Tectonic Shifts in Retail Industry are Creating Unprecedented Opportunities for Independent Stores

Major retailers that are part of the critical infrastructure for distributing household essentials, healthcare items, and shelf-stable food, are raking in the cash during this pandemic. While consumer spending at bars, restaurants, and places of entertainment has dropped precipitously, spending at Amazon and Walmart has increased considerably in the past few weeks. The companies cannot hire workers fast enough to meet consumer demand.

According to a report from Facteus, a firm that provides data from billions of transactions from over 1,000 financial services companies, Amazon and Walmart’s year-over-year growth recently hit 80% and 18%, respectively in the past few weeks.

The pandemic has worked as a catalyst for pre-existing trends, “accelerating the retail reckoning,” as Derek Thompson predicts in his recent article on how The Pandemic Will Change American Retail Forever. Brick and mortar storefronts are rapidly becoming obsolete in a world that is forcibly consigned to shopping from home.

There are still many uncertainties about SARS–CoV-2 and how humanity will safely find its way out of lockdown. Recovery from the virus may not confer long-term immunity and a vaccine may be more than a year away, likely pushing social distancing measures into 2021. Consumer behavior may be forever altered by this experience, as many people may continue to avoid in-person browsing at stores long after the worst is over.

While it might seem like the retail titans are still uncontested in their domination, there are tectonic shifts happening in the retail industry that are giving smaller, independent stores an unprecedented opportunity to gain new customers online. Merchants that can adapt and excel at getting products to a homebound population stand to be the most resilient during this pandemic.

In order to keep up with demand, Amazon has had to delay shipments of non-essential items by up to a month in some cases, prioritizing household basics and medical supplies. Major grocery retailers are competing against one another to hire furloughed workers in order to keep up with the demand for groceries with so many people eating at home. Independent stores that can be found online have the opportunity to step up and fill in the gaps where major retailers cannot meet the demand fast enough.

People are more inclined to support small businesses right now in light of current circumstances. Amazon’s severely strained relationship with buyers, sellers, affiliates, and employees is also contributing to consumers’ eagerness to support independent stores.

On April 21, Amazon slashed commission rates nearly in half for most product categories, negatively impacting media companies and publishers that have not diversified their affiliate revenue sources.

Amazon’s essential workers are planning to join others from Instacart, Whole Foods, Walmart, Target, and FedEx in a strike on Friday. They are protesting their employers’ record corporate profits which they say have come at the expense of workers’ health and safety. Many consumers have already grappled with a question of conscience in continuing to shop on Amazon after hearing reports of grueling labor conditions for years.

Another major development in the retail industry has come to light as the result of a recent Wall Street Journal investigation, which revealed that Amazon is using data from its sellers to launch competing products. Merchants selling successfully on Amazon are not safe from having their products copied and their businesses effectively cannibalized.

Documents obtained by the WSJ, along with interviews from more than 20 former employees of Amazon’s private-label business, described how the marketplace operator uses third-party sellers’ data to gain a competitive advantage:

In one instance, Amazon employees accessed documents and data about a bestselling car-trunk organizer sold by a third-party vendor. The information included total sales, how much the vendor paid Amazon for marketing and shipping, and how much Amazon made on each sale. Amazon’s private-label arm later introduced its own car-trunk organizers.

The WSJ exposé details the great pressure that Amazon executives are under to deliver successful private-label products:

Former executives said they were told frequently by management that Amazon brands should make up more than 10% of retail sales by 2022. Managers of different private-label product categories have been told to create $1 billion businesses for their segments, they said.

This practice of launching competing products with access to third-party sellers’ data has been happening for years but is an especially hostile tactic to employ in a time when Amazon’s revenue is skyrocketing and small businesses are struggling to stay afloat. It is a sobering reminder of the value of hosting your own online store and the importance of owning your own data.

There are some positive developments in the industry that should give small business owners confidence in maintaining independence from the dominant forces in online retail.

