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During the COVID-19 crisis, one area that has seen tremendous growth is digitization,

meaning everything from online customer service to remote working to supply-chain

reinvention to the use of artificial intelligence (AI) and machine learning to healthcare with

telehealth and biopharma has been revolutionized and there’s no going back. In the past, it

has taken a decade or longer for game-changing technologies to evolve, from cool new things

to productivity drivers but the COVID-19 crisis has sped up that transition by several years.

Unstoppable rise of e-commerce, sophisticated customer analytics, personalized sounds

and smells, digital mannequins that “know” your clothing preferences, automated home

delivery—these are just some of the elements that will shape the shopping experience in the

coming years. We are entering the world of “phygital” (physical and digital at the same time).

The COVID-19 pandemic has dramatically accelerated the migration to e-commerce. the

expected five-year trajectory happened in a matter of months [6]. Every activity and function

that could move online did, fueling a mass digital migration. Companies sent their employees

home and eliminated business travel, and many now plan to continue with some hybrid form

of remote work and virtual meetings. Consumers went online to fulfil needs ranging from

buying groceries and taking school classes to exercise and doctor appointments, but digital’s

growth has plateaued in the past six months and may begin to slip back once the pandemic

eases, even as total digital adoption stays well above pre-pandemic levels [3].

At the peak of the pandemic, there were almost 12 million new users of online

services – more than the population of Slovakia, Croatia, and Slovenia put together. Prior to

the pandemic, 61 percent of consumers used digital services; following the lockdowns
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imposed in various countries, that figure had grown to 76 percent by September 2020 [10].

only 13 percent of US households had purchased groceries online before the pandemic, 31

percent had done so by late March 2020

Digital adoption in Central and Eastern Europe

For many businesses, customer interaction patterns shifted dramatically as lockdowns

were imposed. Some companies innovated, expanding their business models and making

strategic decisions at a pace hard to imagine prior to COVID-19. Take, for example, Booksy,

a Poland-based application for finding, scheduling, and managing appointments. Prior to the

pandemic, the company was focused mostly on the beauty sector. The impact of the

lockdowns was massive, leading to a 90 percent drop in activity on the application. Within a

few weeks, however, the company had managed to expand its business model by forming

partnerships with numerous banks, an electronics chain, and other businesses, enabling users
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to make appointments with them without the need to physically wait in line – something that

is especially important during the pandemic. Thanks to its quick reaction, Booksy saw a 25

percent increase in its visitor numbers, 10 percent of them focused on the new services

offered.

High-income and low-income households spending curve [17]

Low income household spending remains stable during Covid-19 and maybe slower

to recover. After stimulus support ends, many low-income household spending will depend

on the speed of jobs recovery. But as companies digitize and automate their operations, some

jobs may not recover or will look very different, creating uncertainty about job and wage

growth prospects. This creates uncertainty of the purchasing power recovery of low-income

consumers.

High income spending dropped dramatically as they spent a higher share in services

such as travel and dining that were hard hit by lockdown restrictions and health concerns. As

a result, their spending rapidly declined. Yet they were more likely to be able to work from
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home and maintain their income, contributing to a sharp increase in their savings. Once the

pandemic ends, overall consumer spending may rebound quickly but not all consumer

segments will recover at the same pace. After health concerns end, high-income consumer

spending is likely to rebound rapidly due to pent-up demand and accumulated savings. They

may experience a short-term economic boom like in the Roaring Twenties.

After the health fears subside, the strength of the consumer spending recovery will

depend on the willingness of high-income consumers to spend and the purchasing power of

low-income households.

The survey conducted by UNCTAD and Netcomm Suisse eCommerce Association, in

collaboration with the Brazilian Network Information Center (NIC.br) and Inveon, shows that

online purchases have increased by 6 to 10 percentage points across most product categories till

October 2020. However, average online monthly spending per shopper has dropped markedly

Percentage of online shoppers making at least one online purchase every two months
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Fall of average online spending per month since COVID-19, per product category [15]

In United States the share of e-commerce in total retail had only slowly increased

between the first quarter of 2018 and the first quarter of 2020 (from 9.6% to 11.8%), it spiked

to 16.1% between the first and second quarter of 2020. The development is similar for the

United Kingdom, where the share of e-commerce in retail rose from 17.3% to 20.3% between

the first quarter of 2018 and the first quarter of 2020, to then rise significantly to 31.3%

between the first and second quarter of 2020. Similar changes are also observed for other

regions, including the People’s Republic of China (hereafter China), where the share of

online retail in total accumulated retail sales between January and August 2020 reached

24.6%, up from 19.4% in August 2019 and 17.3% in August 2018. In Korea, where official

statistics are available, the e-commerce transaction value rose by 15.8% between July 2019

and July 2020. Significant increases were observed for food services (66.3%), household

goods (48%) and food and beverages (46.7%), whereas online transactions involving culture
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and leisure services, or travel arrangement and transportation services declined significantly,

by 67.8% and 51.6% respectively.

