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Could COVID-19 shift online shopping loyalties?

Could COVID-19 shift online shopping loyalties? Blog Feature

April 29th, 2020 min read

With social distancing guidelines and regional "stay-at-home" orders, the coronavirus has profoundly changed the way that we, as consumers, well, consume.

Online sales of consumer packaged goods (CPGs) have skyrocketed 56%, with food and household goods leading the charge at 69.5% and 57.5%, respectively. 

Amazon — currently the world's leading retailer — has leveraged rapid shipping times as a key feature over the last few years.

Prime's 2-day delivery isn't just a logistical masterpiece; it's been a driving feature of the platform's growth against brick-and-mortar stores. But during COVID-19, Amazon has delayed shipping on "non-essential" items across-the-board.

What used to take two days to ship can now take weeks, if not months, to leave one of Amazon's logistics centers.

What has once been a pillar of reliable shipping is becoming an unpredictable mess in the wake of surging online shopping.

So, how will this impact Amazon in the long run? Consumer loyalty is on the line. Does Amazon have what it takes to stay at the top?

Delays, confusion, and discovering what's really 'essential'

How could anyone be prepared for this? That's the question lingering in the back of almost every business owner's mind this year. The truth is, basically no one was. How could you be? But no one has had to perform quite like Amazon during this crisis.

Due to the overwhelming demand for online shopping, Amazon made the bold decision last month to prioritize "essential items" for shipping.

These are things like toiletries, food, and healthcare supplies that Amazon deems "essential." For everyone who ordered that latest video game, their shipping time went from two days to two weeks.

At the same time, Amazon barred third-party sellers (which make up 58% of Amazon's total sales volume) from selling their "non-essential" products on the Amazon marketplace — causing obvious unrest amongst this army of sellers.

Despite Amazon's recent announcement that they are willing to accept non-essential items again, a good chunk of sellers have already been forced to post up elsewhere, with many pouring resources into their own e-commerce portals.

Of course, the entire concept of "essential" has been a confusing point for consumers and business owners during this pandemic. According to workers, Amazon's definition of essential is confusing at best.

For small businesses, this may be a turning point. Amazon has convinced small businesses across America to enroll in its Fulfillment By Amazon (FBA). In fact, 64% of businesses that use FBA don't have their own logistics. They solely rely on Amazon.

But during this crisis, those businesses have been left scrambling.

For small businesses that are already on the verge of collapse, loyalty to Amazon's fulfillment center may never return.

Customer loyalty is up for grabs

It's not just the loyalty of small businesses that could change the future dynamic of online shopping.

As Amazon's logistics framework bends under pressure, consumers are starting to think about alternatives. Online grocery shopping at Walmart has doubled over the past few weeks. Target has seen similar success in its online sales.

According to recent surveys, only 54% of shoppers feel safe at the grocery store, and even fewer (33%) would feel safe at a mall. People want to shop online now more than ever, and that's stressing systems.

While all three retailers are dealing with shipping issues, Amazon is facing a uniquely challenging issue. People pay for Prime. It costs $119 a year for consumers to receive 2-day shipping.

Globally, 54% of consumers have higher customer service expectations than they did last year. Given that 91% of customers will simply leave a brand without complaining when they feel they've been wronged, Amazon has a real problem on its hands.

Sure, some customers will be satisfied with Amazon's response. After all, we are facing a global pandemic.

But many won't. And those that aren't will start shopping around for other options.

It's easy to say that the first major retailer to get its logistics under control during the pandemic will stand to reap the highest rewards, but it may not be that simple.

Even if Amazon is first, the damage to consumer loyalty may prove too much for it to overcome in the short-term. Pandemic or not, paying $119 for a service that doesn't work starts to look very questionable.

What does this mean for you?

We're at the precipice of change. For years, Amazon has been the unbridgeable giant in the retail space. After COVID-19, we may see some shifts in the landscape.

Not only do Walmart and Target have a genuine opportunity to grab a significant chunk of Amazon's user base, small businesses are also in a unique position to rapidly promote their own online portals.

It may seem strange to talk about a shifting landscape. After all, Amazon is dominating the retail space right now. But things will open back up. The question is, will consumers still feel loyal to Amazon?

Amazon will still be king of the jungle, but it may not have as many loyal subjects.

And brands who can please those customers stand to gain some market share in a marketplace that has seemingly been set-in-stone for almost a decade.

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