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E-Commerce and Covid-19: How the Pandemic is Driving Demand

Online shopping is experiencing significant growth at a time when traditional retail is restricted. In this QAD Precision Report we look at this trend and how retailers can respond.

The drive towards online shopping is being accelerated by the global Covid-19 pandemic. As a consequence, retail platforms globally experienced a six percent increase in traffic between January and March this year. That increase translates to 14.34 billion visits in March 2020, compared to 12.81 billion visits in January 2020.

Globally, e-commerce has been growing an average of 20 percent year-on-year for the last ten years. While it may be too soon to predict what growth for this year — if any — current conditions make shopping online more attractive than ever. 

Across the world, many of us are still living with severe restrictions to our movements and all but essential retail outlets are closed — although what governments define as “essential” differs globally. Given the unprecedented situation, it is perhaps unsurprising that we have turned to online shopping, for both essential and non-essential items, including food and cleaning supplies, home furnishings, DIY tools, crafts and games.

History suggests that a surge in e-commerce was likely — we’ve seen it before. In 2002 and 2003, the SARS outbreak helped cement the popularity of B2C and B2B e-commerce platforms in China. E-commerce giant Alibaba experienced tremendous growth during the outbreak. Then, as now, people turned to online shopping to meet their needs while reducing contact with others. 

The Increasing Necessity of Digitization

It seems all but inevitable that certain retail outlets will disappear from our high streets and shopping malls. Retailers and brands that rely primarily or solely on in-store sales are, of course, unable to sell goods at this time.

Unfortunately, many retailers were in a difficult position before the Covid-19 pandemic. Competition from online retailers — both local and international — as well as changing shopping habits, along with high operating costs such as rents, rates and insurance, all meant that traditional retailers were already facing an existential threat.

Moreover, the pandemic points to the increasing importance of digitization. Retailers with strong e-commerce operations are better placed to ride out the current shutdown — and some are positively thriving. Amazon, unsurprisingly, is seeing a huge demand for its products and services. Reports suggest that consumers are spending almost $11,000 per second on Amazon.

The e-commerce behemoth is not the only one. Popular online furniture retailer, Wayfair, and home goods store Bed, Bath & Beyond have seen online sales surge. Wayfair more than doubled its online sales in March, and experienced strong growth in April too. 

As we move past this disruption, future-minded retailers will need to invest in technologies to support a digitized world. What was quickly becoming a necessity prior to the coronavirus pandemic, will be crucial after it for any retailer that wants to compete in an increasingly digitized world. 

The Appeal of the Marketplace

As the surge in Amazon sales indicates, shoppers like the convenience and choice available on e-commerce marketplaces. In 2019, the UPS Pulse of the Online Shopper survey found that 96 percent of consumers had made at least one purchase from a marketplace in the previous three months. 

Consequently, brands and retailers — even those with their own e-commerce operations — have found it increasingly important to sell on marketplaces as well. On the plus side, joining a marketplace gives a brand access to customers far beyond the geographic boundaries of their stores. Nonetheless, it does also mean that a brand may be competing for the same customers with several other similar brands. This can be a distinct worry for retailers whose offerings are not niche, or sufficiently differentiated from their competitors.

Wholly relying on a marketplace can have unexpected downsides too. In March, Amazon announced that due to the skyrocketing demand for essential items, it would recruit 100,000 extra staff in the US as well as stop accepting non-essential items at its warehouses. Furthermore, in parts of the world, notably France and Italy, Amazon is only selling and delivering essential items. Given the unprecedented situation, it is obvious that essential items should be given priority. However, for retailers and brands that sell goods exclusively, or mostly, through Amazon, this has been a devastating blow. 

Many Carrier vs Multi Carrier Shipping

Any company that sells its products online needs to contain fulfillment costs. Getting products to consumers is an expensive business — particularly when delivering to rural communities. In a post-pandemic world, keeping those costs as low as possible will become even more important.

A true multi-carrier shipping strategy is one of the most important aspects of controlling costs. Multi carrier shipping is not the same as “many carrier” shipping. 

Take, for example, a retailer based in the UK. The retailer might use one carrier for domestic shipping; a second carrier for delivery across Europe; and a third for all other international deliveries. That’s many carrier shipping, not multi carrier.

A true multi carrier shipping solution allows you to switch between carriers for both domestic and international shipments. As a result, you always use the lowest cost carrier that can meet the promised delivery date. It is possible to rate-shop every delivery this way, but that is time-consuming and not feasible if you are a high volume shipper.

Multi carrier shipping along with automated routing allows you to set business rules that govern each shipment. Parcels are automatically routed to the lowest cost service depending on its characteristics, such as delivery address, weight, customer and so forth. 

Furthermore, multi carrier shipping also allows for consolidations. This is particularly useful when shipping internationally as a consolidated shipment only requires one customs declaration for the entire shipment.

Additional cost savings can be achieved by using local carriers when a consolidated shipment arrives at the destination country. If you are shipping from the US to Europe, for example, this would be particularly advantageous. There are a wide range of carriers available across Europe, and using different carriers for final deliveries across different countries can result in significant cost savings.

Buy Online, Pick Up in Store

Final mile delivery to customers — and the high number of items that online shoppers return — can significantly squeeze a retailer’s margin. As a result, retailers should encourage customers to use less expensive options such as “Buy Online, Pick Up in Store” (BOPIS) options. Under normal trading conditions, this increases store footfall, offers a chance to upsell, and allows customers to decide if they want to keep or return the item while in-store.

During the current pandemic, a number of retailers that sell essential goods are using curbside pick-up. This helps retailers maintain social distancing guidelines in-store for both employees and customers. Examples include The Home Depot, Lowes and Michaels

It is likely that this delivery channel, along with BOPIS, will remain after conditions return to normal. Even retailers with a huge number of outlets can benefit from partnering with others to expand their pick-up locations. Walmart customers can choose to pick up their online orders from a FedEx location, while Amazon, Michaels and Kohls have a similar partnership with UPS. No matter how large or small a retailer is, cutting shipping costs makes good sense. 

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About QAD Precision – Trusted Global Trade and Transportation Execution

QAD Precision, a division of QAD Inc., provides industry-leading global trade compliance, and multi carrier transportation execution solutions from a single, integrated platform. An ISO-certified company, QAD Precision assists companies to streamline their import, export and transportation operations, optimize deliveries, and increase logistics ROI. QAD Precision’s scalable and extensible solution easily integrates with existing ERP and WMS solutions. Industry leaders in every region of the world rely on QAD Precision’s global support centers to leverage thousands of carrier services and manage millions of global trade and shipping transactions every day. For more information about QAD Precision, visit www.qadprecision.com.

 

 

 

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