New Lockdown eCommerce Customers and Long Term Growth

Wednesday May 13, 2020 | Posted at 3:48 pm | By Paul Dicken
May 13, 2020 @ 3:48 pm

In this post we look at the contribution to ecommerce growth during lockdown by returning customers versus new customers and point a way towards the long term picture for ecommerce.

The 64-thousand-dollar question preoccupying many people directly involved in ecommerce, and a good few outside it, is this: what will happen to the surge in ecommerce as lockdown restrictions start to ease? Will this signal the start of sustained, elevated growth for the online sector or will buyers settle back down to their pre-coronavirus habits?

With the absence of any evidential data, you would be excused for making the following intuitive conclusions:

  • Those categories experiencing growth of items we consume regularly in the home and garden – FMCG for want of a better catch-all term – are likely to sustain many of their gains
  • Those categories serving more one-off markets, like leisure equipment, home-working tech and garden furniture and appliances are likely to see a deeper drop back to ‘normal’ levels, taking seasonality into account

This sounds pretty plausible, but it’s always better to see what the data says. So we ran the numbers to find out.

This was our methodology. We looked at the 6-week lockdown period from week commencing 23rd March to last week, the week of 4th May. We also took a sample of customers across a spread of categories, including motor parts, clothing shoes & accessories, tech/electrical, and home & garden.

For these companies, we compared the lockdown period against the same 6-week period in 2019, for a year-on-year comparison. Then we looked at the percentage of revenues coming from returning customers, that is customers who bought during lockdown who had also bought in the 12 months before lockdown, and compared this to the percentage from new customers.

Then we did the same for the percentage of orders coming from returning versus new customers. We wanted to make sure that we were accounting for large, ‘industrial’ returning customers perhaps skewing the revenue data.

The results were startling, and illuminating for the long term health of ecommerce. In short, those categories that performed well during lockdown saw the vast majority of both revenue and orders coming from new customers. When we say the vast majority, we mean that at least 90% were new customers across all successful categories, and this number was above 95% for many. Returning customers, therefore, only formed single digit percentages for revenue and orders.

Those categories that remained roughly static during lockdown, or performed poorly, saw a far greater percentage of their revenues and orders coming from returning customers, as one would expect.

We should caveat this with the reminder that we’re talking about a relatively narrow window of 6 weeks – in fact the first 6 weeks of lockdown – during which brick and mortar stores started to close. This is a major contributing factor for new buyers forming such a high percentage of the surge in volume.

Once you take into account our observation above regarding FMCG and more one-off products, the opportunity for categories that have done well since mid-March seems clear: they have a vast cohort of new customers to market to – with the exception of some marketplace channels where the marketplace owns the relationship – in the hope of making them returning customers and considerably adding to the base of frequent buyers.

If we assume that they do a decent job of this, then the very high percentages of new customers should translate to a rosy medium-to-long term outlook for both buying habits and growth in those categories.

Our conclusions certainly chime with Mintel, who recently forecast that UK online grocery would jump 33% in 2020. The research house also feels these changes in buying habits will be lasting.

If you’d like to discuss your ecommerce plans for the second half of 2020 and beyond, please do drop us a note here.

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