online presence. Google search traffic has not diminished too much since the COVID-19 outbreak, so all small businesses will take this time to improve their online web presence fast.
By combining offline with the rest of the cross-channel data, retailers will cross-sell and recommend items to brick-and-mortar customers via websites, email, app, or even mobile push that are similar to or complement their in-store purchases. They will also engage in-store shoppers during this time by reminding them that the consumable products and perennial favorites they have previously bought in person can easily be repurchased or refilled online.
Marketers from around the world and across different industry categories are leveraging these insights by recognizing there is no one-size-fits-all approach during this time. There is limited certainty about the immediate economic future in emerging markets. The recovery, when it comes, will likely proceed at different speeds in different places. Although the post-COVID period may not be the first priority, now is the time to think about ways to sustain a brand’s engagements. –TVJ Bureau