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Successful communication during the Corona crisis

#6 E-commerce strategies for

companies and brandsDüsseldorf, April 2020

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The Corona crisis is massively changing the buying behaviour of consumers.

For most industries, the tried and testedsales channels are breaking.

E-commerce is booming.

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Just as in stationary trade, goods for daily use are also in great demand on the Internet.

Source: Google Trends

Google Search

Face mask Toilet paper Disinfectant Groceries Corona

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TOP search terms on Amazon change during the lockdown

Quelle: ARA Premium / Brand Analytics

• Toilet paper, disinfectants and mouthguards are still top keywords

• However, there is increasing demand for activity items (puzzles, painting by numbers, PSA, Nintendo) and personal hygiene products (hair clippers)

• There is also an increased demand for home office equipment and digital communication (headphones, webcam, headset

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In online grocery retail, traffic increases by 20-25%.

Source: similarweb.com

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Due to rapid growth, demand cannot be fully met due limited capacity.

• Rewe, Netto and Real show traffic increases of 20-25% in their shops, the Dutch startup Picnic even speaks of a 50% increase.

• The beverage supplier, Flaschenpost is struggling with increased order volume, as is the drugstore dm, which currently has a delivery time of 9-12 days.

• Picnic also delivers to "systemically relevant" people on Sundays.

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Major marketplaces are also reacting.

Amazon prioritised goods for daily use in its warehouses. In this way, the industry giant is trying to remain systemically relevant in order to prevent a legal lockdown in logistics centres. This endangers product visibility in search results not only for the short term but also the medium term.

eBay, on the other hand, receives additional impetus for its "Local Heroes" program and waives sales commissions up to and including June 30th for local merchants who want to enter online trading.

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And some retailers are even reducing their advertising.

Amazon is decreasing Google Search.Grocery retailers limitcommunicating theironline offers.

Source: similarweb.com

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Some industries win, others lose.

Demand has increased due to panic buying, which has led to an unexpected shortage of supply

Unexpected shifts in demand between

sectors and channels

Short and long-term changes in communication channels

PANIC BUYING

DEMAND

COMMUNICAITON

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Even before the crisis, consumption in Germany was trending in favour of e-commerce.

Source: IFH Köln „Handelsszenario 2030“, Handelsverband Deutschland HDE 03/2020, Statista und Amazon Sept. 2019

Forecast Current Future

• March 2020:226,000 retail companies.

• Forecast until 2030: Decline of companies by 64,000, decline of sales outlets by up to 80,000.

• Retail closures cause estimated losses of around €1.15 billion per day.

• Result: insolvencies and business closures.

• Except for grocery retail: higher demand and multiplied turnover due to hoarding purchases.

• Closures of stationary shops inevitably result in online purchasing.

• Consumer behaviourwill develop towards online trade in the long-term.

• Emergence of market concentrations: only large retailers can cushion extreme fluctuations in consumption.

• The winners are so-called, “generalists”:In Germany, these are Amazon and Otto.

• Amazon continues to develop as a market leader.

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Demand is shifting in favor of “generalists”.Amazon holds a 52 % share of total online sales.

Amazon‘s customersplace an average of 41 orders per year.

E-commerce-sales in million Euro

Source: Statista and Amazon, status September 2019

9.278,1

3.200

1.440,9

878,5

809,1

757,3

601,1

554,7

524,5

488,5

0 2000 4000 6000 8000 10000

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• FMCG brands with their own webshop do not necessarily contribute to the increase in traffic, even during the crisis. Consumers are loyal to online channels in retail.

• 84% of consumers are willing to leave their favouritebrand as soon as another provider offers them services according to their individual preferences.*

• 49% of all product searches begin on Amazon.

Source: B2X Care Solutions GmbH, München: What the Future Holds for Customer Care in the Global Consumer Electronics Industry Business: E-Commerce 2020: Sieben Trends im deutschen Onlinehandel

Familiar shopping channels and convenience are primary success factors in online shopping

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E-commerce strategies for brands during the crisis.

Germany and Europe are currently still in the first phase, the acute outbreak.

1. Acute phaseRemain capable ofaction

2. Recovery phaseStabilization of thebusiness

3. New normalReducedependency

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2

• Online dependence of consumers

• The demand in some categories is increasing (Essentials), while some are decreasing (Luxury)

• Decline in sales due to lower stock

Ensure availability of goods and logistics, e.g. dropship, own warehousing, service providers

• Return of traditional purchasing channels

• Changes in the competitive environment

• A focus on strong brands

Carry out market/competition analyses and repositioning

Develop e-commerce strategy, strengthen brand building and online visibility

• Increased dependence on platforms like Amazon

• Loss of control

• Predatory competition

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Short-term optionsfor brands.