Wired published an article this week titled The Coronavirus Pandemic Is Changing How People Buy Books by Kate Knibbs. She describes how one indie bookseller’s e-commerce startup has found unlikely success in positioning itself as “an easy way to buy books online without further enriching Jeff Bezos:”

Bookshop went from a well-intentioned startup facing an uphill battle to one of the most popular ways to buy books online in a matter of weeks. The New York Times, BuzzFeed, Vox, and The New Republic are all affiliate partners now. Its headcount has doubled in size. Hunter expects to hit $6 million in sales by May, eons ahead of its loftiest projections from January. If the company’s performance holds steady, it could do $60 million in sales a year, although Hunter is assuming post-quarantine life will be different. “I’m sure that when things open back up, our sales will drop, maybe even cut in half,” he says. “But even then, we’re still one of the top 10 bookstores in the US.”

Yesterday, Shopify launched its new Shop app, touting modularized, distributed marketplaces as the future of e-commerce. The app allows shoppers to browse local merchants and make purchases. It provides a new vehicle of exposure for the company’s 1m+ merchants on its platform. Businesses do not have to pay to have access to the app, nor do they pay commissions on the sales it generates.

Google is also making it easier for smaller stores to be found on the web by opening up the Shopping tab to free listings and partnering with WooCommerce, Shopify, and BigCommerce. This essentially gives more free traffic to small businesses whose listings will break up the longstanding dominance of major online retailers in the Shopping tab.

WordPress developers with e-commerce experience have the opportunity to build products and stores that will help traditional brick-and-mortar businesses start selling online quickly, so they can continue to find success in. the brave new world of online-first retail. WordPress has a plethora of plugin options for making e-commerce accessible to store owners, no matter how simple or complex the store’s requirements.

Independent WooCommerce Stores Are Booming

One user in the WooCommerce community’s Facebook group asked how the coronavirus is impacting members’ e-commerce stores. Responses were varied based on the types of products that the merchants were selling, but the vast majority of responses from store owners and developers were positive reports of increased sales:

• “I have a client selling cleaning products. He got several pallets of hand sanitizer in and sold out in a week. He was doing about $2000 in sales a day.”
• “My client does fruit and veg online. Went from £4k a month trickling along as a side part of his business, to £150k last month and the heading for the same this month.”
• “We are selling plumbing and home improvement tools and items sales have quadrupled.”
• “Positive impact. Highest sales for me on my indoor activities niche (puzzles, board games).”
• “Sales are up more than 1000% – natural supplements”
• “Built a cake delivery service to sell slices of cake locally…… £4K in a day and sold out. It’s crazy.”
• “800% increase on a niche plant site I host”
• “Compared to same month last year, up approx 250% (garden products)”
• “3000% increase during the last month compared to monthly average over the last year. Natural health products”
• “Our canvas printing site is up 20%”
• “We are selling more Glass Bongs than ever. People are staying home and getting stoned.”

Saad Munir, the CEO of an e-commerce marketing agency, manages 28 stores for their clients with $30-$500k sales per month in various niches.

“Some of them are popular brands of their niche,” Munir said. “We have seen a drop in sales of up to 80% in non-essential and medium luxury products, and a 400% increase in essential products. However, now non-essential and daily-use products have also started getting good sales since everyone is home and sticking to their devices during this social distancing. We also have clients of furniture e-commerce stores. This means high-ticket items. They have even seen increased sales in bedsets, sofas, etc. So, for sure online sales are increasing. We also on-boarded several new clients and most of these stores are in WooCommerce.”

In the WooCommerce Help & Share group, one member asked for help collating all his orders into one list after his artisan cheese business increased exponentially overnight. Another member asked for help optimizing his client’s store after their pre-COVID-19 revenue went from less than £1k/month to almost £2k sales per day.

If independent self-hosted stores are able to perform well during this crisis, they have the opportunity to earn customers’ loyalty for continued business long after social distancing requirements are no longer necessary. It’s a unique opportunity that may not have been possible on such an accelerated timeline without this exact set of circumstances.

These recent shifts in online retail are the first cracks in the ice towards a web that is more friendly for smaller, independent stores. The trend towards buying all of life’s necessities online has evolved overnight to include a wider spectrum of consumer demographics than ever before. Diverse independent stores are crucial for meeting this demand without losing the unique and varied shopping landscape that the pandemic has forced to be temporarily closed.