The Changing Consumer Habits in the Age of eCommerce

Numerous studies show that the Covid 19 epidemic affected where, how and what consumers buy and more importantly these behaviors became permanent. According to a global study conducted by Ipsos with 25,885 people, 81% of consumers said that they have changed their shopping habits since the epidemic began and 92% said they will continue their new habits in the future. For example, in the tourism sector room cleaning has become an undesirable feature as a result of Covid19. Presently tourism has slowly started to return to normal, but consumers still maintain the habits they acquired during the Covid19 pandemic. Hilton hotel chain announced that the room cleaning service will be provided on demand only and will only be done automatically after the 5th day (1).

Covid19 has affected where consumers buy, due to the reality that consumers became home-centered, turned to online shopping, then began to learn how to combine physical + online channels in and out of quarantine. This caused companies to organize to make holistic sales in the omnichannel, that is, online + physical + social media channels. Some were caught off guard, while others put their future plans ahead and adapted quickly. There is no life for a company that does not adopt an omnichannel sales strategy in almost every category. In the past, multichannel and omnichannel were the same thing, but as the mobile channel structure became more widespread, applications and literature began to separate multichannel and omnichannel structures (2).

Multichannel management means creating consumer value with different marketing mix strategies specific to each channel by integrating all existing channels including mobile so as to acquire, retain and develop consumers. In Omnichannel on the other hand all channels are managed as a single channel and this means applying a single marketing mix integration strategy, especially a mobile channel centered one. Multichannel and Omnichannel strategies can differ in detail with the main principles being the same for manufacturers and retailers marketing single or multiple brands.

For multichannel and omnichannel management, it primarily depends on managers understanding the logic of holistic channel management, observing how the investment made on one channel affects the other channel and making the right decisions accordingly. For example, knowing how a different price or a discount campaign applied in one channel affects the other channel is the trick (3). On the other hand rather than a “one size fit all” approach in the supply chain, other tricks seem to be to produce solutions suitable for the target audience and to cooperate with business partners (4).

Meanwhile, omnichannel and multichannel strategies should not be confused with each other. For example, Apple today works not only with the classic physical store system (brick and mortar) but with both the physical store and the online store system (click and mortar). Apple stores are not like regular stores. Their aim is not to sell, but to support the e-commerce channel where the majority of their sales are generated. In this way, Apple stores work as a contact point with the consumer and serve to convey the Apple experience. While Apple tries to increase the demand for its products with services such as Apple TV+ and Apple News+, it offers the same experience with its consistent communication across all channels. Although Apple displays a holistic image in communication, you cannot talk about a holistic sales strategy when you consider the places where you can buy its products. Therefore, it can be said that it uses a multi-channel strategy rather than an omni strategy (3)

For a brand that implements the omnichannel strategy, you can complete your shopping journey that starts in the mobile app in the physical store or it could be the opposite. Apple on the other hand does not prefer this because it will lose sales, it is doing the right thing. The key is to maximize sales sustainably. For this reason, it should not be a routine decision to apply Multichannel management or Omnichannel management to your retail brand or manufacturer’s brand. Like Apple, this decision should be made by considering forecasts, competitive costs, stocking opportunities, information flow, in other words, all market conditions (5).

The important point here is that omnichannel shopping is growing rapidly all over the world and smartphones are now directing shopping. People don’t just look at the phone in their hands as a means of speaking or surfing social media. Now the mobile phone has become the biggest shopping tool for them. Again according to research by Ipsos, 56% of consumers globally say that checking the same products with online research while shopping at a physical store provides great purchase assurance. (1) What is more interesting is that in all these purchasing processes, consumers do not want to communicate with virtual sellers, but with real people even within the application.

More importantly, they were called opinion leaders, then they became celebrities, then they became influencers. Now, their new title is consumer curators; in other words, they became the ones who the consumers came across while surfing the web and social media and influenced them with their comments and directions. According to a global study by GFK 47% of online shoppers shop influenced by videos, while 45% shop influenced by curators on social media. (1)

Covid19 affected how consumers shop because many went shopping with masks, wanted less contact with people and did not prefer crowds. Instead of paying with cash or card, they preferred contactless payment.

Covid19 has affected which products consumers buy because trust, protection, family health have become more important. For this reason, the orientation towards brands and products that are considered safe increased. Today, to stay in touch with consumers, it is necessary to know all their met and unmet needs. The consumer now wants more dominance and it has become more difficult to obtain and retain the consumers and maintain their trust and loyalty. Yes, consumers turned more towards e-commerce, but at the same time, they have turned to collect information by researching on the Internet and are even specialized in this subject.