In nine of 13 major countries (Brazil, China, France, India, Germany, Indonesia, Italy,

Spain, Japan, Mexico, South Africa, UK and US) surveyed by McKinsey, at least two-thirds

of consumers say they have tried new kinds of shopping, And in all 13, 65 percent or more

say they intend to continue to do so. In Latin America, where the payments and delivery

infrastructure aren’t as strong, e-commerce use doubled from 5 to 10 percent. In Europe,

overall digital adoption is almost universal (95 percent), compared with 81 percent at the start

of the pandemic. In normal times, getting to that level would have taken two to three years.

Strikingly, the biggest increases came in countries that had previously been relatively

cautious about shopping online. Germany, Romania, and Switzerland, for example, had the

three lowest online-penetration rates prior to the COVID-19 crisis; since then, usage

increased 28, 25, and 18 percentage points, respectively—more than in any other markets.

We expect that, in developing markets—Brazil and India, the pandemic will accelerate digital

shopping, albeit from a low base [1]. Online medical consultations via Practo, an Indian

telehealth company, grew more than tenfold between April 2020 and November 2020. In

France, the state health system reported 1.2 million virtual consultations in September 2020,

compared to 40,000 in February 2020

Companies are also showing greater interest in online channels as a way of staying

engaged with their existing customer base. For example, Allegro, the most popular online

shopping destination in Poland and the tenth most popular in the world, increased the number

of its partners by 15,000 between April and June 2020, achieving three-quarters of the level

of growth seen in all of 2019 within just three months. Similarly, Mall Partner, the online

marketplace of a prominent Czech e-commerce player, saw its partner network grow three

times faster after COVID-19-related restrictions were imposed. E-commerce continues to

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boom with 37 percent of consumers planning to shop more online this year. However,

omnichannel remains the spice for holiday season as consumers look to multiple channels for

gift inspiration

Increase in digital adoption

Digital leapfrogging and a new Asian channel mix. Two shifts in the pattern of

digitization are breaking down the traditional narrative of fragmented traditional trade being

replaced by modern store-based trade. First, e-commerce is increasingly replacing store-based

trade. In China, Emerging Asia, and India and Frontier Asia, retail markets are leapfrogging

straight from traditional formats to e-commerce, which is expected to reach 30 percent of

retail sales in China and 20 percent in Emerging Asia by 2025.

Consumers shifted to digital channels

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The COVID-19 crisis also highlights the complementarity between online and offline

sales channels. Thus, while Amazon’s own sales in the first quarter of 2020 were 26% higher

than in the previous year, its share in total e-commerce in the United States fell from 42.1%

in January 2020 to 38.5% in June 2020. Amazon lost market share to Walmart (from 4.2% to

5%) and Target (from 2.2% to 3.5%). It can be inferred that these and similar companies

benefitted from large networks of bricks-and-mortar stores, facilitating fast delivery and pick-

up by the consumer.

While dynamics likely vary across countries, these data suggest that despite the shift

to e-commerce, a significant share of e-commerce sellers are facing the same economic

repercussions as traditional brick-and-mortar retailers, following reduced spending by

individuals on items considered non-essential. A sample of 200 000 third-party Amazon

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vendors in the Unites States suggests that by April 2020 around 36% of merchants were

inactive, an increase from around 28% in February. Particularly affected were sellers with

less than 1 500 product listings (ASINs), while sellers with over 3 000 listings saw positive

upswings. This highlights how the COVID-19 crisis might have involved a shift in demand

from small and specialized sellers to larger and diversified sellers.

