The coronavirus has spread to the internet. Is online commerce at risk?
News services have been dominated by information about the spreading coronavirus. It turns out that it threatens not only people but also… business. Alibaba has already prepared USD 3 billion in loans for companies affected by trade restrictions. Will the global epidemic shake the e-commerce market?
Check the report on the behaviour of Polish e-consumers.
Since the beginning of the year, the word “coronavirus” has not left the lips of the whole world. The dangerous epidemic is spreading quickly across the globe and stirring fear among its inhabitants. It turns out that the dangerous disease threatens not only human life but, consequently, also the condition of the online sales market. How is that possible?
The market is struggling with logistical problems and product shortages. This applies especially to goods imported from China. That is one side of the coin. The other is that the outbreak of the epidemic created favourable conditions for e-commerce, because buyers are stuck at home and therefore shop online – notes Sascha Stockem from the Sopot-based start-up Nethansa, which supports Polish and German companies in selling on Amazon. – More and more often we hear voices that the virus is affecting the condition of the e-commerce market. However, these are not only negative changes, as many might think – the expert adds.
Epidemic vs online food sales
His words are reflected in the results of individual entities. Thus, over a period of 10 days (from 2 to 12 February), sales of fresh food on JD.com rose by 215%. In that period alone, the company sold as much as 15,000 tonnes of food products.
Growing demand for protective products
Fear of illness and concern for loved ones are the main purchasing motivators. That is why the outbreak of the epidemic triggered a sharp increase in online sales of products that help protect against the epidemic. These include cleaning products, medicines and dietary supplements promising to boost the body’s immunity. A good example is the situation of the Dettol brand, which belongs to Reckitt Benckiser. In the Chinese online store Suning.com, sales of Dettol disinfectants between 10 and 13 February rose by an impressive 643% compared with the same period last year.
Check at what times we most often shop online.
Logistical challenges for corporations
The heads of one of the largest companies in the world – Procter & Gamble – are fully aware of this. They informed shareholders that the virus is having a positive effect on the online sales segment. This is happening at the expense of sales in brick-and-mortar stores. Demand is the same, but customers are more willing to shop without leaving home. Such a change in trend may seem trivial, but from a logistical point of view it is a huge challenge. This is especially true for the largest corporations, whose turnover reaches billions of dollars.
This is an adversity that was hard to prepare for; operational challenges change with every hour, which makes it very difficult to accurately estimate how the situation will develop – admitted Jon Moeller, Chief Financial Officer of Procter & Gamble.
The epidemic threatens e-commerce – facts and data
Does every online store benefit, then?
Not necessarily. A lot depends on the product category. For example, toys or computer components, which are often produced in China, have become more expensive by as much as 300%. The situation is different for fast-moving products such as food or cleaning products. These are usually not imported goods but produced regionally, so it is easy to meet demand for them – reassures Sascha Stockem and at the same time notes that from China, the factory of the world, we import most of the attractively priced components necessary to make a whole range of products.
Restrictions related to the operation of a factory responsible for, for example, cells or transistors may cause delays and complications in the manufacture of devices that do not even bear the “Made in China” label. The virus’s impact is therefore not limited to consumers locked at home. It also means blocked roads, shorter factory operating hours and logistics problems – especially air transport.
Alibaba supports affected companies
Alibaba, the Chinese e-commerce giant and one of the main competitors of Amazon, decided to react to the shifting changes in existing sales trends. According to Reuters, the company announced that it would allocate nearly USD 3 billion for low-interest loans to help companies indirectly affected by the virus epidemic. Moreover, the company will also offer “exceptionally cheap” credit terms for businesses located in Hubei province – the centre of the outbreak. Alibaba will allocate about USD 1.5 billion to companies from that region alone.
– This is no accident. The strength of the Chinese platform is domestic manufacturers and distributors who focus on selling goods produced inside the country. Compared with Amazon, this is a completely different business model. Jeff Bezos’s platform works with companies from all over the world. Such diversification allows the entire platform to remain stable – explains the CEO of Nethansa.
Is global online trade at risk, then?
Yes and no. It all depends on the perspective. In some places gaps appear, while others become more profitable. One might venture to say that the trading environment abhors a vacuum and, with the help of the invisible hand of the market, always tends towards equilibrium.
See also retail trends for 2020.
Summary
The coronavirus has caused changes in online commerce of a twofold nature. On the one hand, restrictions in logistics and production in China are hitting component supplies, which is visible, for example, in the prices of toys or electronics. On the other hand, however, food sales on the JD.com platform rose by 215% in February, and Dettol disinfectants in the Suning.com store by as much as 643%. Consumers, avoiding brick-and-mortar stores, are moving their purchases online, as confirmed by Procter & Gamble, among others. China’s Alibaba allocated USD 3 billion to support companies affected by the epidemic, including USD 1.5 billion for entrepreneurs from Hubei province, illustrating the differences between the Chinese model and the American one represented by Amazon.
