How social distancing has impacted Amazon buying patterns
Faced with a global health crisis, Amazon Sellers have had to react to a unique set of circumstances. Social distancing in the wake of the COVID-19 pandemic means consumer habits have, and will continue to, change. These changes have already affected most market segments, and to survive and prosper you must ensure your product portfolio, inventory and advertising strategy is fit to react and cope.
With millions remaining at home, Amazon is now part of a lifeline for essentials rather than just a convenient option for online shopping. Consumer spending on Amazon is up 35% from the same period last year. The labor numbers also reflect the company’s growth — Amazon has hired 80,000 new workers in the past few weeks alone.
But not all categories are experiencing the same kind of market uplift. Understanding these differences is important. But the key question is how long these changes will last? Are we experiencing a decisive shift towards online shopping that will extend past lockdown, and when will the types of products people buy go back to ‘normal’?
Panic buying and window shopping
The one major change we have seen due to the uncertainty caused by COVID-19 has been the tendency to stockpile. Most indications are that this will subside once confidence in availability is established — and that seems to be borne out by experience in Italy and Spain.
However, as lockdowns are eased, it will be interesting to see if subsequent waves of infection trigger the same kind of ‘panic-buying’ behavior. It’s possible that FBA comes back online for ‘non-essential’ goods just in time for the next wave of panic buying.
Customers on Amazon are also now becoming ‘window shoppers’. This is likely for a number of causes: less discretionary income, more time to peruse listings, interest in investigating new products. However, one interesting idea (over which Sellers have some control) is the huge variability in delivery times.
With pre-pandemic expectations for delivery within two days, the number of products on Amazon with lead times of four or more weeks should be expected to drop conversions. Particularly when it comes to FBA Sellers, the dramatic increase in delivery times has single handedly led to a significant change in Amazon purchase patterns. The fact that FBM, in many cases, is now faster than FBA has resulted in an unprecedented number of FBM Sellers winning the Buy Box. Right now, the importance of having products in stock and the ability to get them to buyers has never been more crucial.
Changes in popularity of categories
Online shopping has increased, but not every type of product has experienced the same kind of boost in demand. Historically — i.e. more than two months ago — out of all product categories, electronics was the most popular. In the US, 44% of Amazon shoppers had purchased electronics via Amazon. That was followed closely by clothing, shoes, and jewelry at 43%, and home and kitchen products at 39%. Now, the most popular products are health, home working and fitness items.
Based on research by Stackline, we’ve compiled a graphic showing the major growth trends by category compared to march last year. The changes aren’t actually that surprising, but are dramatic and worth taking note.
But the situation is changing daily and as lockdowns are eased, there will be opportunities for Sellers as demand will surge in some new areas.
The rise of online grocery shopping
A survey from RBC Capital Markets found that Amazon was the most popular online grocery destination for new shoppers over the past month, with 60% of respondents saying it was their first choice. Of those who use Amazon for grocery shopping, 34% said they were placing an order at least once a week, compared to 21% in the 2018 survey.
A new Gordon Haskett Research Advisors survey found that one-third of shoppers purchased food online over the past week. Of those who don’t buy groceries online, 41% said they would do so in the next six months.
Online grocery shopping has been around for years. But it’s seeing a spike, and this is one category that we predict will be a long-term transformation. This is more of a ‘gut feel’ than anything else. But the convenience of online grocery shopping is hard to deny, and it just seems like once people try it, it may just become a habit. This is supported by further RBC research in which more than half of respondents said that COVID-19 is “leading them to permanently boost their willingness to buy groceries online”.
But will Europe be different? According to the FT, online shopping in Italy (historically, one of the least penetrated markets in Europe) has doubled since lockdown. In France, estimated online orders for home delivery rose 32% year-on-year in the week of March 2, while click-and-collect orders rose 29%.
The point here is not that Amazon Sellers should move into grocery, but that online food purchasing will introduce many more people to online shopping. Amazon has a long history of cross-selling and upselling to ensure that once grocery purchasers are on their site, they will be directed to other categories and products.
Competition around the corner
As consumer behavior changes and more customers start shopping online, Amazon will become more competitive. In these uncertain times, advertising spend will always be a target for cost-cutting. Sellers are cutting back spending on ads and pay-per-click campaigns.
With less money spent by others, campaigns may cost less so you can reap bigger returns and increase your sales further. It all comes down to the crucial question of inventory and avoiding stock-outs. But now is a good time to establish your presence on Amazon — the feat will only get harder. If you want specific advice on how COVID-19 has changed Amazon PPC, check out this article.
Understanding the change as it relates to you
While the world is trying to come to terms with the effects of COVID-19, behavior is changing and shoppers are increasingly moving online. Amazon Sellers are in a good position to serve a population in lockdown, but only if they are able to align products, inventory, supply chains and advertising.
Tactics will need to be adapted to this new world, and while a great detail of historical sales trend analysis data will be useless now, situation analysis will be even more important. Looking at general trends is fine. But what you really need to do is analyze how your specific product portfolio is interacting with the ongoing shifts in Amazon purchasing patterns.
By connecting the dots between your logistical and supply data with real CVR, CPC and AOV statistics regarding your own product, you can make informed decisions about where to invest. Market disruption can be a good time to re-assess processes and make investments for the future. Analytics software is something that could help you in the short and long-term.
In these uncertain times, there are still opportunities — it will just take a slightly different mindset and approach. Watch how different countries react as the virus recedes. Countries that recover earlier will give you an opportunity to see what might happen in your most important geographies. Buying patterns will change as a result of COVID-19, so the best we can do is to follow the market closely, look for opportunities and keep washing our hands.