Title: Impact of Covid-19 on Ecommerce
Category: Research Paper
Sub Category: Dissertation
Subject: Research Methods
Novel strain of Covid-19 emerged in Wuhan, China in late 2019 when a mysterious illness resulted in death of thousands of Wuhan residents. By the advent of new decade, Covid-19 spread like a fire to many other continent including Europe, UK, USA and Australia. World Health organization (WHO) declared Covid-19 as a global Pandemic as it has currently effected more 200 countries around the world while erasing $6 trillion from the global stock market. There are more than 1.9 million cases reported worldwide till April 14th with hundred and twenty thousand deaths and 462,000 recovered. This threat resulted in fear and uncertainty across the world as a result many countries. (Ozili & Arun, 2020) Majority of the world population is experiencing a lock down where people are sitting at home and practicing social distancing is decrease the spread of virus. Surreal experience of self-isolation across the world has resulted in rediscovery of hidden talents are people are keeping themselves busy by introducing themselves to different interests which craft, books, music and movies. Apparently people are also looking for spending and shopping online. On contrary, many business around the world have found best way to reach new customers apart from supermarket as many companies having physical stores along with online stores are using e-commerce websites to offset the losses from the closure of physical stores. Majority of people shopping online are looking for necessity spending on groceries and consumables unlike discretionary spending on fashion retails as this situation poses immense pressure on consumer wallets from consumer confidence perspective.
According to Davis & Tony, (2020) 52% of consumers across the world are avoiding crowd and 32% of consumers are not leading house as a reaction to reduce the spread of infection which poses significant risk of respiratory failure amongst people. This has significantly effected business around the world and many consumers are shifting towards brick-and-mortar brands to fulfill their shopping needs while embracing the impact of coronavirus. In response to the virus many e commerce stores closed their operations to assist government in containment of the disease. However, these stores started opening to fulfill the shopping needs while ensuring that products being shipped to consumers are not manhandled. (Mendoza, 2020)
Rationale of the Study:
The objective of this study is to investigate the impact of Covid-19 on e-commerce market whether this pandemic poses negative and positive impact on e-commerce markets around the world specifically GCC markets. Furthermore, the study aims to investigate the impact of Covid-19 pandemic on consumer spending behavior on E-commerce.
The study aims to answer following research questions.
• What is the impact of Covid-19 pandemic on business operating via e-commerce or brick and mortar model?
• What is the impact of Covid-19 pandemic on consumer spending behavior on business operating via e-commerce or bricks and mortar model?
• What are the challenges faced by business operating via e-commerce or bricks and mortar model in event of Covid-19?
• What are the solutions to address these challenges faced by business operating via e-commerce or bricks and mortar model in event of Covid-19?
The research methodology encomposes review design as the findings of the study are proposed based upon the analysis of published articles, websites, survey reports and resources available online. The study poses significant limitations as Covid-19 is an evolving situation resulting is limited amount of published evidence available on the Google Scholarly. Furthermore, author cannot collect primary data from
Global E-commerce Market:
Adeyeye, (2008) defines e-commerce as an “integration of communications, data management, and security capabilities that allows organizations to exchange information on sale of goods and services via electronic medium”. E-commerce which includes B2B, B2C and brick-and-mortar brands such as Amazon are opening again to shipping for both essential and non essential items which has resulted in significant boost in sales. B2C market is the largest e commerce market where transactions are conducted between consumer and companies. China is the largest e-commerce market with more than 384 million users purchasing products worth of $672 billion online representing 25% of the global ecommerce spending. The motive behind e-commerce spending is price advantages, reviews availability and product range. (Lipsman, 2019)
Courvoisier, (2005) argues that in this digital era many merchandising retailers around the worlds have revamped potential product offerings in response to fierce competition and changing consumer dynamics. Rana et al., (2015) states that modern retail consumers have increased their powers to bargain as they have many options available in terms of product, store and channel selection. This increasing power of consumers have made them more demanding than ever as their purchasing behavior is continuously evolving. Nowadays, consumers can choose from wide variety of branded products with no differentiation in every supermarket store or their e-grocery store channel which offers consumers to purchase goods online using mobile applications and websites. Jaafer et al., (2012) states that consumer buying decision has been a complex process where there are numerous factors which are relative to purchase intention which includes consumer behavior, consumer perception and their attitude towards products and services. Al these attributes serve as a key notion during consumer decision making of considering and evaluating certain products. Purchase intention is the most commonly used tool to gauge performance of purchasing process as once consumer decides to purchase certain products from certain channel their action will be driven by their intentions which can be altered by price, quality perception and value perception.
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Shifting Consumer Behavior towards E-commerce:
The emergence of pandemic with the name of Covid-19 has posed significant challenges for businesses across the world are business climate has been tightened by closure of international borders, temporary closure of bricks-and-mortar model and staffing issues which has resulted in uncertainty. This has resulted in significant change in consumer behavior at massive sale as many local shops are forced to close for safety reasons consumers are conducting panic buying in bulk resulting in significant changes in consumer outlook, perception and behavior. (King, 2020) Many consumers have switched from buying offline to online while spending more time at home while getting their products delivered at their door steps as evidence from eMarketer, (2020) suggests that 74.6% of consumers in United States are likely to avoid shopping at malls and shopping centers if coronavirus outbreak in the country worsens. Evidence from Ipsos, (2020) suggests that 50% of Chinese consumers and 31% of Italian consumers are using e-commerce more frequently in event of coronavirus outbreak in the country.