Of course, as the consumers research, with the help of “cookies”, they began to be watched more and more segmented, to receive more personalized messages and to be exposed to more product recommendations. Yet on the other hand consumers began to ask that their personal data is respected. This is a very important breaking point for brands that want to target using data. However, Google has announced that it will not allow third-parties to collect “cookie” information from 2023 so as to prevent those who do not understand this dilemma and to prevent bans that may be placed by regulators in the future. While this may also create a monopolistic opportunity, it reveals that every company can now only market on the data they collect, which will make personalization difficult, but traditional communication methods may gain importance again. (6) Of course, it is necessary to see the application and decide, but it is also known that programmatic work will be affected.

The developments I’ve attempted to explain above, are developments that show how covid19 has changed consumer behavior, how these behaviors have become permanent and how this forces companies to act in the omnichannel. There are also developments related to digital shopping platforms and the trends are very different here, demonstrating the necessity of knowing what companies should or should not do so as to maintain channel dominance. That’s why I want to share my views on this subject.

There was a very interesting article in the May-June 2021 issue of Harvard Business Review by Andrei Hagiu and Julian Wright called “Don’t Let Platforms Commodify Your Business”. The researchers carried out this research with funding from the Singapore Ministry of Education and the State of Singapore. Julian Wright made public in the article that he was a consultant to Facebook (7).

The authors count as Amazon, Alibaba, and Apple App Store in the world as global players, they are called digital multisided platforms MSP let’s call it MP for short. The authors emphasize that MSPs or MPs make it much easier for sellers and even brands to reach new customers. As we all know, you can open your own store on these platforms as well as sell your goods in their stores with their efforts.

Yet as thousands of companies large and small are now discovering, relying on selling through these platforms carries significant risks and a number of additional costs, the authors continue: MP’s use the dependence of the vendors to their advantage sometimes unnoticed and sometimes by showing. They increase their fees. They play with algorithms to make the price more important. They make it mandatory for sellers to advertise for continueus visibility in search results. They compete with sellers (brands) by imitating (PL) their products. They impose restrictions on the prices that sellers can set outside of their MP. They’re also changing their rules and designs in ways that weaken sellers’ relationships with their customers. 

But the writers say that everything is not over yet. They suggest four strategies for merchants to work on these platforms to their advantage:

  1. They can invest by developing websites or apps directly with their own brands.
  2. They can use these platforms as showrooms.
  3. They can specialize, offer personalized offers, or many different offers to one person.
  4. They can conduct public relations and lobbying activities to reduce the power of the platforms.

An interesting article titled “Walmart vs Amazon: The Battle to Dominate the Market Industry” was published in the Financial Times in May 2021 by Alistair Gray and Dave Lee. (8) In the article, it is stated that Amazon threatened the supermarket giant Walmart, which once changed the way Americans shop, by opening Amazon Fresh, or investing in brick and mortar, in Los Angeles in September 2020. This is said to be a complementary move after Amazon’s 2017 acquisition of the Whole Foods chain. Since then it is emphasized that Amazon has opened more than 20 stores to strengthen its competition against Walmart.

On the other hand according to the authors Walmart senior management; were convinced that changing consumer habits during the pandemic would be permanent and that Walmart needed a new business model for online grocery shopping that would increase its competitiveness and prioritize digital transformation efforts. That’s why Walmart tells 90% of Americans that any Walmart store is only 10 miles away and that if Walmart can improve the digitalization of grocery shopping, it could hinder Amazon’s success in this industry. They then explain the difficulty of the job as follows:

“However, convenience store delivery is mandatory for Walmart and Amazon in today’s terms. The reason for this is that grocery baskets mostly contain low cost products, there is additional labor cost to collect products from the store, the transportation needs to be airconditioned and the last mile costs of transportation, which means the cost of reaching the consumer from the warehouse shelf. Besides delivery, Amazon has one more thing to worry about, which is that the performance of its physical outlets is far behind its online sales. Here they need to reach a similar level to online sales by developing their business. Amazon is now preparing orders faster and is busy multiplying “Prime Now” points to deliver grocery items directly, in addition to the use of new technologies such as smart lock technology and Alexa assistant. For now Amazon’s stores are too few and scattered to have a transformative competitive effect on Walmart’s business, but that will change if Amazon begins to have an impact with Whole Foods and Fresh stores in some geographies.

