GANDT Fireside Chat #002 | Impact of Corona on online marketing and current restrictions lifting

Post by Elli Schneider
Apr
23
2020

True to our motto “Working Out Loud”, we at GANDT Ventures we exchange our thoughts and ideas on current news topics in the world of online marketing, digital retail, and e-commerce. This helps us uncover opportunities that can be used for companies and our clients as part of our daily business. But most of all, it is a lot of fun and a great way to share knowledge. Our podcast-style chats are available to anyone who is interested to find out more about what Google, Facebook, Amazon and the likes are up to.

 

Online Marketing Investments in Germany | March 2020

In recent weeks and months, we have seen a significant decline in digital marketing investments across all industries.

If we look at the figures published by market research firm Nielsen for the month of March 2020, which has been badly affected by the impact of the Corona crisis, we see Sky and Otto in the top ranks.
Coverage of “basic-” needs through pay-TV offers or the advertising of garden articles are comprehensibly in focus despite the current crisis situation. Telecommunications companies have logically benefited from the increased demand in internet and television services.

What is particularly interesting here, however, is that the European-wide DIY retail chain OBI, which we mentioned in our last Fireside Chat, completes the top 3. As a result, it is not only ManoMano that is among the players in the DIY market sector.

 

Covid-19 Impact on Dropshipping

In Switzerland, parcel quotas were already introduced at the beginning of April for the largest online retailers, and in Germany, too, DHL is struggling with a flood of parcels similar to that around Christmas time.

Customers have to count on extended transport times and changed delivery times. In the state of Bavaria, Sunday deliveries were introduced to master the situation.

Being affected by delivery difficulties or lack of orders also poses major problems for companies – the risk is much higher if the business is mainly based on dropshipping.

Generally speaking, (online) businesses that rely on dropshipping do not have a warehouse that they can use in the event of production bottlenecks. This poses tremendous problems along the entire production and distribution chain. Thus, if the producer cannot continue to deliver due to COVID-19 the sale of the goods comes to an immediate halt.

A gradual reduction in the situation will allow the reopening of construction markets, particularly in the home improvement sector.
In spite of digitalization efforts, there is a risk of not being able to manufacture or deliver the ordered goods.

 

Amazon Marketing: Latest KPI Development

In our last Fireside chat, we had already named Amazon as one of the digital players that benefits from the current crisis situation. In terms of revenue and distribution dependencies, Amazon has thriven in the COVID-19 pandemic. It might even be the first company in history to break the 2 Trillion USD valuation by the end of this year.

The group’s current KPIs confirm this fact – Amazon’s conversion rates of the campaigns have increased by about 25%, and ad revenue has grown accordingly by 17%.

Due to the current restrictions, these numbers do not come as a surprise; consumers are dependent on online shopping for many goods.
Particularly interesting is the comparison of the number of orders with a 7% lower order value per shopping cart.

Thus, we see basically increasing orders as well as sales at the US online mail order retailer, but the purchasing decisions are made faster and on cheaper items. The number of big ticket items (more expensive products) are not being made and commodities are the key product group.

 

Amazon is not short of products

160 million active products are available on the German marketplace alone; Amazon records 2 billion sales worldwide each year. Analysts suspect that Amazon’s revenue in the Corona crisis so far has been as high as 10,000 dollars per second.

The online marketplace does not have to fear financial losses, but we also want to mention that these sales records are mostly based on brand-owned articles and Amazon’s Web Services (AWS).

Amazon notified its sellers and vendors back in March of a delivery freeze for goods deemed non-essential.
This heavily affects so called Powersellers on the Amazon Marketplace. These product suppliers sell large quantities of products through Amazon as their primary source of income. Yet, as Amazon has deprioritized a substantial number of non-critical product groups, many Powersellers face problems to uphold their rankings. After all, sales on Amazon can only be sustained permanently if merchant performance is recommended.

Apparently online marketing with their partners during Corona is currently not a top priority at Amazon.

 

Impact of Corona on online marketing at Google Ads and Facebook

Google Ads and Facebook, on the other hand, expect that they will both have to accept losses of USD 44 billion.

AdSpendings have been declining for weeks, but the most exciting thing is to look at the CPC development:
While record levels have been recorded in some industries, we can confirm that there are also industries where CPCs have fallen and it is worth investing right now.

 

ElectronicPartner (EP): Compensation of offline outages due to digitalization

Electronics specialist Electronics Partner (EP) is a positive example of a company that can benefit from the investments made in digital marketing.

ElectronicPartner is one of the largest European groups in the fields of consumer and household electronics, IT, multimedia and telecommunications.
The Group consists of around 360 specialist dealers throughout Germany and recorded sales of 1.5 billion euros last year.

The focus is mainly on the services offered and so this company also met the limitations associated with the impact of the Corona crisis.
Nevertheless, one-third of the lost sales could be compensated entirely by online revenues.

Thanks to the investments made in digitalization in recent years, the company can now benefit from its efforts in time of need.

 

Recommendation for action after relaxing the Corona dimension names (Germany and Switzerland) – Google My Business

In both Germany and Switzerland, the Corona measures have come into effect. Among other things, point-of-sales reopenings are possible under certain conditions.

The core online marketing measures during the Covid-19 crisis should be to inform the customers about the reopening and, if necessary, to take necessary provisions.
The constant use and updating of your own Google My Business profile supports direct communication with the customer:
When will the business reopen after the Closure of the Covid-19 Crisis? Are there any adaptations to the regular opening hours?

 

Profitability and factors for the reopening of stores

In fact, traders also have to ask themselves whether they can benefit economically from the immediate reopening. It can be costly to reopen when customer sentiment is still low and the cost of business are relatively high.

The legal requirements for a resumption of operations provide for various investments, such as Plexiglas panes at the cash registers. Moreover, societal uncertainty might be a problem in the first few weeks after re-opening – as we have seen in Austria. The major shopping streets are not expected to be directly filled with high-purchasing customers.

Due to the regulation in Germany that only shops with a retail area of less than 800 square meters can be opened, most “big players retailer” are excluded from the next round of COVID-19 regulatory changes. However, it is precisely these branded shops that attract a large proportion of customers to the pedestrian areas.

 

Legal situation of the Corona Restrictions in Germany vs. Switzerland

In Switzerland, on the other hand, the general food supply is only allowed to be done by Migros, Coop and Landi (the bigger stores – able to create enough space between customers). Smaller retailer and stores have been complaining for weeks that they would like to re-open and see this as unfair competition. Hence, there are substantial differences between COVID-19 provisions between German and Swiss Retailer.
In both Germany and Switzerland, fears of unfair competition continue to rise and stores are increasingly aggravated. We must try to learn from the countries around us to see what works best. An extraordinary situation that calls for special measures.

 

Agenda | GANDT Fireside Chat Video #002

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