Post Pandemic E-commerce Market:
In the current crisis of Covid-19, Davis & Tony, (2020) states that Amazon has hired 100,000 employees over the last most to fill the position of 75000 roles. Furthermore, they have also rented new distribution centers and delivery network in response to the sales boost of 58% reported by the end of March 2020. In a nutshell, this event of pandemic have significantly changed consumer behavior in terms of how they are searching for products and how they are spending as majority of people around the world are sitting home while using their laptops and desktops. Evidence from different e-commerce stores suggests significant increase in consumer spending for online groceries, food delivery, kids meal, alcohol, home improvement and general merchandizing because “stay at home” order by government requires retail stores with 10,000 square feet must have 25% of its occupancy rates whereas people outside store needs to wait in a queue approximately 6 feet apart from each other while wearing personal protection equipment (PPE’s) which includes masks and gloves prior entering a retail outlet. (Davis & Tony, 2020) According to Fryer, (2020) baby products sales over e-commerce stores have surged by 1,197% and food and beverage ecommerce sales have surged by 54%. On contrary sales for apparel, jewelry and electronics are subsequently down. Data from Litstark on e-commerce revenue from 850 largest e-commerce stores suggests 40% increase in revenue for the companies. More than 120 countries with 2,500 global businesses operating on e-commerce reported 400 million consumer transactions in an event of pandemic. (Mendoza, 2020)
Current Challenges Faced by E-Commerce:
The immediate challenges faced by e-commerce market includes instant surge in orders, disruptions in supply chain, shortage of labor, health and safety of labor, closure of warehouses and sorting centers. Thus there is a huge shift to online shopping despite all these challenges making difficult for e-commerce stores to adapt to the increasing customer demand while maintaining optimal stock level and delivery performance. (Charlton, 2020) Many marketers believes that e-commerce sales is likely to increase in future as well as people will be practicing social distancing as a standard practice and more and more people will stay home. On contrary, ecommerce seller are not optimistic about the future as 36% of sellers predicts that the sale will ultimately decline due to supply chain disruptions resulting in product shortages, shipping delays and potential for demand. 44% of sellers believes that Covid-19 will result in production delays resulting in inventory shortages throughout 2020 . For example, world leading e-commerce giant Amazon have experience massive strain on its supply chain which has resulted in shipment delays, technical problems and labor shortages. As a result Amazon was compromised as it closed all the shipment of non essential items until April 05, 2020. Thus, it is only accepting orders for household staples and medical supplies. Amazon is categorizing shipment to tackle this immense growth intro different categories which includes baby products, health & household, beauty and personal care, grocassy, industry and scientific, pet supplues e.t.c and scheduling deliveries. On the seller side Amazon is facing significant challenges such as price gouging and false marketing which resulted in suspension and ban of these sellers on Amazon and eBay as many producers are found taking advantage of panicked consumers. (Ugino, 2020)
Solutions & Recommendations For E-Commerce Stores:
In these current times, E-commerce stores needs to be tactful and transparent. Single vendor e-commerce stores should not alienate their audience with tacky promotion in order to take advantage throughout this pandemic. Even though these strategies can benefit retailers tactically but in the long run it might hamper their reputation. E-commerce stores must focus to address the issue of delivery delays, out of stock products and ensure internal stock sanitization procedures by partnering with their suppliers and sharing point of sales data with them. Secondly, Communication is essential during these tumultuous times thus it is essential for retailers to communicate in advance if there are any supply chain and logistics related disruption. However, retailers must not over communicate with consumers which often results in frustration. Thirdly, e-commerce stores must diversify their supply chain to alleviate these problems before they worsen. Diversification includes looking for new manufacturers and fulfillment locations. Fourthly, e-commerce stores needs to be more social and connect to their customers using social media platforms during these difficult times while advertising to assure that sales are not declined while keeping existing customers engaged to increase their level of trust. (Ugino, 2020)
Findings of the study suggests that Covid-19 poses significant threat to the economic eco-system including e-commerce market. E-commerce have witnessed immense growth in the event of Covid-19 outbreak with exponential increase in sales for household merchandise however the sale for luxury and fashion items on e-commerce stores have significantly reduced. In a nutshell, Covid-19 had positive impact on business operating via e-commerce or brick and mortar model. Furthermore, findings reveals that there is a significant shift in consumer spending behavior as consumers are increasingly relying on e-commerce stores to practice social distancing while avoiding shopping centers and malls. Findings suggests that there are significant challenges faced by e-commerce companies amongst which the most prominent challenge includes disruption in supply chain, shortage of employees and delays in delivery. In the end author has proposed some recommendations to address these challenges by depicting transparency, diversification, getting social and engaging with existing customers.
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