Will the coronavirus permanently change the face of e-commerce?
The coronavirus crisis hasn’t just hit in-store retail, but has also set the ball rolling in many aspects of the world of e-commerce. What long-term effects can be expected in online retail?
Is e-commerce a winner or loser of the crisis?
The lockdown during the spring of 2020 significantly impeded trade as a whole. The countless retailers that had to close their stores for weeks have undoubtedly been hit the hardest by the crisis. But online retail also recorded substantial sales losses, depending on the range of products being offered. Particularly in segments such as clothing, shoes, and furniture, consumers were extremely cautious for a long time during the coronavirus pandemic. In contrast, other sectors even saw their sales increase, as was the case for online pharmacies, food delivery services, and fitness equipment suppliers. According to a study conducted by the German e-commerce association Händlerbund, more than half of online retailers reported negative effects on their business during the height of the crisis. Around a third only experienced minor effects at the time, while about one in ten respondents had even recorded higher sales.
But what does the situation look like today? Current predictions assume that e-commerce can expect higher growth in the long term compared to before the crisis and the digital transformation in general will almost certainly experience a permanent boost.
Coronavirus and distance selling: is the market power of online giants growing?
Sales giants that are increasingly conquering more market shares, such as Amazon, were also confronted with new challenges during the coronavirus pandemic. In some cases, supply chains were interrupted, the delivery of non-essential products like fashion and leisure items was temporarily postponed in order to concentrate on drugstore goods and other products for everyday use, and new employees had to be recruited. It is now becoming clear that Amazon is among the companies that have profited most from the coronavirus crisis in the e-commerce sector. Despite increasing costs for personnel and logistics, the high-reach player managed to double its net profit in the second quarter of 2020 as compared to the previous year.
Does the future of e-commerce lie in regional trade?
The major success of e-commerce giants is also partly due to the fact that more and more smaller retailers have decided to sell their products on Amazon and similar platforms during the crisis. Interestingly though, a countertrend can also be observed, with some retailers increasingly opting for alternative forms of cooperation. In particular, these include regional marketplace models, which have gained ground since the coronavirus crisis due to the greater demand for local products and services. The German platform Einzelheld, which lets local retailers and food businesses sell their products on its website, is a good example of how to make a virtue of necessity. In any case, the trend toward regional, sustainable consumption will most likely continue beyond the coronavirus crisis, meaning that online retailers can gain competitive advantages in the long term by realigning themselves in this direction.
The bottom line: higher growth rates in online retail compared to before the crisis
Despite all the challenges and short-term sales losses, there is now a very clear signal with regard to how this time of crisis will impact e-commerce in the long term. According to a recent market study conducted by the German E-commerce and Distance Selling Trade Association (bevh), products for everyday use as well as household goods, in particular, are being bought online a lot more frequently than before. On the whole, online retail consequently increased its sales in the second quarter by around 20 percent compared to the previous year. However, we must not lose sight of the fact that some retailers are still really struggling with the repercussions of the coronavirus pandemic. What’s more, the crisis gave rise to significant additional expenses in many sectors and some distance sellers are only slowly catching up here. Only time will tell if e-commerce can position itself in the long term in a way that will let it master future crises more easily.