As the Coronavirus continues to sweep across the globe, businesses small and large have been forced to reconsider business trajectories and current budgets. While businesses are forced to adapt to changes in demand, supply, and labor availability, the COVID-19 outbreak can present an opportunity for companies to explore and embrace other valuable channels to engage with a wider audience.
We observe growing attention on e-commerce as businesses shift online
E-commerce platforms have been receiving ever-growing attention as businesses quickly shift online. Major online marketplaces have been experiencing significant increases in on-boarding merchants and users. Online marketplaces such as Amazon, Filpkart, and Alibaba have all experienced increase in brand value. Shopify, a multinational e-commerce platform, had reported a 46% increase in gross merchandise volume in just this quarter in comparison to last year. Looking at April’s Digital Economy Index, e-commerce sales of various goods and services including electronics, groceries and telecommuting platforms have been on the rise (Exhibit 1).
Exhibit 1: Top categories of e-commerce goods being purchased during the pandemic
Despite the increase in online traffic to major marketplaces, e-commerce retailers seem to be experiencing various degrees of success. A survey done by digitalcommerce360 in early April reported that 55% of retailers had indicated a decrease in e-commerce revenue, while 34% indicated an increase.
The logistics sector may be struggling to accommodate with the surge in demand
As a result of increasing e-commerce sales, there have also been large upscaling efforts for those in logistics and courier services to accommodate for the demand. However, this has not necessarily translated into significant increase in profits due to the rising costs of handling and navigating overseas packages. Furthermore, the extra security measures businesses have invest in to maintain safe social distancing protocols can be costful. Lai Chang Wen, the CEO of the singaporean delivery company Ninja Van, expressed concerns over increased costs due to cross-border restrictions and the risks of overinvesting in manpower.
Hospitality, travel and offline retail has taken the largest hits during the pandemic
Shifting trajectories has not been easy for everyone. Those in the hospitality and travel industries have inevitably taken the biggest hit as tourism halts due to travel restrictions across the globe. When analysing the impact of the pandemic on aviation, CAPA (Center for Aviation) has projected "by the end of May-2020, most airlines in the world will be bankrupt”. Most recently, Avianca Holdings- one of the oldest airlines in the world- had filed for bankruptcy after being unable to meet a bond payment deadline.
Big retail chains with low online presence have also experienced decreases in revenue as social restrictions are established. For example, U.S. retail giants such as J.C Penney, Meiman Marcus and J.Crew that have been largely dependent on brick-and-mortar operations have all filed for bankruptcy during the pandemic. Within retail, various products have been experiencing set-backs. For the global cosmetic industry, goods such as make-up, toiletries, and perfumes have experienced downfall in sales as a result of many offline stores shutting down across the globe. Furthermore, large cosmetic companies’ such as Chanel S.A., Estee Lauder Inc., and Johnson & Johnson have all had their global supply chains disrupted by the halting of many production sites globally, particularly in China.
Exhibit 2: Scale of COVID-19’s impact on different businesses
Looking ahead, there is strong reason to believe that e-commerce habits will persist after COVID-19
Investing in digital channels is a long-term commitment. In other words, as businesses continue to establish their digital presence to overcome the lack of offline channels, there is strong reason to believe that our e-commerce habits will stick with us even after the pandemic has left. A March study conducted by Nielsen in Singapore had found that three-in-four respondents plan to maintain their online shopping levels even after shelter-in-place restrictions ease. Similarly, Shopify’s CTO Jean-Michel Lemieux “#Offline2Online” statement on Twitter regarding the platforms’ significant increase in on-boarding merchants reflects the growing sentiment that e-commerce will continue to dominate the market.
There is also a chance that there will be more convergence between online and offline shopping moving forward. Currently, new forms of purchasing and collection services such as click-and-collect, delivery pick-ups, and one-day shipping have allowed for a wider array of goods and services to be sold online. Hence, businesses who have been behind the curve in their e-commerce efforts should take advantage of this trend to actively work on redirecting marketing funds into their digital channels.
Businesses should look towards investing in digital channels and digital marketing strategies to stay on top of the e-commerce shift
Exhibit 3: Suggestions for businesses shifting online
As people remain at home and distant from one another, digital marketing can allow brands to overcome physical restrictions by maintaining relationships with its consumer base online. Developing effective digital marketing strategies through social media campaigns or utilising influencer marketing can allow companies to foster new relationships and engage with a wider audience (exhibit 3). Currently, there is a wide selection of data analytics tools available to better understand the factors that drive online sales conversion. Through studying consumers’ online purchasing habits, businesses can better understand how to better market its products within a growing digital economy.
Ultimately, the growth of e-commerce will not be temporary. The new developments within digitals services will only continue to boost the overall convenience and appeal of online commerce. It is safe to say that consumer habits may fundamentally shift. Hence, it is imperative for companies to adapt early and stay ahead of the trends.
Written by Ruchel Phua. An avid learner who's passionate about telling stories through data insights and online trends.
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