The continuing uncertainty due to the coronavirus outbreak has had a significant impact on eCommerce businesses and their marketing strategies. Consumers are avoiding crowded places, practicing social distancing, and changing the way they shop. With many shops closed, people can no longer go to restaurants and opt for food delivery instead. From essentials, like toilet paper and hand sanitizer, to online groceries and medical supplies, consumers have increasingly turned to shopping online. With customers spending more time at home ordering their needs online rather than going to the shops, we see a rise in eCommerce sales – making eCommerce one of the fastest growing sectors amid the coronavirus crisis.
How Coronavirus is Impacting eCommerce
Massive changes in consumer behavior are affecting organizations that are trying to adapt to these changing demands by shifting their focus to delivering digital content products as well as dealing with supply chain and product shipping issues. Businesses that have been forced to adapt, change, or pause their marketing and other business strategies portray a clear picture of the increasing toll the coronavirus pandemic has taken on the global market. Currently, the end of the crisis is difficult to predict, so all brands, particularly luxury brands, will continue to make difficult adaptational decisions that will cause further disruptions to their pre-planned budgeting, campaigns, and hiring.
The Impact of Coronavirus and eCommerce Growth
Data from various sources suggest that most organizations in the retail industry are experiencing a drop in demand for their offerings. Areas where retail sales are doing well are those that offer products labeled as essentials, such as groceries, personal care items, hand sanitizer, household items, hygienic products, toilet paper, diapers, medical supplies, and feminine care products. Other products that are experiencing a rise in eCommerce sales are entertainment items such as video games, puzzles, and board games. However, the increased number of orders doesn’t mean that these brands are not experiencing difficulties. Even eCommerce giants, such as Amazon and Alibaba, are trying to mitigate problems related to the supply chain.
Smaller companies are most likely to have to make more drastic changes to their logistics, budgets, marketing campaigns, and hiring plans than their larger competitors. On the other hand, larger companies are facing more supply chain issues.
Issues in the Supply Chain
As they avoid public places, consumers have shifted to purchase more online. However, consumers expect that level of service to be the same. Unfortunately, with the coronavirus impacting the travel industry and air transport, it has also led to issues in logistics and the supply chain.
One scenario argues that eCommerce stores, online divisions of major retailers, and delivery services are the biggest beneficiaries of this change in consumer behavior. The foot traffic in traffic malls definitely went down, but on the other hand, declining consumer demand, product shortages, and supply chain issues could blunt the eCommerce sector (if the economy goes into deep recession or depression).
The most significant impact within the eCommerce realm is supply chain disruption. Many eCommerce brands get their goods from Asia, which is the location most heavily hit by the COVID19 pandemic to date. The virus has continued to spread, and even manufacturers in the Americas and Europe have experienced closures. This means that the challenges that were already felt in Asian manufacturing are now also felt in other locations of the world.
Based on prevailing forecasts, most brands likely have 3-6 months of available inventory, which means that the true impact of manufacturing closures, decreased production due to staffing shortages, and supply chain issues will be fully realized only when replenishments are expected and can’t be delivered.
Brands with multiple consumer distribution touchpoints will be able to react to changes in fulfillment challenges. As for those relying solely on manufacturing, brands with the ability to pre-emptively carry excess inventory, or with sound inventory control will be able to respond.
How Amazon is Dealing with Increased Demands for Shipments
Last month, Amazon announced that they plan to hire 100,000 new delivery and warehouse workers to be able to meet the huge spike in online sales and shipments. They also plan to increase the hourly pay of the staff employed in those positions through April (additional $2 in the U.S.). More and more Americans are turning to eCommerce stores like Amazon to purchase household supplies and groceries. However, Amazon informed its customers that there would be delays in Prime shipments as well as that stocks on highly sought-after items were running out. Communities practice social distancing to stop the spread of the virus, so getting priority items to their door is vital, especially for the older population and others with chronic health problems.
