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The Covid-19 impact: the second life of e-commerce in Portugal?

by ace
The Covid-19 impact: the second life of e-commerce in Portugal?

In a 2018 study, Boston Consulting Group (BCG) and Google estimated that Digital had an impact of 9 billion euros on Portuguese GDP, which represented approximately 5% of the total. In that study, it was also evident that Portugal was well behind its European peers, where the weight of Digital had average values ​​of approximately 8%. Some systemic factors demonstrated, at the same time, some of the causes of this low weight, but also the strong growth potential – for example, while Internet penetration was already quite high (71%), online shopping was much lower (31% ).

The Covid-19 pandemic has revolutionized the way people live and relate globally. One of the most evident signs is the strong growth in the number of new users of digital channels, a consequence of confinement and travel restrictions. In Italy, for example, according to the Financial Times (20 March), Carrefour reported a doubling of its customers online, in just one week of confinement. In the USA, application downloads from the three largest retailers increased by more than 100% compared to 2019, still during the month of March, according to data from Apptopia. And according to a survey conducted by the Wall Street Journal on April 20, about a third of respondents said they had made grocery shopping over the internet for the first time, only during the Covid-19 pandemic.

In Portugal, according to a study by Group M carried out in mid-April, the effect of the pandemic also generated a growth of e-commerce between 40 and 60% compared to the values ​​of 2019, in some relevant categories such as food retail. Additionally, the Society Interbank in services (SIBS) announced that the average value of online purchases has increased by approximately 18% over the period of state of emergency (from around € 34 in the first weeks after confinement, to approximately € 40 in the last week of state of emergency). These combined factors demonstrate, on the one hand, that a significant number of people probably adopted these solutions for the first time and, on the other, that those who already had access to digital channels have diversified or reinforced their basket.

Although it is too early to draw conclusions about the impact of this crisis on the adoption of digital channels in Portugal and to compare with what happened in other countries with greater maturity on this front, it is possible to anticipate that the fact that many retailers do not yet have an e Competent e-commerce has limited the increase in its use. Despite this, it is indisputable that we are facing a structurally different scenario for Portuguese companies, in which growth in the online environment is no longer an option and that it is crucial to work on the relationship with these new consumers to ensure their retention in a channel where they can have a better experience and at lower costs. The most recent figures from BCG's Demand Sentinel, which tracks online traffic by categories in Portugal, demonstrate this: in the first half of May, already in the process of being de-defined, categories such as Beauty / Cosmetics (+ 28%), Furniture ( + 39%) and Medicines (+ 19%) maintained traffic much higher than that registered at the end of January.

In this “new normal” phase, digital channels will continue to be huge opportunities for contact with consumers. Recent BCG studies point out that, even with the reopening of countries after confinement, some consumer groups continue to show some reluctance or even to rule out the possibility of going to physical stores. In addition, the most recent epidemic crises also show that e-commerce has managed to remain at high levels after the moment of restoring sanitary normality. It is no coincidence that countries like China or South Korea have e-commerce penetration figures well above the average in the western world – the importance of the SARS crisis in 2002 is recognized for the growth of this channel in China, and in particular , for the appearance of two online commerce giants: Alibaba and JD.com.

The retail sector is one of those that will be able to take greater advantage of this change in consumer behavior, but to do so, it will have to implement an integrated digital marketing strategy, with the help of using data to generate and retain knowledge about its potential base and current online customers. This knowledge will allow the creation of targeted campaigns and better targeted personalized offers.

Another essential factor is the consumer experience in online / mobile channels. The digital medium offers countless shopping opportunities in thousands of stores worldwide – it is a truly global sector, which drastically increases competitiveness. So, for a company to be able to attract and retain a consumer until the end of the purchase process, it must ensure an excellent experience through, for example, simple and intuitive interfaces and with reduced loading times for pages (Google advises that this does not exceed 3 seconds), appropriate checkout and payment methods, among others.

At the same time, companies should not forget the logistical response related to the management of inventories, as well as distribution, as these also influence the consumer experience. Thus, it is essential that the inventory management processes are reformulated, using analytical tools that make it possible to foresee demand levels and ensure responsiveness to requests, and that an ecosystem of partners is established that allows consistency in the digital shopping experience, including not only the moment of purchase, but also the delivery, return and connection with the physical channels.

In short, the Covid crisis is a wake up call for Portuguese companies to make the transition from the offline world to the online world, which is shaking the current competitive balances. The offline presence will continue to be decisive, also in the online success – in this period of confinement, the omnichannel brands were the ones that registered more growth. But the urgency of a solid online presence is now evident, and it can now reach a scale that justifies betting with much more attractive margins than it has hitherto.

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