The structural challenges facing both companies differ greatly from a technology and customer perspective.”

The authors set different goals for Walmart and Amazon:

For Walmart, the goal is to “digitize its existing store business to compete with an e-commerce giant that plans to develop by opening a high-tech physical store.”

For Amazon, the goal is “to compete with a giant chain store with the innovations it develops, while trying to increase the number of physical stores to support its grocery business.”

Large investments are required to achieve both goals and make the business sustainable. In this wrestling, the one on top will be the winner. Will Amazon come out on top? I think it’s too early to announce the winner. But if Amazon wins the race, what other developments can happen in the market, for example: Retail platforms like Amazon, besides their sales and brokerage revenues, also create a huge “retail media” power and earn from advertising communication. Currently, it is estimated that the money spent in this retail media is 100 billion dollars, and it is stated that only Amazon’s advertising cake will generate 26 billion dollars in 2021 (9). In other words, if Amazon wins over Walmart becoming more dominant, who knows what the revenue it will earn from advertising alone will be.

While talking about Amazon, a memory came to my mind; in spring of 2018 we went to Seattle with some senior executives of Yildiz Holding. Our aim was to GOYA (stands for Get out there, Observe Own It, You Provide Feedback, Achieve our Goals) for the Godiva Cafe project, which we are currently parked on the side due to the pandemic. For this reason, while examining the new model Starbucks Reserve stores, I took the opportunity to visit Google, Amazon and Microsoft offices. Thankfully, I couldn’t see anything different from our pladis and Yildiz Holding offices. The young, libertarian, individualist comfort approach was not different from the one in our offices. We have already made our head offices in Istanbul, London and New York similar by following such trends.

Shortly before our visit to Seattle, Amazon made two major changes that are unprecedented in its history. The first one was Amazon Go, Amazon had opened a store without cashiers, clerks, completely based on beacon infrastructure technology, I was amazed. It was interesting, but I found that it couldn’t replace the existing brick and mortar. The second development was Amazon’s acquisition of Whole Food in 2017. During my visit to Amazon, I met face-to-face with Jeff Bezos’ close colleague, Amazon’s strategist for 25 years. Why are you investing in brick and mortar, is this a comeback from the digital, I asked. The answer I got was: Jeff must have a reason! Frankly, it seemed strange to me. At the time, I thought Bezos had to believe in classic physical stores and their power. Because although it seems to have some advantages due to e-commerce digitality, it was not possible to provide the same efficiency and profitability as a physical store. Maybe that’s why it was developing more quickly in oligopolistic markets. 

E-commerce cannot be a profitable alternative for people’s daily needs for food and hygine. The focus and solutions of e-commerce companies must be different in order to include these “recession-proof categories”. However, the “.com” extensions of the existing physical markets, which are actually seen as e-commerce, are in fact the “last mile” business of transportation logistics, which is also mentioned in the FT article, which has been digitized (apprentice) is a unique solution. It should not be seen as an e-commerce application. But it will always be a complement to the physical market. It will be limited to a customer satisfaction model. Because the demand for the “economic crisis resistant categories” that are not efficient in e-commerce, that is, for the food and hygiene categories that every trader wants, could not reach the demand level to meet the cost burden of e-commerce global giants such as Amazon and Ali Baba. In order for these categories to be sold profitably, it is necessary to create a larger order and consumer occasion. The FT article I have mentioned above takes this issue more broadly. For example, in order to ensure efficiency and profitability in e-commerce, “last mile” logistics are carried out by employees living in that region and projects such as cost reduction is developed, but I see these as futile efforts (10). 

And now it’s time to have a company, which aims to bring many global and local brands to the e-commerce ecosystem and introduce them to its customers, to offer its customers “e-commerce-specific” products and solutions, and to support e-commerce. That company operates in the B2eB (Business to e-Business) sales channel in the fields of category management, marketing, promotion mechanisms and customer services for brands/customers. On the other hand, in the B2C (Business to Consumer) sales channel, this new company will reach millions of users through stores on MP platforms. 