Strong demand Others

Marketplaces

Webshop

• Adjust media investment and targeting, e.g. via search, shopping, affiliate

• Use additional marketplaces if necessary

• Shortening the path-to-purchase• Adjust media investment and

targeting, e.g. via search, shopping, affiliate

• Evaluate supply capacity and exploit opportunities

• Close campaign monitoring• Plan budgets for recovery phase

Quelle: Kantar China, WeChat survey, n=1093, Datenbasis 6.-9.02.2020

• Competition analysis• Customized keyword sets• Increase campaign budgets to

ensure visibility

No E-Commerce No short-term scope for action

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Main risk for the expansion of online shopping is logistics.

Dropship Fulfilment Service Partner Online-to-Offline (O2O)

Current developments show the limits of e-commerce and the dependence on functioning logistics processes.Service levels decrease with increasing demand. Parcel delivery companies and infrastructure are overloaded. There are potential solutions, but they cannot be implemented in the short term.

Direct delivery to the consumer and invoice the retailer

Can also be used for marketplace strategies

Outsourcing logistics to external service partners

Helpful for missing D2C processes

Connecting additional marketplaces possible

Cooperation between stationary and online shopping

Applying interactions between off- and online shopping

Example: shoes 24

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Chancen für Unternehmen im E-Commerce

• Older people and technology “laggards” adapt to online shopping

• Switching to online offers

• Advantages of online shopping are unavoidable

• Guaranteeing flawless fulfillment

• Offering additional services

• Improving long-term

e-commerce strategy

• Winning both, new as well as

existing customers

• Development of a sustainablee-commerce strategy

• Recognizing a variance of selling potential

• Coordination of channel distribution

• Investment in e-commerce channels

• Maintain independence from large platforms

Current trends Opportunities for companies with e-commerce sales

Opportunities for companies without e-commerce sales

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We believe that this crisis will not create anything new in the long-term.

But it will almost certainly accelerate the developments that have already taken place.

1818 Source: Desk Research, IFH Studie „Onlinehandel“

Uncertainty about the new Coronavirus is deconstructing traditional shopping behaviour, as retail researcher, Eva Stüber reviews the results of a study by the Cologne IFH Institute. "Older people in particular are now becoming aware of online shopping, including groceries. That will remain. People are adapting to this and noticed: It works."

"We are currently experiencing an

increase in demand of almost 50 percent"

PicNic

"We are experiencing a

significant increase in

order intensity in online sh"

REWE online Flaschenpost.de

"Flaschenpost registers

significantlyhigher

demand"

getnow

"We are practically fully

booked -sometimes seven days in advance"

hellofresh Bringmeister mytime.de

"Processing time of four to

six days is currently standard"

"The increased demand may

result in a longer processing time"

"The current demand is 60% above the level

before the crisis"

The purchasing behaviour permanently changes due to prevention measures.

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In the future, the survival of brands will depend on a strong e-commerce focus more than ever.

Source: https://www.netzoekonom.de/2018/06/22/600-millionen-euro-umsatz-mit-retail-media-in-deutschland-erwartet/, BMO Capital Markets, E-Marketer 2018, Estimate 2018-2020

Amazon advertising

revenues werealready rising

by +70% annually

before the crisis

Increasing traffic and sales leads to tougher competition for visibility

Growth Rate

2020

It is extremely risky to become absolutely dependent on platforms in your e-commerce strategy.

At the same time, brand webshops are becoming less relevant within the consumer journey.

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Few brands can afford to work without a marketplace presence.

Webshop vs. Marketplace vs. Hybrid from the sales perspective.

Brand Loyaltyweak strong

strong

weak

„Uni

quen

ess“

of t

he P

rod

uct

Hybrid Webshop

Marketplace Hybrid

Use of the marketplace to

build brand awareness

Use of the marketplace in the consultation phase

and focus on conversions

Apple

Beck‘sTradeMarks

Startups

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The Corona crisis is massively changing consumer buying behavior. Online trade is booming. Demand is shifting stronger than ever before that favour“generalists” in the retail sector. Some brands and retailers are participating more, others less. Logistics is the key success factor.

Amazon and ebay are reacting differently to the crisis. Particularly Amazon, who puts brands and retailers under massive pressure to act in the short-term.

This further increases the dependency on large platforms. In the future, the survival of brands will significantly depend on a strong e-commerce focus.

Management Summary

„ The goal must be to develop our own e-commerce strategies in order to reduce dependencies.“

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Please stay healthyand take good care of yourself.

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