Covid19 & The E-commerce Value Chain

E-commerce was already a big part of how modern consumers shopped. As of 2019, globally, for every 100$ spent, 13.7$(1) of that was contributed to by e-commerce sales. Now, this figure might sound low to you, considering the ubiquity of E-commerce and no doubt your own personal anecdotal experiences with it, however keep in mind that these retail sales figures include categories that might not typically be considered part of retail, such as fuel sales, automotive sales etc.

Once we get past that, and count GAFO items, that is, general merchandise, apparels and accessories etc. E-commerce alone, holds an estimated Lion’s Share of 30%. And in the health, and beauty industry a whopping estimate of 24.5%(2).

The Covid19 pandemic however massively impacted the entirety of the E-commerce Value chain. Stringent laws against shipments from heavily effected areas, countries deploying lock-down measures, radical changes in last mile deliveries and much more,

So, now that we’ve come to appreciate how massive a part E-commerce has come to play in our lives, we want to look at it’s resilience in these unprecedented times. After all, even the stumbling of a giant can have massive reverberations. So how is this complex network of delivery, shipping, warehouses, consumers and buyers holding up?

1)Marketing:

Perhaps one of the more nebulous areas to analyze. Traffic and conversion rates for non-essential products will definitely take a hit. But this does not spell doom and gloom for the marketing industry. The current situation provides an opportunity, for companies to alter their messages, engage with consumers, and build a stronger brand.

Changing the framing of your messaging can also help a great deal. Traffics to social media websites have surged by up to 45%, and websites like YouTube and Tik-Tok are no doubt seeing an increase in activity. This can provide a great opportunity for Top-Funnel, and Mid-Funnel marketing for most industries.

You can see below the google searches for various social media and entertainment websites has increased, since the quarantine, which displays an increased opportunity to connect with audiences online and build a better brand image. This also directly corresponds to the increase in google searches for the term "Social Distancing", you can observe a direct co-relation, with this increase around the second week of march.

2)Shipping:

Shipping by far is most affected by the current Global Pandemic. The industry was already in the middle of a significant transition, with regards to the adoption of costlier Low Sulfur fuels and retrofitting of scrubbers as part of updated Maritime regulations. And now with the widespread pandemic, this process is surely to get hampered.

The demand and supply from industries is currently at stake. A lot of countries have adopted extensive measures, ranging from health checks, temperature reports, restricting movement of the crew to disallowing entry if the vessel was had been to or embarked passengers in China.

If you click on the image it will lead you to a dashboard that provides a summary of lock down measures across various ports around the world.

3)Warehousing:

Lot of E-commerce companies utilize fulfillment centers, where a third-party logistics company finishes up their delivery for them. The impact of the spread of the novel Corona Virus has not been positive, with Warehouse working conditions being called into question, Employee protests and walkouts in the USA. Even in India where companies are steadily resuming services, back orders and checkpoints will continue to be significant bottlenecks.

(Image source: https://sourcingjournal.com/topics/sourcing/coronavirus-china-supply-chains-alvanon-fedex-aarete-ups-fedex-192923/)

4)Last-Mile deliveries:

Perhaps the most crucial part of the supply chain, last mile delivery, is not only the most expensive—accounting for 53 percent of shipping costs—but also the most visible part of Order fulfilments. It is also currently the riskiest part of it. Bringing the order from the warehouse to the consumer’s doorstep provides those involved with a high risk of exposure, as well as increase points of contamination. Food delivery services, like Zomato, Swiggy, Dominoes etc. have taken precautions by introducing “contact less” delivery options, fore-going cash on payments in many cases. As well as providing their last mile-fleet financial support and free medical check ups.

(Image Source: https://www.fixlastmile.com/blog/how-on-demand-industry-can-withstand-the-coronavirus-threat/)

5)Post-Sales:

Post-Sales services are also pretty severely affected by the covid19 outbreak, with customer care services for prominent companies like Vodafone, Dominoes etc. being shut down temporarily. Various BPOs have been running pilot programs, allowing more than just key employees to work from home. While their still exists various issues withWFH, like designated office spaces, and industry standard equipment at the residents of employees, the pandemic has pushed those concerns out the window, forcing companies to adapt.(3)

Looking Forward

Not everything is doom and gloom however, while the current crisis will leave behind major impacts, both economical and social, it will also leave behind opportunities for businesses to innovate. Just like the affordable fashion industry emerged in America during the great depression of the 1930s--when consumers adopted a "waste not, want not" mindset, this crisis will also provide not just opportunity for business to profit, but to also contribute to society in a positive manner.

Healthcare is suddenly one of the top priorities in the world, among soaring demand for sanitary products, and calls to "flatten the curve". Health and Sanitation are suddenly part of the larger discourse, especially in a country like India, which ranks at 150th in healthcare according to the World Economic Forum. Legislation in Wuhan, that ban the trade and consumption of wild animals, have been passed(5). Governments will probably begin to focus more on healthcare to alleviate the costs associated with a widespread Pandemic.

This crisis will pass, like many before it have, however with it's passing, it will bring forward the implementation of long overdue changes. Changes that will leave us more resilient to something similar in the future, provided we act upon it.

Article by Akshay Arora, student of PGDM (Big Data Analytics), Goa Institute of Management, Goa under the guidance of Ameer Iqbal, IIM Bangalore.

 References:

1) https://www.oberlo.in/statistics/ecommerce-share-of-retail-sales

2) https://insights.risiinfo.com/e-commerce_statistics_June_2019/index.html

3)https://economictimes.indiatimes.com/tech/ites/bpos-run-work-from-home-pilots/articleshow/74485341.cms

4)https://hbr.org/2004/10/how-industries-change

5)https://www.bloomberg.com/news/articles/2020-02-24/china-bans-trade-consumption-of-wild-animals-to-counter-virus