The Coronavirus Pandemic - earlier restricted to China has spread its wings across the world. And it is bound to cut across & cripple several industries worldwide. Every sector around the world is staring at a colossal loss, with every passing day.
If this crisis persists, all businesses will share a severe-profound impact in the coming days. eCommerce, too, finds itself unable to cope with the disruption & will likely take a while to adjust.
B2B, B2C, or C2C all businesses are poised to feel the impact of COVID-19 in the coming days. Some companies are facing super-high demands (OOS), whereas others are stuck with their stock (Overstock). The crisis worsens & leaves companies with no apparent respite.
The effect of Coronavirus was such that even recruitment was severely affected. Hiring new talent has been paused momentarily, and most businesses are looking to adjust & be as agile as possible.
45% of businesses have postponed or re-evaluated recruitment - eConsultancy
In the coming days – you can expect customers to minimize casual shopping & stockpile on other disease-fighting & grocery essentials. For eCommerce businesses, thus, a wrong investment/deadstock can seriously affect the brand's ability to weather the storm, whether it is Coronavirus or global recession.
The outbreak has also affected the marketing activities of many companies. 62% of U.K. personnel said their marketing budget commitments are delayed or under review.
Source: Coresight Research
Further, 42% said that many strategic infrastructure spending is delayed amidst this new and ongoing uncertainty.
Governments are talking bail-out money, but this kind of funding will go through several bureaucratic tapes & possibly delays. Avoid such unreliable routes to protect your business in these sensitive times.
There are other measures that eCommerce brands need to take in the coming days to stabilize operations & prevent a collapse. Let’s study how COVID-19 has rattled businesses worldwide:
What Coronavirus Could Mean for eCommerce?
The order frequency has escalated in the past few weeks. Consumers working from home, sick leave, or trying to avoid contact with others are ordering everything online. This has made it hard for eCommerce brands to keep up with the demand.
COVID-19 is putting a significant strain on eCommerce, which is why most businesses have already implemented various actions to combat the problem & reduce its impact. Here are a few things:
Delivery – Due to the regulations imposed, carriers are not able to deliver shipments to locked down cities. Apart from this, many eCommerce brands fear that a package may get contaminated on the logistics end. Even the delivery riders are hesitant to approach crisis hit colonies.
Often buyers end up with messages that say, the parcel will be delayed – due to increased supply & longer delivery times. Speedy delivery is sending every logistics brand into a severe crunch. eCommerce supply chains are stressed & unable to cope with the restrictions & demand.
- Labor – Work from home is affecting production across various manufacturing facilities. With no one to handle, sort, pack, load, label and dispatch the goods - these facilities are unable to cope with the severe demand. Such companies are in urgent need of workers to meet the growing strain from Coronavirus.
Some have resorted to employing people on a part-time basis. They are even going to the extent of borrowing people from nearby establishments. Some eCommerce businesses ended up switching suppliers at the last moment.
Quality – It is suspected that some asymptomatic workers are still around in factories, which raises the likelihood of transmission to products. The new strain of the virus, supposedly, survives on surfaces for longer than 2-3 days. If that were the case, then consumers could catch the virus from a parcel.
Which is what many people suspect. Despite all the precautions, your consignment could be infected. As such, some companies are witnessing a hold-up of their inventory. No one's buying appliances & other non-essential commodities during this epidemic.
How did U.S. Industries Respond?
Almost every industry felt the tremor of Coronavirus – from rising prices to depleted stocks, & other governmental restrictions. eCommerce companies at all levels struggled to handle the logistical bottlenecks & product shortages. Amazon too wasn't immune to this epidemic.
Several Sectors around the world are feeling the domino effect of this pandemic. Retailers announcing delays & supply chains getting disrupted have caused severe turmoil in the U.S. & around the world. The shopping patterns of consumers have changed drastically in recent times.
From aggressive shopping for essential commodities to complete avoidance of other goods. Here’s how COVID-19 affected various sectors:
Food & Beverage – With restaurants deserted in the wake of the COVID-19 epidemic & people holed up in their houses; Food & beverage suffered on the ground. But the same got a significant boost when residents started ordering from food delivery channels. Such apps are seeing an influx of traffic.
According to Apptopia, Grocery apps witnessed a hike in daily downloads. US consumers are turning to online delivery; rather than risking a trip to the physical store.
Instacart witnessed a surge amid the outbreak. In March, the app saw a 218% increase in download activity compared to February.
Despite that, in the early week, many essential food items were cleared of supermarket aisles, due to widespread panic & hoarding tendency in people.
Food shortage connected with a labor shortage means replenishing goods on short notice will also be a problem.
Consumer2Consumer – A lack of hand wash, sanitizer, & toilet rolls in supermarket aisles, is due to some people detecting the need for these and collecting them at the earliest. This stock up & growing necessity of people; allows them to resell the same at inflated rates.
Sites like eBay are becoming playing fields for these hunters, who bulk buy from nearby retail stores & sell it later here at exorbitant rates.
