Technology And Analytics

How
Retail’s E-Commerce
Post-Pandemic Fits into
Future
by Kathy Gramling,
Jeff Orschell,
and Joshua Chernoff
May 11, 2021

HBR Staff/contrastaddict/Stocksy/Getty Images

Summary.   The pandemic has changed consumer behavior in big and small ways
— and retailers are responding in kind. Since the early days of the pandemic Ernst
& Young has been tracking these shifting trends using the EY Future Consumer
Index and EY embryonic... more

If we have learned one thing from the past year, it’s that things
can change in an instant — changes we thought we had years to
prepare for, behaviors we assumed we’d stick to forever,
expectations we have of ourselves and our organizations. This is
true of the way we live, the way we work, and the way we shop and
buy as consumers.

In early 2021, the EY Future Consumer Index (Index), which has

surveyed thousands of consumers since the early days of the
pandemic, found that 80% of U.S. consumers are still changing
the way they shop. Sixty percent are currently visiting brick-and-
mortar stores less than before the pandemic, and 43% shop more
often online for products they would have previously bought in
stores. One of the most significant effects of Covid-19 is the
realization that, for many of us, geographical location has become
less relevant — so long as there’s an internet connection. This
flexibility allows more consumers to move away from urban
centers; the latest Index data shows that 26% of respondents plan
to live in less densely populated areas, up from 22% in April of
2020.

Using the EY Embryonic platform, we also saw, almost overnight,

e-commerce strategies shift from a perpetual top priority on every
retailer’s three-year plan to a desperately needed lifeline that
could enable them to survive a global pandemic. We found that
retailers made approximately $10 billion in e-commerce
investments, acquisitions and partnerships from May to July
2020. These investments spanned logistics capabilities to enable
last-mile, asset-light approaches like ghost kitchens (restaurants
with a space for kitchen equipment and facilities, but no dining
area for walk-in customers) and dark stores (retail distribution
centers that cater exclusively to online shopping), as well as
product portfolio investments geared toward digital capabilities
in AI and blockchain.

For some retailers, this past year has accelerated previously

existing efforts to innovate. But for many others, it has spurred a
great reset of the way they think about consumers’ needs and the
future of digital commerce.
What consumer experience do you want to create?
To be successful in e-commerce, you need to think bigger than e-
commerce. The core question retailers must ask themselves first
is not, “What e-commerce investments do I need to make?” but
rather, “What consumer experience do I need to offer?”

This is a culture change for many retailers who’ve long had a

mentality that’s anchored in brick-and-mortar stores. The
consumer experience is rapidly evolving from one that’s built
upon the transactional process of in-store shopping to one that’s
rooted in deep, ongoing and enriching relationships. As a retailer,
you need to create an interwoven journey that’s relevant to your
target consumer — and structure your channel ecosystem, e-
commerce included, in a way that provides value along that
journey.

Considering the consumer’s entire journey is especially important

in today’s environment, where people’s social needs, such as
feeling a sense of community, will impact their buying habits as
the conditions of the pandemic continue to change. While the
shift toward online shopping will likely remain, the desire for
post-pandemic social interaction will likely drive people back to
stores. Case in point: The Index found that 38% of consumers
intend to do more shopping online and visit stores that provide
great experiences.

In order to offer consumers the journey they need, retailers must

understand the future of experience-led capabilities. E-commerce
is a key piece of that future. But it’s not just about being online —
it’s about doing it right and continuing to consider how in-person
shopping fits into the customer’s overall journey.

So, how can retailers think about this integrated consumer

journey, and how e-commerce fits into it? Here are some core
questions to help define investment and operating model
decisions.
 Do I have an agile, adaptive technology platform that
understands that every consumer journey is different?
Is my organizational structure free of silos — which isolate e-
commerce, merchandising, store operations, supply chain, and
marketing — that interrupt the experience?
Have I considered my assortment congruity — what’s online
and what’s in store and the logic behind channel exclusivity?
How can I be price-competitive and still maintain margin? For
example, how can I introduce impulse purchases in an online
environment? What role does store layout and merchandising
play in this?
How do I orchestrate the consumer journey from digital to
physical and back again?
And finally, how do I maintain the experience all the way to
consumers’ doorsteps?

It all comes down to delivery.

E-commerce success depends on the last mile. Today’s
consumers aren’t keen on excuses, especially when it comes to
accessibility, affordability, and convenience. The Index found
that only one in five (21%) U.S. consumers say they are forgiving
retailers and brands for service disruptions due to Covid-19. In
other words, the pandemic is no longer a reasonable excuse for
not delivering orders on time. Today, retailers are vying for
limited shipping capacity in the last mile due to surges in online
shopping. As many of us experienced after Black Friday in 2020, it
took weeks for products to finally arrive on our doorsteps. Even
the most advanced e commerce capabilities can’t conceal the
importance of fulfillment, as delivery becomes a cornerstone of
the experience.

The store as fulfillment center. The Index found that 37% of U.S.
consumers will buy online and pick up in store more often in the
future. But buyer beware: curbside or in-store pickup can quickly
 lose its luster if consumers endure long wait times in a jammed-
up parking lot, or if their local store inventory can’t accommodate
their online purchases. So, while the store as a fulfillment center
can be an effective strategy, it requires systems and business units
that communicate with each other to deliver on the promise. As
services scale, so must retailers’ ability to deliver a consistent
experience.

Regardless of how consumer behavior continues to change,

retailers must be prepared to continue to develop stronger deeper
relationships with their customers — both online and in person.

The views expressed by the authors are not necessarily those of

Ernst & Young LLP or other members of the global EY organization.

KG
Kathy Gramling is EY Americas Consumer
Industry Markets Leader

JO
Jeff Orschell is EY Americas Consumer Retail
Leader

JC
Joshua Chernoff is EY-Parthenon Americas
Managing Director

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