COVID-19 and E-commerce, Brooks Brothers

Expert Profile

Section 1: Immediate Impact

1.1. Within Brooks Brothers, what did online consumer purchasing habits look like pre-COVID?

In luxury brands, you see a lot of research done online before purchase and there’s certainly those folks that are walking around a mall, or walking around in a department store and they’re going to make a buy, but generally speaking the web is used for that kind of purchase oftentimes as research.

So I think the big difference between pre and post COVID is that there was still lots of research, but because people were not going to stores, there was just a higher percentage of that traffic that would have perhaps purchased in the store now just executing online. For those businesses that had their own websites they saw traffic go up. They saw conversions go up and total sales go up as a percentage of total. Their web business did not make up for the shortfall of what got usually transacted either in their own retail or in a wholesale environment, but it made up for some of it for sure.

1.2. What has been the immediate impact of COVID-19 on online consumer purchasing habits during this pandemic period?

Take it away just specifically from Brooks, but I think any online business that had stores they got more aggressive had an initial hunker down of preservation of cash. So, although people wanted to push digital because they knew they needed to make up the fact that stores were going to be closed. People started to pull back on cash and we’re not doing what I’ll call top of the funnel kinds of advertising because the ROI on that is much less productive than other areas of the funnel. But again, back to once we got out of March and into April and everybody realized, “We’ve got to figure out how to get all those stork shoppers online.” You started to see people spend more aggressively on Google, on Facebook, on Pinterest. Some of the younger brands got more aggressive with TikTok and Snap, but they had no choice. You got more aggressiveness going on in email to the universe of people that you already had. Therefore, you had no choice but to get the message out through E-commerce or online.

Within Brooks Brothers, I know we had customers that were only store shoppers and had to get more aggressive to talking to people that we knew were active customers but had only shopped with us in store. Especially if you have a demographic that’s a little bit older, we reached out to them to explain, “It’s safe to shop online and here’s all the feature functions that we have. Although we know you’re a store shopper, you can still get what you want through us online.”

A lot of higher end brands are a little stuck up if you will when it comes to more digital forms of advertising. You’d be surprised there’s a lot of them that are higher end that have gotten more aggressive in some of the areas where you think that they wouldn’t have. Now I’ll give you a perfect example, I don’t have any brands that I can call out, but one of the functions that you see on a lot of websites these days is installment payment. So, I don’t know if you’ve heard of companies like Klarna, QuadPay, Affirm or Afterpay but basically what happens is you buy your item, you’re not using a credit card, you’re using one of these services. When the item ships you pay a quarter of it today, they ding your credit card for a quarter of it.

Then they charge you the other three quarters every two weeks. So, after six weeks you’ve paid for the whole thing. I think that higher end brands have looked at that and said, “That’s cheesy” but you’ll see more and more higher end brands who are trying to get aspirational customers and maybe they want to buy that USD 1000 handbag, but they don’t want to pay for it all at once so they use a service like that. So, I think you’re seeing some of the higher end brands open up to being a little bit more flexible not only where they advertise, but how they communicate out to customers.

1.3. What have been some of the challenges around altering e-commerce purchasing processes during COVID-19?

Well, you got a couple of things depending upon how the brand was set up to ship their online business they may have taken in product, sent it out to their own stores, sent it out to the wholesalers, some of that is on a consignment, some of it is on a traditional sell-through. However, because volume increased so much on the line and because distribution centers were closed down and obviously you saw volumes go up in some cases. You saw longer delivery times because of the issues at the distribution centers. In some cases, businesses just had the inventory in the wrong places to be able to fulfill the orders and then I guess the other part is once COVID started to loosen up over the summer at least on the East Coast maybe throughout the US, the stores that started to open got more aggressive with buy online pickup at curbside. One of the big challenges for businesses is if you didn’t have buy online pickup in store, which was retrofitted to buy online pick up at curbside, it made doing curbside delivery much more difficult.

1.4. What have been some of the unexpected e-commerce success stories during this pandemic?

Well, certainly not. I know that outside of luxury goods, online food shopping became prominent. So, there was a lot of trial there it’ll be interesting to see how much of that sustains once we get out of this mess. Nobody was spending any money because they didn’t know what the hell to do, but once we got to April and everybody realized that we were in long-term lockdown.

Section 2: Lasting Impact

2.1. What will be the lasting impacts of COVID-19 on online consumer purchasing habits?

I think that consumer shopping habits are not going to go back to the same as it was before. Of course, it depends on the category, so I mentioned food shopping online we went from a very low percentage to a much higher percentage. Within luxury goods I think E-commerce will settle back, it’s not going to stay at the level it is now it’ll move back higher, but closer to where it was pre-pandemic, that’s just my opinion. I think for an overall four-wall retail store, I think this pandemic pushed more quickly what we were already seeing pre-pandemic and that is fewer stores, smaller stores just a continued retrenchment of the physical retail stores. The mall is changing as well, and they are having to drive traffic differently than perhaps they did before. You look at some of the larger retail department stores, you just don’t need as much space as you might have once thought you did, but that was happening before the pandemic.

