Last week, ACI Worldwide published analysis that showed the effect of the Covid-19 virus on online behaviour. Some of the numbers mentioned are staggering. For example, most retail sectors have seen an increase of 74% in March compared with the same period last year. The sectors with the biggest increases in retail are DIY products (136%) and Garden essentials (163%). Online gaming has experienced an increase of 97%!
If you are reading this at home, as most of you will be, you may not be too surprised by the dramatic increase. In countries worldwide movement is restricted amid the lock-down caused by Covid-19 and so our only route to purchase items is online. The question I have been pondering is how many of these new online buyers, or existing buyers buying in new categories, will return to offline when they are free to choose their channel?
Over the past decade eCommerce penetration in the US has been slowly rising. In 2019 it achieved its highest penetration yet at only 16% eCommerce vs in-store retail, according to Digital Commerce 360. These figures take out items such as fuel and sales in bars and restaurants that cannot be completed online.
16% isn’t much, and feels even smaller when you look at the absolute amounts – $3,161,752,000,000 in-store vs $601,750,000,000 online. But it is significant when you take into account the year on year growth as a result of Covid-19. If we apply the retail sector average of 74% then eCommerce penetration reaches 33% in 2020, and that is important because it is above the “magic” 25% tipping point.
If, like me, you are a fan of Malcolm Gladwell, you will recognise the term “tipping point” because it also happens to be in the title of his debut book “The Tipping Point”. In his book, Gladwell explored the science behind the idea that little things can make a big difference. However, I want to look at more recent research published in 2018 by Science.
Tipping points that reshape society
The research published in Science sort to find the point at which a minority view could overturn that of a majority. The experiment was created by Associate Professor, Damon Centola from the Annenberg School of Communications, University of Pennsylvania. 194 people were recruited via the web and they were put into online communities where the participated in a “social coordination process”.
Participants were randomly assigned to one of ten independent online groups ranging in size from 20 to 30 people. They then carried out activities that reflect common types of online exchanges, such as communicating with a group through a chat interface where the exchange is broadly anonymous. They were rewarded for consensus and financially punished each time they failed to coordinate with each other.
Once a group-wide convention was established, a small number of confederates with an alternative view were introduced. What the experiment showed was that committed minorities ranging from 25% to 27% achieved uptake levels of 72-100%. Under 25% each group experienced only a small number of converts to the confederate view.
The study points out that further work is required to prove that these findings are applicable to other social settings, so we shouldn’t get too excited. However, with 8% headroom from the penetration we are currently experiencing, perhaps online commerce has reached a tipping point. If it has, the online user experience is going to change dramatically.
Organisations that previously relied on retail sales to provide their brand experience will have to invest more in the online user experience to compete. The predictions made in the late 90’s about the death of retail real-estate and the experience economy may finally come true. That said, I think Google just announced they are opening a store so who really knows.