The greatest attraction of e-commerce for all manufacturers and brands in the market is that it looks like B2C sales, that is, it is perceived as “drop-shipping”. However, this is a dangerous trend. The existing traditional value chain does not only enrich the business. At the same time, it makes it attractive and sometimes even makes the job come alive. For this reason, I find it more appropriate for traders to get rid of this deceptive temptation and return to reality, getting rid of the B2C charm and trading on the B2eB channel. In this way, you can list your products widely on the existing global giant e-commerce platforms. I believe that in terms of market penetration, it is more beneficial to have your goods in many independent stores within the platforms besides opening a store on the platforms yourself.

How will e-commerce solve the problem of basket size and shopping frequency?

For example regarding snacks; by creating occasional demand instead of impulsive demand! Special packages should be prepared for the occasion of rewarding, sharing, celebrating, and relaxation. It should be essential to be able to sell 10Lira products for 10 evenings at once, not 1Lira product every evening. If I made a 15Lira package, instead of selling it 3 times a week, let me sell it for 45Lira on one occasion. For this, let me market it with products that will create synergy, such as snacks and fruits. Let me offer the opportunity suggestions for stocking. Let me develop packaging suitable for secondary usage. I will even set up a subscription system if I can. Let me encourage larger orders with packaging that has secondary use or nostalgic meaning. Let’s add a second meaning to the product by selling it together with promotional materials that will be perceived as a reward by the consumer. Thus, while offering new opportunities to the consumer in every occasion of their life, responding to their changing habits, we successfully implement multi-channel marketing strategies by making product and presentation differentiation, and with algorithms, we prevent destructive price competition with the stores we’ve opened in MPs and prevent harming the perception of our brands in the eyes of consumers.

Also Read: other articles by this author: The Art of Negotiations with Foreign Partners, Negotiation Secrets from a Turkish Billionaire, and What I Learned from Running a Billion-Dollar Family Business

Bibliography:

(1)  Facebook IQ, ‘Industry Perspective: The Evolving Customer Experience, https://scontent.flhr3-3.fna.fbcdn.net/v/t39.8562-6/10000000_177595441080422_2602623811680593006_n.pdf/FBIQ_The_Evolving_Customer_Experience_Report.pdf?_nc_cat=110&ccb=1-3&_nc_sid=ad8a9d&_nc_ohc=vaiw5BtjTfYAX_4Rrn7&_nc_ht=scontent.flhr3-3.fna&oh=5ddcdd40661379357ee39b6c289bef38&oe=61053ECE

Lichtenberg, Nick (July 15th, 2021), ‘Say goodbye to hotel turndown and these other services people simply don’t want to pay for anymore, Business Insider, https://www.businessinsider.com/daily-hotel-housekeeping-over-pandemic-changes-economy-hilton-services-hospitality-2021-7

(2)  Verhoef P.V et al. (2015). From Multi-Channel Retailing to Omni-Channel Retailing, Journal of Retailing, 91 (2), pgs.174-185.

(3)  Shankar Shankar, V. and Tarun K. (2020 ) Omnichannel marketing: Are cross-channel effects symmetric. International Journal of Research in Marketing, 38 (2).

(4)  Graf, Claudia, Lange, Tim, Seyfert, Andreas and Noortje van der Wijden, (July 19, 2021), ‘Into the fast lane: How to master the omnichannel supply chain, https://www.mckinsey.com/industries/retail/our-insights/into-the-fast-lane-how-to-master-the-omnichannel-supply-chain

(5)  Nexcess, ‘5 Examples of Brands with Great Multi-Channel Marketing Strategies, Nexcess, https://www.nexcess.net/woocommerce-resource/channel-strategy/

(6)  Boiten, Eerke, (March 9, 2019), ‘Google’s scrapping third-party cookies – but invasive targeted advertising will live on’, The Conversation, https://theconversation.com/googles-scrapping-third-party-cookies-but-invasive-targeted-advertising-will-live-on-156530

(7)  Hagiu, Andrei and Julian Wright, (May-June 2021), ‘Don’t Let Platforms Commoditize Your Business, Harvard Business Review, https://hbr.org/2021/05/dont-let-platforms-commoditize-your-business

(8)  https://www.ft.com/content/9ab41b9e-a294-430f-951d-49cfc3415460

(9)  Weiner, Lauren, Leora Kelman, Shane Fisher, and Mark Abraham, (May 19, 2021) , ‘The 100 Billion Media Opportunity for Retailers, BCG, https://www.bcg.com/publications/2021/how-to-compete-in-retail-media

(10) Hai, H.B et al. (2021) Who is interested in a crowdsourced last mile? A segmentation of attitudinal profiles. Travel Behaviour and Society 22, 22–31

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