Ecommerce and COVID-19 – the good, the bad, and the ugly

How did the COVID-19 crisis accelerate ecommerce expansion towards new merchants, new customers, and different types of products? 

The COVID-19 crisis has led to a sharp increase in ecommerce, as we all know. What I find particularly interesting is the adoption of buying services online – not only when it comes to Netflix and Disney+ subscriptions, but an overall increase. Our projection for 2020 is that ecommerce will grow by about 40% compared to 2019; especially in specific industries, like services, DIY, or sporting goods, where we have seen surges of 100%, 150%, or even 200%.

We also observe that there were huge differences per countries as the restrictions varied. Some countries limited in-store shopping severely; therefore, with no limitations applied to online shopping, ecommerce grew very fast. There were also countries such as Brazil, Peru, or Chile that had very strict restrictions for online delivery as well – and since delivering goods was not possible, ecommerce actually shrank. So, the way in which governments handle the crisis has a sharp effect on how much ecommerce is growing. 

It is also worth mentioning that apart from food delivery (which has spiked in Western Europe) and entertainment services, we see an acceleration when it comes to the online sales plans of real estate agencies and car dealerships. In addition, entirely new services emerged. For example, doctors’ appointments are now taking place online – which used to be impossible in many regions (besides Asia, where this had already been going on for years). In other words, we see that many of the services that required our physical presence can now be offered online. 

In this context, what can be done to support online merchants, while also protecting customers and increasing their trust? 

This aspect is very country specific as well. In some countries, the logistical infrastructure is mature enough to handle this 40% increase in ecommerce. In others, that is not the case, especially where the national postal services still dominate the delivery space, or where these services have been privatised but still own 90% of the market. Here, we witness logistical problems because these players are not flexible enough and cannot scale up fast enough. The payment infrastructure also plays an important role, and there are countries in which it is constantly improving; but most payments are made with cash on delivery, which is very expensive. 

However, my biggest concern now regarding trust is the massive increase in the number of scams due to the COVID-19 pandemic. The crime syndicates are rapidly going online, which was already happening. However, this trend is now being reinforced by the pandemic. According to one of our studies, 3% of all websites are now scams. That, of course, is hindering the consumers’ trust as online fraud is now the most reported crime in the UK, the US, and across Asia. 

So, I think policies need to be developed to apprehend online scammers faster, otherwise consumers will lose trust and move towards physical marketplaces, which, I think, in the end, is not a positive development. 

What do you think is the short-term impact of the COVID-19 crisis on the ecommerce industry? 

One of the big impacts of COVID-19 on the short-term is represented by higher costs. Amazon is a great example of a company that is protecting their organisation from COVID-19, spending around EUR 800 million in 2020 for that purpose alone, testing 50,000 employees every day to prevent their operations from stopping – however, all companies are faced with more sick leaves and higher costs to keep the operations going. 

The second short-term impact of the crisis is constituted by the logistical challenges. As most packages are usually shipped with passenger flights, their sharp decline meant that they had to be shipped with cargo flights instead – thus, triggering a large increase in the logistics cost. In addition, warehousing costs have increased too, simply because there is more demand but the same amount of supply. 

Finally, in regard to productivity, companies report an increase for now. However, I think that this is mainly caused by the fact that we simply work more hours, not because we work more efficiently. I believe that we will slowly start to see a loss of productivity in time, caused by the lack of social interactions. We also noticed that a lot of people are becoming unemployed, which is impacting the demand for products both in-store and online. So, even though there is a high demand for now, on the midterm, I expect that ecommerce will also suffer as people simply have less money.

What about the long-term impact? 

On the long term, we see three trends: ecommerce growth, changing consumer behaviour, and what I call regional platformisation. 

I believe that ecommerce will keep growing because consumers will continue to shop more online after the pandemic. In addition, physical stores have been severely affected and are now simply closing – a trend that was visible for a long time and was just accelerated by the COVID-19 pandemic. A self-reinforcing effect is that the more people get used to online shopping, the less they will shop physically. 

Regarding the changing consumer behaviour, as previously discussed, we see the emergence of new online services that mitigate the lack of physical presence. Besides online therapy, dating, and shopping, I expect virtual reality to become an option in travel and other forms of education and entertainment. 

Finally, we have observed a move towards platforms, a trend that will also accelerate because we have more schemers, and people are moving towards marketplaces because they trust them more than they trust individual websites. Another trend is regionalisation: on one hand, we have industry giants like Google, Facebook, and Amazon in the US, while on the other, we have Alibaba and Tencent in Asia – which makes me curious as to what will happen in Europe, as I think that the governments are right in limiting the power of marketplaces in the region. My expectation is that regions will move towards their own growth, and as a result, we will see ecommerce becoming more regional and less global than we have previously thought.

This editorial was first published in our Cross-Border Payments and Ecommerce Report 2020–2021, which assesses the change of pace that occurred in 2020 and provides a comprehensive overview of the major trends driving growth in this space, being the ultimate source of information for players interested in selling across borders. 

About Jorij Abraham

Jorij Abraham is an ecommerce generalist with more than 15 years’ experience in integrating marketing, business processes, and information technology to build online turnover. He is currently the Managing Director of Ecommerce Foundation, and he also co-founded two companies: eVentures Europe and vZine. 

About Ecommerce Foundation 

Ecommerce Foundation is an independent organisation with the mission to facilitate ecommerce through the development of practical knowledge, market insights, and services. Safe.Shop is the Global Ecommerce Trustmark initiated by Ecommerce Foundation, helping online shops sell nationally and across borders by creating consumer trust.