Wednesday, September 23, 2020

E-commerce also faring poorly in social distancing era

Mar 26. 2020
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By Syndication Washington Post, Bloomberg · Gerald Porter Jr., Jordyn Holman · BUSINESS, HEALTH

Coming off his best sales month ever in December, Eric Powell, the founder of online retailer Ratio Clothing, was looking to keep the momentum alive with new spring and summer collections for his custom dress shirt business. The customary post-holiday hangover in January and February was winding down.

But instead of a rebound, Ratio's sales plunged sharply after the first week of March as the coronavirus outbreak suddenly and drastically changed consumer spending.

"It just hits you like a freight train," said Powell, 38, who is based in Denver. "I knew things were coming, but I didn't anticipate how bad it was going to get."

Ratio's experience shows that e-commerce isn't being spared from the outbreak -- even companies that are technically operating normally since they have few or no stores to close. Since the start of 2020, online sales growth for apparel has plunged to zero from a growth rate of about 30% the previous quarter, according to data from e-commerce software firm ChannelAdvisor. The steepest drop came at the beginning of March, the study shows.

Meanwhile, data from e-commerce research company Edison Trends shows that from March 2 to March 22, a handful of e-commerce brands including Stitch Fix and ThirdLove saw a weekly average drop of 7% in sales.

As consumers grapple with the pandemic and a stalling economy, their spending priorities are shifting amid the uncertainty, said Mike Shapaker, chief marketing officer at ChannelAdvisor.

"Right now everybody's focused on getting enough food, toilet paper and whatever you need to live," Shapaker said. "If we come out of this, we can see everything spike back up, or this becomes a new normal for quite a long time."

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While it's still early, major brands appear to be experiencing less of a blow amid the outbreak, Edison Trends data shows. Nike's online sales posted comparatively modest declines in the first two weeks of March, while Adidas experienced a sharp increase due to a broad promotion.

Nonetheless, most retailers will only absorb a fraction of lost sales from store closures, according to a report from Moody's Investors Service. While companies selling groceries and essentials may benefit, "most brick-and-mortar operations will not be able to offset the steep loss from store sales with their online platforms," Moody's analysts including Christina Boni wrote.

Powell, meanwhile, is quickly running through his options to keep his business afloat. For now, he has furloughed several employees after scaling back advertising on Google and Instagram until the "dust settles." Because Ratio sells customized shirts, it carries less finished product in its inventory, so offering discounts isn't feasible, he said.

"While we're hoping for the best, we have to plan for the worst, and we simply can't predict how long this will last," he said.

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Caitlin Mociun, 38, is facing the same bind at her jewelry business, Mociun. In early March, she said demand for her products, which include rings, necklaces and earrings, was strong. But then came a "massive drop." For five days, she watched her online sales fall sharply.

"As a small business, if people don't keep buying things, we will cease to exist," Mociun said.

 

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