Market disruption by COVID-19 has been savage and swift. But one message is clear: e-commerce is back.
Surprisingly, COVID-19 has been a good thing for nearly half of all retailers. According to new ABS data, 44 per cent of retailers said revenues had
increased as a result of the pandemic, while more than half of all businesses in retail trade (53 per cent) reported that that revenues were down.
Australian small businesses recorded a 54 per cent increase in sales processed via PayPal during April. COVID-19 has driven digital payments to volumes that might have been expected five years in the future in the space of a just couple of months, PayPal Australia CEO Paul Ryan said.
Companies that have invested in digital resources during the pandemic are seeing mixed results, but some results are outstanding.
Nexba to ramp up global e-commerce
Due to high consumer demand during the COVID-19 crisis, Australian healthy sugar-free drinks brand Nexba re-focused its business plan and is now looking at targeting global customers in the UK and beyond through a revised international e-commerce platform model.
The company, which will retain its existing retail strategy, pioneered the ‘Naturally Sugar Free’ market in Australia and makes sugar-free and artificial sweetener-free drinks.
In April, the company saw traffic to its website leap by 233 per cent over the previous month. It also saw UK consumer sales through the Sainsbury website quadruple with 20 per cent of total Nexba sales made through the retailer.
“For nine years, nearly all of our business model has been focused in traditional retail,” says Nexba co-founder Troy Douglas. “But during this crisis, consumer e-commerce has turned out to be far more important than we thought.”
In Australia, Nexba sells to Coles, Woolworths, 7-Eleven, Local Liquor, Liquor & Co, Liquor Boss and Supabarn stores, plus Amazon in Australia. Retail sales of Nexba kombucha and tonic water are up 76% and 30% respectively over the 13 weeks to mid-May, compared to the 13 week period before.
“I think that the crisis has seen an accelerated trend amongst consumers towards health and wellness,” says Douglas. “What is exciting for us is the ability to use this and accelerate our e-commerce and online model,” he adds. “We want to treat this as a global business opportunity that can grow to a significant share of our business in the future.”
Recently Nexba appointed Zoe Eaton, the ex-CEO of I Quit Sugar.com as the general manager of e-commerce. “E-commerce is an area that we absolutely want to invest in,” says Douglas.
Nexba has 15 employees, turned over about $14 million last year (at 137 per cent revenue growth) and is on track to turn over more than $24 million this financial year.
Nexba total sales have doubled year on year for the past four years and prominent investors in the business include Paul Zahra - former CEO of David Jones and current global retail advisor, Joe Farage - founder of luxury fashion house Farage, John Bacon - founder of Link Healthcare and Adrian Hondros - CEO of Porter Davis and former head of CBA Private Banking.
The Nexba advisory board has been instrumental in re-adjusting the direction of the company towards e-commerce, says Douglas. In March, one of the advisory board directors identified that a potential big risk area was falling sales in petrol stations in Australia, after reduced foot traffic due to COVID-19. So the company took action early. “We took the right approach of removing the risk within sales forecasting and adjusting the business model.”
Governance is also in place for monthly reporting on tax and a COVID-19 issues list has been a board agenda item for some time. “In terms of addressing those issues, we clearly accelerated looking at how we ensure that we've got a 12 to 18 month-plus runway from a cash perspective, without the need to do a capital raising,” says Douglas. “We needed to ensure we're in a solid position to sustain our growth.”
Nexba is seeking a Series B capital-raising and plans to expand further into the UK, then into Europe and New Zealand. “What we're seeing in the food and beverage industry is an accelerated behaviour change amongst consumers to buy online,” he adds. “I think that the trend for online consumption will only continue to increase.”
Get the digital strategy right
Some companies during the COVID-19 crisis have taken the opportunity to perform digital housekeeping and improve their digital assets, says Melbourne digital marketing consultant Rob Lawson.
“Many businesses we speak to are saying this is an opportunity because they have been negligent and have not done enough online previously. And so they are allocating a bit of the government money they are getting or are re-investing in the business so they can hopefully be in better shape coming out the other side of this crisis.”
Behind any investment in websites and digital assets lies a whole digital strategy which must align with the wider business mission and plan, says Lawson.
“You need to look at digital marketing in terms of this question - what are the top three business objectives that you have? And how can digital marketing support those? Then come up with a plan to support the objectives,” he told the AICD during an interview.
During the COVID-19 crisis, businesses have cut back on advertising and other promotional budgets, but they should still invest in search engine optimisation (SEO) as a priority, he says. “The quality of the leads you get from SEO are way in front of anything else, and are staggering.” SEO business leads carry much higher conversion rates than other forms of marketing and advertising.”
