COVID-19 has changed how we live. For months, millions of people around the world were only allowed out of their homes to buy essential items such as food and medicine. The inaccessibility of physical stores led to an unprecedented demand for brands to turn to eCommerce to get their products into people’s homes. The problem was that many businesses were not ready for a sudden surge in demand, and did not see it coming. While the general trend for the last few years has been to move some aspects of business online, many companies simply did not have the necessary capacity or knowhow to operate efficiently. If you are looking to invest at this time, there are a few industries that are showing promising growth and innovation.
Numerous sectors see an increase in demand
Data shows an increase in demand across a range of sectors over the last few months. In particular, the pet care, beauty, and organic food industries have seen a boom in demand. These sectors have been traditionally resistant to digitization because consumers were traditional in their buying habits. They preferred to visit specialist brick and mortar businesses, which enabled them to view products in person before purchase. What can be observed from available data is that consumers are placing an increasing amount of trust in online purchases. The hope is that this trust continues beyond the COVID-19 crisis. If these industries continue to embrace eCommerce, even after the crisis, they are ideal investment opportunities.
Pet Care Sector
Traffic and search demand highlighted strong growth between March and May 2020 when COVID-19 was at its height and lockdowns were in place. The sector showed little traffic growth over the past two years, but the crisis has boosted traffic significantly. The pet care sector saw a 23% year on year increase in traffic. Aggregate site traffic increased from 12,249,931 in March to May 2019, to 15,137,661 in March to May 2020.
Now that a more significant number of people are buying pet care supplies online, it is likely that they will make repeat purchases if they have a positive eCommerce experience. This has a knock-on effect on brand awareness, which may allow for COVID-19 related growth to continue after lockdown. Online search data indicates that the demand is only increasing as time goes on.
The pet care industry continues to grow
These figures demonstrate that the pet care industry is ripe for investment. The value of the pet care market (grooming, food and accessories) in the UK was approximately £4 billion in 2019. The pet care industry in the US is now worth over $72 billion, and that figure is ever increasing. In the UK, there are 9 million dogs and 8 million cats, and pet owners are changing the way that they interact with their pets. Many individuals see their pets as companions and treat them like they would a human member of the family. As a result, spending has increased on pet care items such as high-quality food and accessories.
COVID-19 has resulted in sustained demand for Pet Care products, with an increase of 36% in Mar-May in 2020. While this figure is higher than in other parts of the year, the 22% growth excluding the Covid months, suggests that the sector was already in a healthy position prior. While Covid-19 has temporarily boosted demand, it is likely demand will continue to grow afterwards, making it a perfect investment opportunity that is likely to yield results.
The beauty sector has had a significant impact on the UK economy, as it is worth £30 billion in 2019. The explosion in online shopping and the promotion of beauty products on social media has contributed to the huge growth of the industry in the last couple of years. Both traffic and search demand has seen strong growth during March, April and May.
Similar to the pet care industry, the beauty sector saw little growth in the past two years. However, the COVID months of March, April and May have witnessed high growth.
The good news is that the significant growth seen in the beauty sector is likely to boost future growth. Brands such as Cult Beauty, who are exclusively online, have benefitted from tried and tested eCommerce systems that can support a high volume of orders. Demand for beauty products typically spikes in late November and December when people are buying Christmas presents. However, COVID-19 seems to have had a similar effect.
Marketing sources in the sector remain similar to the pre-COVID period, but with more traffic coming from organic search. Numerous companies increased online conversions by engaging with customers via giveaways and competitions. Brands also saw increase social media reach as the lockdown forced millions of people to stay at home.
The beauty marketing mix
Search engine data has shown that beauty products have increased in popularity significantly, seemingly as a direct result of the lockdown. Beauty retailers were forced to close during the lockdown as they were deemed as non-essential. Consumers visit beauty retailers to test products in person. Store closures forced them to turn to online shopping to fulfil their beauty needs. As shops reopen their doors, searches for beauty products is decreasing.
Before the COVID-19 crisis, growth in the beauty sector was limited. It is not yet possible to know whether the crisis has permanently changed consumer behaviour, or whether growth will return to pre-COVID levels. Despite this, investment opportunities are certainly available and advised. If you are planning to invest in the industry, choose a company that is innovative, proactive in their marketing, and in their ability to deliver online purchases quickly and efficiently.
Organic Food Sector
Traffic and search data show strong increases in the organic food sector. This is likely to be attributed to the panic buying of food at the beginning of the pandemic in March. The decline that can be seen throughout April is due to the slow of panic buying, rather than a reduced interest in organic food. Before the crisis, interest in vegetarianism and veganism had been growing for years. This suggests that there will be sustained growth in the sector after the crisis ends.
Organic food sales rise by 4.5% in 2019
Pre-pandemic, sales of organic food in the UK rose 4.5% compared to the previous year to a record of £2.4 billion. Even after panic buying eased, demand is still high for organic food. This is likely to continue as individuals are becoming more aware of how their eating habits affect their health. The conscious consumerism movement has also contributed, which encourages consumers to shop ethically.
The clear winners of the lockdown period are deliveries for organic food in general, rather than specific products. High growth keywords include ‘local veg box delivery near me’, which saw a 649% increase outside of the COVID months of March, April, and May.
Supermarkets struggled to keep up with the unforeseen demand for fresh food during the first few weeks of the crisis. As a result, people looked for other ways to get fresh food to their door. Consumers found a way to dodge the problems large supermarket supply chains were experiencing by ordering from organic food companies that they may not have used before the pandemic. Due to its growing popularity, even before the pandemic, the organic food market is a solid investment choice. While COVID-19 boosted sales to previously unforeseen levels, industry growth is predicted to continue.
UK spending starts to rebound
After months of lockdown, shops have been allowed to open their doors. Spending is starting to rebound; weekly aggregate spending increased significantly in the middle of June*. Businesses can now benefit from both physical and online stores. Companies would do well to keep up the eCommerce momentum, even after COVID-19. The value of online retail sales in the United Kingdom reached £76.04 billion in 2019, and this figure will only grow over time. Whether we experience a second peak or not, more consumers have been converted to online shopping and will continue to want goods to be delivered to their homes quickly and efficiently.
What the COVID-19 crisis has shown retailers is that they need to adapt to change quickly. The companies that embraced eCommerce with open arms and assessed their customers’ needs have come out on top. The businesses that have seen significant growth over the last few years found new ways to connect with customers online seamlessly. The reward for their effort was increased sales, and by extension, customer loyalty. It is these businesses that are ripe for investment; they are innovative and have real growth potential.
Read our range of articles and reports to find out more about which industries you should be investing in.
*Data sourced from Fable Data, UK & Germany Consumer Economy.