These stores are heading towards smaller footprint stores and using some of these stores as distribution hubs. Maybe they weren’t doing that before. I do a podcast and I had one of the really well-known Forrester Research Principal Analysts of Retail E-commerce on. She was saying, which I had heard before, that E-commerce got pushed up by three or four years and retail got pushed down by three to four years. It accelerated things that people were looking to change.

If you’re in the fashion business, if you were shut down for any extended period of time, maybe you couldn’t get your designs out, you couldn’t get it to you to your manufacturing facilities. Maybe the manufacturing facilities were closed so now you have delays in getting new product, so you’ve got all that and then your own workforce. If you have a call center maybe you haven’t had people go back to the office. That’s another change that you’re going to see is already happening is businesses that have had these large footprint contact centers, where they have 200 or 300 contact center people demonstrating that they can actually be effective and have them work from home. I think that’s going to cut down on real estate as well.

2.2. How will Brooks Brothers look to further optimize its e-commerce channel for the future?

One of the barriers for people buying online is credit card security. I think with every passing day, as much as it becomes more secure, there’s more and more people trying to steal credit card information. So, there’s just a core group of people who are not going to be happy with doing that. When you’re buying apparel, I think as more and more brands are doing more free shipping, more free returns, it takes away that barrier for people and retailers. The problem is retailers, if they’re going to do free shipping and free returns, they’ve got to figure out a way how to change the economics of other aspects of their business to pay for that.

Either that means higher gross margins, better management of inventory so you lower your mistakes. There’s just a lot of different ways to deal with it, but customers demand free shipping, especially during the holiday season. People are getting more sensitive if they can get free returns, so they buy the medium and the large and then they send back the one that doesn’t work. During the Christmas period, you’ve got some issues with FedEx and UPS and they’ve been signaling for the last four to six weeks that they were going to be delayed because their volumes increased so much. They are also on standby for the vaccine, which is just starting to get pushed out and they’re doing a joint partnership.

There’s no replacement for the physical retail store if you want to buy certain things online. Honestly, I don’t understand how people buy cars or expensive jewelry online without touching and feeling it but there’s billions of dollars of all those categories done online. On the apparel side because of the fit there’ll continue to be more technology about, “How do I measure what will fit me?” There’s already technology out there, there’s companies like Fit Analytics and True Fit that help you understand if you’re a medium in Brooks Brothers, are you a medium in J. Crew or are you a small.

There’ll be more data sharing, a centralized level to help you understand what size you are in a particular brand and I think anything to make the shopping experience quicker, with more and more transactions happening on mobile. For most fashion retailers, it’s happening just naturally. If your core demographic is 20 to 50, more than 60, or maybe even 70 or 80% of your traffic is happening on a mobile device, and probably half of your sales are happening on a mobile device. Speed matters, how quickly a customer can browse the product, checkout, etc. Therefore, it’ll push businesses to be better in the way that they depict the product they have for sale to the customer.

The E-commerce analytics are a by-product, it really starts with the what’s called the e-commerce platform, the store, the technology that you’re trying to sell on. There are businesses like Shopify, which is a large public company based out of Canada that it started as a small business web platform. It’s now migrated to enterprise level, but it’s a solid platform that gives people the stores the confidence that they can have the feature and function that they need. It’s hosted by Shopify you don’t have to be a bunch of technology geeks to have it works. You have to have great product and you need to have creative talks about your product. You’ve got to be able to handle customer service and you have to be able to ship out the goods that your customers are buying. It really all starts from the platform and the feature and the function and making sure that it works.

2.3. How will consumer demographics towards online purchasing change?

Online shopping has been prominent for the last 15 years say. So, I think with every passing year there’s a greater percentage of people over 60 that are shopping online, they’re more and more comfortable. I’m just about at that age and I’d say myself and most of my friends are very savvy online shoppers. So, in five years it’ll be 70-year old’s that are savvy to shop online. I think that in another few years it’s not going to matter, and I worked at a business where the average age was 70. We definitely had a much lower penetration of web selling, but some of that was who the demographic was and some of it was this vicious cycle of saying, “We’ve got an old customer they’re not going to shop online, and therefore we didn’t invest in it.” I think that’s part of the reason why they didn’t shop online. It wasn’t just the fact that they were old, it’s the fact that what we had wasn’t up to scratch.

2.4. How will long-term consumer marketing strategies change due to the shift towards e-commerce?

No, I don’t think so. Again, it varies business to business, but I think still if you looked at many four-wall retailers they probably were doing on average 70 to 80% of their revenue done in the physical store and the balance online. They were probably upside down in their ad spend, they were probably spending way more in marketing to support their stores than they were for the digital side of the business. Businesses are trying to right-size their spend, but I guess the bottom line is digital is important because it drives traffic in store and online. The big challenge is understanding for every dollar that I spend on digital maybe I’m driving USD 4 or 5 online. The real question is how many more dollars am I driving into the stores? That’s a tough thing.