By Tu Le & Chris Baker
The coronavirus pandemic has wreaked havoc on people’s lives and has inflicted serious pain on many country’s economies. The ‘retail apocalypse’ that started when companies like Amazon, eBay, Alibaba, and Jingdong started years ago has been accelerated substantially due to COVID-19. COVID-19 has forced temporary, extended closures to many ‘brick and mortar’ stores that brands relied heavily on as their primary customer touchpoint and sales channel. The closures have made it very challenging for these brands to engage their target market(s). This has led to CQ1’20 retail sales to fall 19% year / year in China while in the US, retail sales for April 2020 fell a record 16.4%.
There are companies that have been less affected by COVID-19 though – direct to consumer (DTC) brands were already attracting the digitally native customers to their online ONLY presence. E-Marketer noted that US DTC online sales is expected to grow by over 24% in 2020 to $17.75B. For those traditional retailers who have been slower to embrace the DTC model, such as restaurants, real estate, automotive, and even high fashion brands – COVID-19 has been devastating.
Current shelter-in-place orders have been implemented across many states in the US in the fight to eliminate COVID-19. The massive drop in retail sales has found many traditional retailers scrambling to find new ways to reach customers. These struggling companies, including automotive OEMs and the dealerships that support them, have begun to experiment with engaging customers digitally and providing online sales options. Tesla, who has already been a pioneer in online automotive sales, in late March followed in footsteps of their Tesla – China operations and offered ‘touchless test drives’ in the US where test drives could be scheduled online and be delivered to potential customers without having to meet in person with anyone.
The quick shift in consumer sales from offline to online during COVID-19 has been staggering. This quick thinking by management should help stem some of the losses they’d have otherwise incurred but in order to be successful long term, brands in these categories need to re-frame their approach to truly put digital first. For the brands with such a firm focus on brick-and-mortar sales, it’s a hard pivot to execute. To date, digital transformation for many of these brands has been about filling in the empty spaces with digital initiatives; quarterly social campaigns, regular search marketing, apps, and occasional online videos.
The brands that were slow to embrace social media platforms and utilize them as customer engagement tools have seen their brand awareness and consequently sales fall off a cliff due to COVID-19. In difficult and uncertain times, when a potential customer’s attention may not be on shopping, it’s SO important to stay in their consciousness even if just to play defense and not allow other brands to fill the voids that theirs would normally reside.
For brands with wholly inadequate digital engagement strategies, there is a need to play both defense and offense. Defensive actions are the immediate moves to maintain engagement with customers and provide support to existing patrons – using high-fidelity digital tools to keep conversations open and supportive. Offensive actions are the bigger structural moves that address the more profound challenge of continuity online – the challenge of truly putting digital first and selling, supporting customers through digital. To put it bluntly, these brands are being forced to ask a truly transformational question: “What if you HAD to sell only online?”
Western brands looking to answer this question should look to China. Alibaba’s founder, Jack Ma famously said, “E-Commerce is like a dessert in the US, yet is the main course in China.” Consumers in China are regularly buying homes, cars, jewelry, and other high-involvement, high-cost products online. Brands in China have built solutions around the expectation of consumers buying online and are answering the question: “How can we fully support a purchase made online with an array of digital solutions?” Just two weeks ago, the founder of NIO, a Chinese EV startup, William Li appeared alongside a famous Chinese online personality for 40 mins. and was able to reach 20M viewers in order to inform, educate and ultimately sell his cars. The result was 5K test drive reservations and 320 non-refundable deposits to purchase one of NIO’s SUVs.
Here in China, customer engagement via social media and selling online has been around for quite some time, long enough that we can confidently say that we’ve reached Social Commerce 2.0. Platforms like Douyin and Kuaishou, two short video platforms, compete toe-to-toe with traditional giants WeChat and Weibo to help brands reach their target markets. And that’s just to name a few.
More and more, product launches, promotional events, exciting news, and shows hosted by key opinion leaders (KOLs) are replacing the traditional marketing channels as a way to bring new customers to the brand, create excitement for products, while educating and engaging current customers. For the China market, the proof is in the pudding as companies like Ford, Renault, and luxury automotive brands like Audi, Maserati, Mercedes, Volvo, and Tesla, who opened their T-Mall store just this past April, all sell vehicles online via their T-Mall stores.
In the West, COVID-19 will force brands to embrace digital marketing strategies even more quickly and for companies like VW Group, GM, and other OEMs whose annual marketing budgets can reach $2.5-3B / annum, that’s a HUGE shift. For those brands that have been sitting on the social media “sidelines” in the US and EU, it’s the right time to aggressively move towards utilizing these popular social media platforms as a primary customer engagement tool.
VW Group, arguably the ONLY automotive brand that seems to have fully embraced the move to digital, recently announced that their VW brand would ONLY sell their EVs online with dealerships taking a supporting role for the customer journey process. In India – Audi, another VW Group brand, in March launched a digital sales service that includes the use of augmented / virtual reality to view their vehicles.
What we’ll also see, as we’ve seen in the software developer space, is that those people and agencies with the experience and knowhow to growth hack, digitally engage customers, and optimize conversion rates will be in high demand.
Now’s the time so what are you waiting for?
Tu Le is the Managing Director of Sino Auto Insights, a Beijing- based business intelligence and advisory firm that helps transportation and mobility related companies develop tech-focused, innovative and transformative products and services that will shape the future of transportation.