How Is Coronavirus Impacting E-Commerce?
The number of people infected by the new coronavirus globally surpassed those infected in China as of February 2020. As the virus continues to spread, new ramifications are revealed daily. How is the coronavirus impacting e-commerce operations, and what can retailers do in response to those challenges?
Supply Chain Disruption
With the quarantine of Wuhan, China, and more than a dozen other cities in a region known as a manufacturing hub, more than 45 days of manufacturing have been lost to date. The ripple effect this has across the global supply chain is becoming more apparent as companies are being forced to halt production of finished goods due to lack of necessary parts provided by the quarantined region. This supply scarcity is resulting in product availability challenges for retailers across industries—from auto manufacturers to apparel brands—that could continue to worsen in the latter half of 2020.
Shortages in the Fashion Industry
If the coronavirus quarantines continue, U.S. fashion brands dependent on materials from China are anticipating negative impacts on inventory levels for summer and fall product lines. This shortage would likely result in a just-in-time inventory approach, leveraging multiple inventory piles across the country and fulfilling orders through split shipments. This means doubled freight and labor costs and a less-than-ideal customer experience. Split shipments also require omnichannel systems capable of optimizing inventory across channels and equipping stores to fulfill online orders where possible.
A Shift to Online Shopping
According to UBS Global Wealth Management chief economist Paul Donovan, the market share of e-commerce is significantly higher now than it was during the last major outbreak in 2002 (SARS), which may reduce the economic impact of the coronavirus. However, fear is a leading cause of economic disruption, and consumers could still potentially get scared into tightening their spending if conditions worsen.
Consumers are more likely to turn to online shopping as they seek to avoid risking infection in crowded shopping areas such as grocery stores. For instance, JD.com, China’s largest online retailer, has seen sales of household staples such as rice and flour quadruple since the same time period in 2019. There have also been more than 222 million downloads from Apple’s online store in China since the beginning of February, a surge of 40% compared to the 2019 average.
Improve the Customer Experience
With so much chaos around this outbreak, it is important that retailers not lose sight of the customer. Brands who go the extra mile to address customer frustrations due to the impacts of the coronavirus will make a positive impression on consumers, which can only encourage brand loyalty in the end.
The current situation in quarantined Italy is a great example of how brands can choose to proactively address issues to appease consumers. Carriers are not able to deliver shipments to households within quarantined cities in Italy, so orders shipped to these areas are being returned to distribution centers. To avoid additional shipping charges, e-commerce distribution centers should implement system alerts to hold orders for these locations until the quarantine is lifted.
At the same time, retailers should prepare to account for increased volumes in contact centers from customers in quarantined regions looking for an explanation. Training agents to handle these inquiries with appropriate sensitivity to the frustrating circumstance can help ensure a positive brand experience for customers.