Across Asia, the average size of households is shrinking. One-third of households in

Advanced Asia and more than 15 percent of households in China are already single-person

ones. In India and Frontier Asia, average household size has declined by about 15 percent

over the past 20 years. The smaller household size has implications for businesses serving

Asian consumer markets. For instance, there could be an expanding opportunity in catering to

the “lonely economy” and the need for new forms of companionship. One trend that has

already resulted from individuals living alone is that ownership of pets is soaring across Asia

—by 60 percent in South Korea over the past ten years. The type of products and services

experiencing rising demand could include smaller portions in packaged food, food delivery at

home, and may even lead to shifts in urbanization patterns as demand for more single-unit

housing increases. This demographic shift is propelling growth in certain leisure categories,

with demand rising for digital entertainment, solo dining, and solo travel. The “self-care”

market is growing strongly as consumers increasingly focus on mental health and healthy

lifestyle choices. Digital natives—those born between 1980 and 2012, including members of

Generation Z and millennials—are expected to drive Asia’s consumption over the coming

decade.8 They account for over one-third of Asia’s population consumption. Asia is

already the world’s consumption growth engine and is likely to reinforce that position over

the next decade. Disregarding Asia’s consumer markets would mean missing half the global

consumption story. Asian consumers are expected to account for half of global consumption

growth in the next decade, offering a $10 trillion opportunity

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Percentage of customers tried new shopping behavior

Constantly monitoring online prices, retailer segmentation, getting savvy on new data,

improving demand forecasting and executional precision, rethinking delivery pathways,

optimizing product packaging, and creating channel specific assortments and bundles to

prevent direct price comparison are some of the some of the factors affecting e-commerce

profitability margin

Post-pandemic behavior trends

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Basket breakup for optimizing costs [9]

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conclusion

We admit that we didn’t see this coming. After all, during the 2008–09 financial

crisis, small-business formation declined, and it rose only slightly during the recessions of

2001 and 1990–91. This time, though, there is a veritable flood of new small businesses. In

the third quarter of 2020 alone, there were more than 1.5 million new-business applications in

the United States—almost double the figure for the same period in 2019 [2]. The effect of the

COVID-19 crisis on e-commerce is not uniform across product categories or sellers. While

some demand shifts may be temporary, others are likely to have long-lasting effects.

Anecdotal evidence from the outbreak of SARS in 2002 and 2003 suggests that the epidemic

has been a core catalyst for the digital transformation of Chinese retail. For example, the

move of JD.com, now one of the largest online retailers in the world, from brick-and-mortar

to online sales in 2004 was a direct response to the SARS crisis. The same crises also

provided the consumer base for Alibaba’s B2C branch Taobab, which was launched in 2003

[16].

The best companies intimately understand their customers’ experience, focus on the

details of what their customers really want, and layer in data to fill out the picture. To drive

this focus, they use data and analytics to synchronize the e-commerce experience with

physical stores, social media, inside sales, customer care, and other customer-facing channels,

making it seamless for the customer to shift among them. Even when a company has a vision

of where it wants to go and what good looks like, leadership may find it difficult, even

impossible, to chart a direct path to get there. In digital, so much is unknown that traditional

planning, sizing up a potential opportunity and developing the capabilities to seize it—isn’t

possible. This is where a test-and-learn mindset is most valuable. By creating a safe place for

line leaders to “test the ground” through small pilot programs and learning from their success
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or failure, leaders can course-correct until the best path forward becomes clear. When done

well, this begets an iterative cycle of testing, learning, and planning.

For consumers, systemic challenges related to connectivity, financial inclusion, skills

and trust (e.g. digital security, privacy and consumer protection) have been brought into sharp

relief. Purely online players are offering highly tailored customer value propositions, such as

value-focused assortments and service levels, fresh meal kits, and farm-to-table concepts. It is

likely that many of the new users will keep ordering at least some goods online in the future.

Others might continue ordering online out of fear of a pandemic blowback or because

merchants manage to retain them through loyalty programmes or subscription models

introduced. But it is vital for companies to keep innovate by:

 Improving consumer experience: improving user interface by providing more

information about product and services, warranties and returns and generating higher

consumer satisfaction through phygital experiences.

 Winning consumer trust: consumers say they want more secure payment processes,

data security is top for education, entertainment and telecommunication industries.

When it comes to grocery, insurance travel and utility they are more concerned with

being reimbursed for return purchases, overcharges and undelivered services.

 Leading consumers from end to end: providing more complete digital journey, form

initial awareness to the end of the sale and beyond with better product and service

offerings at discounted prices.

Digital services and need for improvement

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Reimagining customers in post-pandemic world