- Healthcare – The most substantial burden was probably felt in the Healthcare industries. Thousands infected & admitted, along with possible suspect patients and others in the vicinity, about to catch the virus. Lack of resources in gloves, masks, beds, bleach, ventilators, etc. is exhausting the medical sector.
Doctors infected or withdrawing, and the daily rise of infected has caused a severe burden on resources. With many major manufacturers in countries under lockdown, procuring the diminishing goods is also becoming a problem. There has been an influx in sales for essential healthcare goods.
Compared to the 2nd week of Feb 2020, Masks sales increased 590%, Hand sanitizers 420%, Clorox wipes 184%, Disinfectants sales 178%, Gloves sales 151%, Bottled/packaged water sales 78%, Vitamins sales 78%, Tissues sales 43%, Hand soap sales 33%, Toilet paper & paper towels sales 26%.
Some have already shifted their products to the fulfillment centers in the U.S., while others have started production in U.S. facilities. The Chinese factories are yet to operate at full capacity.
Many U.S. healthcare giants rely on Chinese manufacturers - which are closed due to the mandated quarantine imposed. And alternative sourcing markets are unable to produce all the SKU's. Few have turned to free online consultation services & online tools to help patients.
Many US healthcare giants rely on Chinese manufacturers - which are closed due to the mandated quarantine imposed. And alternative sourcing markets are unable to produce all the SKU’s. Few have turned to free online consultation services & online tools to help patients.
Luxury Goods - Luxury stores that witnessed steady traffic & flourished until this epidemic, have been hit severely. People are stocking on staple items & worrying less about luxury goods. Due to which, most luxury brands are responding by shutting factories, warehouses, stores & pulling back entirely.
Luxury retailers are finding it hard to position their worth during this pandemic. The premium goods markets lean heavily on Chinese shoppers & thus find themselves struggling when the Chinese are yet to recover from the COVID-19 impact.
Luxury – a personal experience that has primarily relied on retail stores to showcase its stuff and stayed away from digital channels; it will have their task cut out in the coming months. Beyond this, fashion centers like Italy, France, London & US are also facing a grim situation.
- Mobile – Major mobile manufacturers like Apple & Xiaomi are facing the heat in this COVID-19 as production has hit a major blow. New launches are pending & postponed until further clearance. With Apple - iPhone 9 to get delayed, bulk purchases limited & per person only 2 units/model.Beyond this, repair shops in the US are also finding it hard to stay afloat as repair parts sourced from China have become scarce in recent times. In China itself, the smartphone sales dropped 56% in Feb 2020. As retailers in New York sit with low stock of iPhone 11 & "infrequent" shipments.
L.G., which supplies camera components, ended up shutting one of its factories in Gumi, South Korea, after a worker tested positive for COVID-19. As a result, creating more delays for mobile brands in the U.S.
Beyond this, the American government hopes to use location data. They are partnering with Facebook, Google & other tech companies to track users & monitor if they are keeping a safe distance from one another. Officials hope to spot vulnerable populations, identify risk areas & hospitals under strain.
- Apparel – The apparel & accessories industry also witnessed an irrational epidemic sweep through the masses. Customers stopped purchasing items from Chinese brands for fear that the packages may be contaminated.
11% drop in ordering physical goods suspected to come in from China – Foster
The Global apparel chain was severely affected as they, too, were reliant on China. The outbreak has slowed both the production & shipment of goods. The Placed orders are yet to be shipped, & for the remaining stocks, consumers are not spending enough.
Fashion stores are already releasing notifications to assert about the hygiene levels in their physical stores. They are also coordinating with warehouses & distribution centers. Fashion retailers are going to have to downsize their orders & upshift when the markets recover quickly.
- Travel – The travel sector was also severely hit in the COVID-19 season. Travel restrictions all around the world have made it impossible for people to even reconnect back with their native states. Some of this could leave a lasting negative impact on the travel industry for the rest of the year.
During these hardships, many trade shows, expos, conferences & other business events were postponed, canceled, or virtualized. Google’s Cloud Next 2020 & Adobe Summit conference was held online. Many companies have canceled meetings/activities as a result of coronavirus.
The airline scene weakened further in the US, as trip cancellation was up by 21%. The biggest decline came from those that were traveling closer to the epicenter of the COVID-19 outbreak. However, this has now extended to the European sectors as well.
Covid-19 will cost the travel industry $46.6 B/month from business travelers - Industry group
Worries over COVID-19 contamination are leading to cancellations of business conferences, which is the most lucrative source of income for airlines. Delta and American have already canceled flights to China & South Korea following a spike in coronavirus cases in those regions.
Online sellers like Expedia saw global ticket sales fall by a whopping 9.4% - Vertical Partners
Besides consumer apprehensions, many U.S. airlines are also extending their travel bans to infected countries. Due to this, the incoming numbers show a clear negative trend – something that continues to domestic sectors where the ticket sales dropped by 1.3%.
Asian-Pacific airlines will lose around $28 billion in revenue this year - IATA
If the epidemic continues to spread, there may be more pain in store for U.S. airlines. As of now, even inter-state traveling is frowned upon. U.S. airlines are nearing a "financial crisis." Even though, frequent travelers are still quite eager to go abroad.