“You've got to look at what's the buyer’s journey is these days - the buyer’s journey is very different. So you've got to engage with the buyer a lot earlier in the process when they're looking. So that point is when they start searching for something online.
“Sixty-eight per cent of stuff that happens with online experiences begins with a search.” Seventy-six per cent of local searches also result in a visit to the to a local store the next day. “So if you're not coming up in search, you missing out on all that stuff.”
The ideal ranking position is to appear on the first page of a Google search list as less than one per cent of people click through to the second page, adds Lawson, who has set up a dedicated SEO website during the current crisis. “What we are saying to business is that SEO might be a good investment now during this period, if they can't afford paid advertising for a while. It pays off because it's more targeted and sustainable longer-term. And after the initial investment it keeps giving you a return.”
During this period, he has had uptake for SEO from various businesses ranging from insurance to landscape construction and all-terrain vehicles to coffee. However SEO is just one part of digital strategy, which takes in many factors such as competitors, social media, email marketing, content marketing, affiliate marketing, advertising and marketing automation.
“From a consulting point of view, people don't value strategy that much. They value results more, but if you don't do the strategy right you don't really get the results.”
Lawson, who presents to boards on digital strategy, says there are not enough marketing or technology representatives on the boards he sees. “The structure of boards are mostly full of accountants and lawyers. There are not enough marketers in the room. And there are not enough people who are tech-focused.”
Meeting demand surge for COVID-19 related products
Some businesses have chosen to specialise in producing products that are needed to fight the virus. Sydney-based Portable Partitions Australia completely changed its business from making partitions for offices to producing perspex screens to protect against coronavirus.
Co-owner and director David Silverton said Portable Partitions' core business, which previously turned over around $5 million a year, had dropped by 90 per cent as offices shut down. However, the new business is experiencing strong demand, with orders from NSW Health and Queensland Health, restaurants and cafes, and pharmacies, retailers, newsagents, grocers, service stations and convenience stores.
South Australian packaging manufacturer Detmold Group has also pivoted to make products in response to the crisis. It has set up the Detmold Medical facility, which has been transformed from a finished goods warehouse to a manufacturing centre. The group is producing millions of surgical and respirator masks which can be ordered by contacting the company through its website and digital channels.
Small business to launch overseas after online pivot
When the COVID-19 crisis hit, Australian small business iDesign knew it had to move away from designing and manufacturing in-store point of sale displays as demand had all but disappeared.
So the company pivoted to start up a new arm of the business and keep jobs. A new idea was born – The Little Cardboard Co, which supplies cardboard items such as children’s furniture and playhouses.
Through the new online focus, an unexpected result from the business flip has been to gain an international audience and customer base, which will sustain into the future. “We will keep this business in Australia when things return to normal after COVID-19,” says General Manager Jayben Vanos. “And we are working on launching a mirror site in the US and UK - this is under final development with the help of the NSW Treasury office here and the Treasury office based in of San Diego.”
The business model has been extended to its US and UK based teams with their own dedicated websites. “Teams on the ground have been appointed to execute this digital strategy and build the brand. We have engaged local suppliers and websites are close to launch date. Business continuity is very much a part of the plan as well as international growth.”
Vanos says he is happy with the traffic and orders to the new website. “This, coupled with the social media push and engagement has been growing steadily day on day with more followers, likes and reshared posts across three platforms – Instagram, Facebook and LinkedIn – growing the exposure base for our products,” he told the AICD during an interview.
The new business makes non-plastic toys and furniture for children, such as cardboard desks and chairs for home-schooled children and cubby houses of different kinds. The products are quick to assemble and use cardboard to make the sustainable and affordable children’s products.
The idea came from a sales staff member after a directors’ brainstorm session at the start of the pandemic and within two months, all business plans and formal registrations were completed, then a web and e-commerce site launched with social media campaigns and designs and samples produced.
External company The Cloudsitters has also been hired to help with digital marketing, as this has been a new area for the team and a “steep learning curve”.
While it will take time for the new enterprise to break even and build reach, Vanos is pleased that jobs have been saved and the new arm of the business launched so fast. “For the team to come together to develop a completely new arm of the business – with a very different product from our core business - within such a short period of time, and to be generating sales…I have been more than impressed with the team, and the value to the company has actually been more valuable than the monetary outcome, which will come in time.”
While some board members are experts in digital marketing, Vanos thought it best to seek external help at this point. “A number of our directors are extremely innovative and digital savvy. However, I believe it’s best to outsource where our skills fall short and as a result we have engaged an external company to manage our socials. These are extremely important and are vital to the success of The Little Cardboard Co.”