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How should retailers’ performance metrics and e-commerce adapt in the COVID-19 era?

In times of crisis, it’s a brand’s operations, more so than their strategy, that prominently leads the way. In the wake of the current pandemic, it’s no shock that retailers are faced with unanticipated obstacles that they must overcome in order to continue their business. Managing cashflow, implementing distancing policies and shifting operations from physical stores to digital platforms are huge challenges in the present. In many cases, the retailer’s overall survival may even be at stake. Right now, it’s crucial for strategy to continue to inform operations and help retailers prepare for what’s coming up next. The reality of the pandemic is rapidly evolving, meaning that retailers must rethink how they measure and qualify success.

Many of the KPIs tracked by retailers have become irrelevant or incomplete within the current context of COVID-19. For example, stores that remain open have implemented measures to limit the number of customers in the retail space due to social distancing and are limiting foot traffic as opposed to encouraging it. Product returns are another metric that is intimately linked to profitability and customer satisfaction. Retailers have been extending return periods and facilitating return processes for years. But given the circumstances, many stores are no longer accepting in-store returns and some have simply stopped accepting returns altogether. Finally, from a purely e-commerce perspective, many of the traditional metrics still stand. Factors like revenue, conversion rates, and cost of acquisition are all important, but under circumstances where customers are all but forced to shop online and every retailer has shifted their focus to e-commerce, there is a need for more finesse in measuring success as there is now more competition than ever.

Today’s exceptional circumstances, as well as the resulting changes to customer behaviour, require retailers to rethink what metrics they are tracking and how they measure success.

What metrics are pertinent right now?

Overall, retailers should be focusing on four additional types of metrics: context, business, operations and customer.

 

Metric #1
Context metrics ensure the understanding of the shifting reality. Our partner Fusion Analytics recommends focusing on the following three key metrics.

— COVID-19 sentiment tracking indicates how much people care about being safe. The most important metric to stand by at the moment is, “does this brand keep me safe?”

— Consumer confidence drives discretionary spending. This tracks when consumers will likely be ready to purchase non-essential goods.

— Total income of your customer segments tracks how much income a group is actually accruing. Some recommend tracking unemployment but that does not highlight details around contract workers and underemployment, whereas total income will. 

These metrics will allow you to adjust tactics as needed.

 

Metric #2
There is a specific business metric worth calling out. All of the changes currently in motion have forced people to change habits—and habits are a huge driver of repeat purchases. There is a very real danger that your customers will change their routine and not come back.

— Fusion Analytics recommends tracking At-Risk-Market-Share (ARMS) to understand what % of market share is currently deriving from habitual customers that could leave for competitors and target competitors with a vulnerable customer base. Let the ARMS and your industry’s level of competition guide your response.

Metric #3
Operational metrics track and improve agility and efficiency. The one current constant in operations is that things are changing all the time… and changing quickly. In order to keep up with the pace, improving time-to-market for products and services but also for content and engaging digital experiences, you need to measure and improve your internal processes.

A few things to keep in mind:

— This may mean streamlining approval processes and being willing to test different approaches that are less polished. Customers are currently in a forgiving frame of mind, as long as it’s clear that your efforts are genuinely trying to provide value.

— A brand’s ability to deliver value efficiently must be emphasized. The current situation is difficult to grasp and will most likely be followed by a recession. Fewer people will be purchasing so the overall market you are competing in will shrink. Competition will be fierce so it will be imperative that you provide value to customers in the most cost-efficient manner. While understanding your costs to create and deliver products, services, and experiences is imperative, it only tells half the story. The costs need to contrast with the value of what you are delivering. Value can be subjective, so we recommend tracking the perceived value of your products and services by your customer. The perceived value can then be compared to your costs to provide the perceived-value-to-cost ratio, which you will want to optimize for.

 

Metric #4
Customer metrics track how your customers are interacting with you and how their behaviours change. In a recent article, Sid Lee discussed the changes in customer behaviours and how brands can reach them. Among the article’s recommendations was to “embrace boredom”: an exciting challenge to create content and engagement opportunities that connect with your customers. The interconnectedness of content and commerce has never been more crucial. People are looking for fun ways to pass the time. For example, baking bread has become a popular confinement activity of choice and the search for bread recipe content has soared since the beginning of confinement. 

— Engagement metrics, such as visit duration, average page views per visit, and page scroll depth, give insight into what content is working well. You may also want to segment these by current and potential customers.

In addition to new behaviours, it’s predicted that client acquisition will be more difficult this year. With stores closed or applying social-distancing policies, retailers will lose at least part of a significant acquisition channel. There will be a need to diversify acquisition tactics but also a need to refocus inward, on current or lapsed customers. Retailers should look into tactics to re-engage with current and previous customers, most likely via a CRM program. Engagement metrics that are segmented by current and inactive customers along with customer lifetime value and churn will be important.

 

Moving forward

Ultimately, there will be structural changes to how many industries operate in the coming years. Successful retailers will be looking at different scenarios and piloting different approaches to deal with each. Sid Lee has built tools around the concept of a Creative Rescue that facilitate scenario identification and planning. In keeping with the importance of metrics, once you have identified the likely scenarios and planned your response to each, the metrics must be determined to track the evolution of each scenario, i.e. which scenarios are becoming more or less likely to occur. The trick will be to create small experiments for the planned responses to learn and adapt, while simultaneously tracking the evolution of the broader context.