In mid-March, Amazon announced that it would prioritize the most in-demand essentials that customers need to stock while in isolation. As for the nonessentials, customers complained that certain items were showing late April delivery dates despite being listed as in-stock and shipping with express shipping service. Modern consumers are used to the two-day shipping window that Amazon Prime provides in the U.S., but now, some deliveries are showing from five-day to a month delivery promises on some items. These huge delivery delays are showing how coronavirus fears have led to an increase in online shopping. And even technologically powerful and advanced online retailers (like Amazon) are having difficulties in handling such a shopping rush.
More Opportunities for Direct-to-Consumer eCommerce Sites
With such long shipping delays in shipments from large eCommerce sites like Amazon, small and medium sites (with simpler supply chains and logistics processes) get an excellent opportunity to serve customers who don’t want to wait too long to get their products. The coronavirus pandemic has forced everyone to adjust their supply chain, but SMB eCommerce retailers are more agile and flexible and can adapt their supply chain much more easily.
Nobody knows how long this crisis is going to last. If it goes too long, we may expect consumer spending to drop to a point where no channel or industry is spared. Taking all the steps you can to serve the quarantined consumer will help your business stay afloat for longer as well as build a more resilient supply chain that will benefit you in the future when the crisis is over.
To adapt your supply chain, you should focus on five areas:
- Redirect your inventory
Make changes across planning, purchasing, and inventory-management operations, and revise your purchasing plans to favor items in high demand. Direct more of your inventories toward locations where eCommerce sales are brisk. Also, you should reassign your staff to cover key categories of products.
- Secure demand
For some online retailers, there is a network-wide stockout due to surging demand for goods. Work closely with organizations across your supplier base and stay on the line with strategic suppliers to work through all the options for securing an adequate supply of merchandise.
- Flexible and agile logistics system
Maintaining the flexibility of your logistics system is crucial for limiting disruption to essential services. Trucking demand and freight costs have spiked in the U.S. from February to March, while carriers are increasingly rejecting contracting rates and selling their capacity on the spot market. Find a way to secure enough capacity to get priority items on shelves as swiftly and reliably as possible. Consider partnering with discretionary-goods retailers to supplement your transportation capacity because they have dedicated or private fleets.
- Add distribution capacity
The distribution demand trends for both essential and nonessential products significantly overlap, and many eCommerce companies are reassigning their employees to have more capacity in categories where items are selling fastest. Some companies are temporarily moving their office workers into distribution due to staff shortages. During the pandemic, keeping your distribution workers is necessary and requires taking additional precautions.
- Deliver reliably
Modifying retail locations to facilitate curbside pickups and bringing such an increased volume of goods to consumers at their doorsteps are no small changes. To make these changes successfully, online retailers are widening delivery windows from the same-day to 2-3 days. This allows them to rationalize the routing and scheduling of deliveries so that deliveries in the same location can be grouped together and shipped in one round of drop-offs.
- Lower Advertising Costs
The coronavirus pandemic has led many large brands to either cut their advertising budgets and put a stop to their advertising spend. However, this has resulted in less competition for small and medium-sized brands. The average CPM in March was $0.81, which is more than a 50% decrease compared to $1.88 in November 2019. It’s the same thing with average CPC, which was down to $0.089 in March from it’s January peak at $0.11. These are all signals that you shouldn’t put a halt on advertising spend but adjust your marketing campaigns and budgets, and take advantage of the absence of big players.
China’s economy stopped abruptly in January and is starting to come back up. It is not back to the way it used to be but is growing. Right now, direct-to-consumer eCommerce businesses can use the situation to their advantage because they have shorter supply chain cycles and can meet the needs of consumers that large online businesses cannot.
The COVID-19 situation is a humanitarian crisis, and as a retailer, you need to make sure that you’re protecting your employees’ health and wellness. With resourcefulness and creativity to the crisis, you should strengthen and diversify your supply chain to make sure your customers can buy the goods they want and have them delivered as promptly as possible. This is a challenging time, and the lessons you can get from it can help you make your supply chain more resilient. In case another crisis occurs in the future, it will be less surprising because you will have the right plans to keep it from causing as much disruption.