55% of frequent US travellers ‘May’ or will ‘likely’ book future holidays - Izea
U.S. travelers haven't bolted the idea of a holiday outing. Many are still optimistic about a future holiday. The same for business travelers peaked at around 61%. This suggests that even though the traveling scene is toxic, as soon as the COVID-19 threat subsides, people will likely take up traveling.
Despite this, future booking decisions are entirely unpredictable. In essence, around 38% U.S. travelers said that they'd never buy a non-refundable hotel or plane reservation if the travel date fell within the next 1-4 weeks. For now, it seems like consumers will take a while to embrace the idea of traveling abroad.
Impact of Coronavirus on Retail
Retail stores are another zone to contract the virus. With very little distancing, the likelihood of spreading the virus goes up. Some stores are drawing shutters on their venture & preventing masses from going in. A noble call - but hurtful to their daily sales.
Beyond this, in the coming days more people are going to keep away from crowded places. This is hurting the traffic & therefore the revenue of these stores; to the extent that some have gone as far as offering free parking, cleaning surfaces like check lanes & touchscreens at least every 30 minutes.
67.9 of US consumers in the age group of 18-29 are avoiding the stores in Feb 2020 - eMarketer
If the outbreak worsens, most consumers would raid the stores & collect all the essentials in one clean sweep. Most have already limited their trips to Shopping Centers/Malls. Hypermarkets, Supermarkets, Grocery Stores are being shunned in these challenging times.
47% of retailers expect some downside in revenue due to the coronavirus – DC360
Work slowdowns, delays, shortages in production/shipment of products, increases in costs or delays in revenue are all factors that severely affect the functioning of retail outlets. Absentee workers are high & work from home is not a viable solution.
There is a large impact on imports at major U.S. retail container ports. All this is due to factory shutdowns & travel restraints in China. That affects the production & fulfillment of goods. Factories have slowly started to resume production. But, cargo movement to/from Chinese ports is still a problem.
44% of retailers expect product delays & 40% expect inventory shortages – DC360
Traditional Brick-&-Mortar outlets, even the Duty-free Stores at Airports lie abandoned. The stores in stadiums, used for hosting sporting events & concerts are also hit severely as fans are likely to stay away. This then means merchandise & memento sales are likely to suffer.
Retailers are doing enough to reduce disruption – working with both suppliers & transportation providers to find paths forward. Walmart & Target source 15% & 30% of their goods from China are not greatly impacted yet. It is the same with Etsy which only has a small percentage of supply & demand in China.
COVID-19 concerns may boost eCommerce
As the retail stores continue to suffer in the wake of this crisis; eCommerce is positioned to get a major boost. The decision to avoid crowded places has resulted in “Germ-phobic” people procuring their goods from digital stores. Delivery volumes have risen & the situation is getting out of control.
Alongside this, Click & Collect, Pick up in-store & Curbside Pickup are also soaring in popularity. Supply chains across the world face the severe load of handling numerous orders. Amidst this, the eCommerce merchants are continually coming up Out of Stock.
As the strain of Coronavirus is especially hardest on older people, it comes as no surprise that 85.6% of respondents aged 60 & older said they would avoid shopping centers & malls.
This could mean they’d adopt eCommerce in the coming days - something they’d avoid in favor of physical stores.
Many online retailers are utilizing the U.S. supply line for the country in the wake of explosive growth for specific products. And they are even diversifying their dependency on supply from foreign countries.
Many eCommerce chains are also proactively communicating their hygiene protocols to ensure full responsibility from their side. The online sales for flu-related products have spiked.
Some suggest that consumers will likely turn entirely to Amazon and other e-retailers & skip retail stores altogether. However, sellers on Amazon's marketplace are struggling to bring goods into the US. Some consumers even witnessed a 50% spike in surgical masks on Amazon when Coronavirus arrived in the US.
eCommerce retailers are showing a tremendous amount of confusion, mixed outlook & uncertainty.
Some expect eCommerce sales to jump somewhat or significantly because of the virus. However, the majority anticipate their eCommerce sales to decline.
If demand remains somewhat high in the coming months, eCommerce stores could end up with low inventory or delayed supply chains.
For brands that bear this burden, it's crucial to have transparent communications & return policy adjustments to preserve customer confidence.
Conclusion
Right now, the situation is still grim, with most countries in lockdown & no respite in sight. The footfall to retail stores will plummet even further. Rebuilding consumer trust & restoring traffic to brick & mortar outlets will be a concern. Health & safety will become a critical issue when stores reopen.
For now, COVID-19 has created supply chain & demand uncertainty. In the worst-case scenario, the supply chain issues, product shortages & fluctuating consumer demand could further diminish eCommerce growth – as the economy falters or goes into recession.
eCommerce is bound to face several negative impacts from the outbreak. Merchants that rely on 3rd parties to source their goods will have trouble procuring goods; from factories that have shut down. Also, it becomes harder to change your sourcing tactics within a matter of weeks.
For now, it is unclear how much of an impact will be felt across all sectors. But for the foreseeable future, consumer fears, especially around poultry items, will be high. As such, addressing & mitigating this will be the top concern for most brands.
