Does COVID-19 benefit original online stores and e-commerce platforms?
Dr. Bryna Meivitawanli and Madeleine Michella Wijaya
The unprecedented pandemic that is currently causing uproar all over the world and have shut down several economies worldwide might be a blessing in disguise for several parties, including online stores and e-commerce platforms. Online stores that sell their products online without having brick and mortar stores from the beginning until now are referred as original online stores in this article. Many of these online stores use e-commerce platforms or online marketplaces as their main channel of sales and promotion. There are also many that prefer to create their own websites or use social media account such as instagram to promote and sell their products. Overall, online businesses in Indonesia tend to use them all so that they have as many channels as possible to reach their prospective customers. It is common to find the same store having an account in multiple e-commerce platforms and social media.
The most commonly used e-commerce platforms in Indonesia include Tokopedia, Shopee and Bukalapak (Fiansyah, 2020). These e-commerce platforms cater all types of businesses starting from individual business owners to large multinationals. Most of these locally known platforms were established in the last decade. Much younger compare to e-commerce platforms such as Amazon, eBay and Alibaba that were established more than two decades ago. It shows that the Indonesian market is relatively new to online shopping and the market is still trying to get used to this new way of purchasing products. COVID-19 pandemic actually helps to accelerate the process of shifting customers from traditional brick and mortar stores to online shop. This is beneficial for both online stores as well as online marketplace.
The original online stores are receiving more attention from the public now since people who were unwilling or unaccustomed to purchasing products online do not have a choice and are forced to shift due to social distancing measures and lockdown policy. Many Indonesians, especially the older generation do not feel comfortable shopping online for several reasons. These reasons include the absence of physical products that they can see, touch and try before making the purchase, the methods of payment that require them to share sensitive information online and also simply the fact that they are not adept in using new technology that is required to make the purchase itself, such as downloading applications, making an account, etc. However, these senior citizens are the ones most affected by the pandemic. In order to be safe, they need to stay at home. Therefore, they are forced to make use of online shopping to survive the pandemic. The younger family members will either try to teach them how to do online shopping so that they can fulfill their own needs or help them purchase their needs online. Both ways will ultimately increase sales of products purchased online.
However, there are many challenges that both original online stores and e-commerce platforms have to face during this time. Well-established brands that are used to having multiple offline branches all across the country started to shift to online platforms. Local businesses that started off as small shops covering customers in its surrounding area also have to find ways to survive by selling their products online. It means that most businesses from large to small are moving online. There are also many people who started their small online businesses during this time due to the fact that they have more time to spend at home. Indonesians are very creative when they are put under pressure and they tend to make good use of opportunities when given to them. People started selling products from handmade hand sanitizers to home cooked food through their personal social media account. This sharply increases competition for original online stores. On the contrary, it benefits online marketplace since their users increase. However, e-commerce platforms do experience difficulties in logistics and delivery. These challenges might nullify the benefits of increased customer base mentioned before.
An original online store selling imported meat from United States and Australia had seen a tremendous increase in sales due to COVID-19. The government of Indonesia announced the first case of COVID-19 patient in the beginning of March. Their sales in March increased by almost triple of that in February. Their sales continued to increase in April where it was more than triple of their sales in February. Another original online store selling cosmetics and skincare also saw a significant increase in their sales of skincare. Since people spend more time at home, they have the luxury to pay closer attention to their appearance. The online store’s customer base used to be dominated by female but the number of male customers started to increase during the pandemic. On the other hand, their cosmetics sales decreased since people are not encouraged to go out, therefore they do not need to put on make up. Decrease in sales is also experienced by an original online store selling clothes. Since the frequency of people going out and events happening decreased tremendously due to COVID-19, people do not feel the need to shop for more clothes. It can be seen that the impact of COVID-19 cannot be generalized for all original online stores.
The coronavirus outbreak has affected local and international e-commerce platforms as a whole. The restrictions implemented during this time encourages people to shop online through various e-commerce platforms such as Amazon and Blibli. In Indonesia, Blibli reported an increase of sales in their essential FMCG products such as food, hygiene products, hand sanitizers, masks, and vitamins. They also reported an increase in the sales of video games, fitness equipments, as well as kitchen utensils. Many food businesses have also opened an online platform as means to deliver their foods to the doorsteps of customers through Tokopedia, Go-food or Grab food. On the other hand, E-commerce platforms such as Amazon in the US also reported an increase in sales. Amazon also took this opportunity to seize the market share further during the pandemic and use their Amazon Fresh feature to deliver fresh food to the customers. Amish Jani from FirstMark also said that this outbreak would create a positive income for e-commerce platforms that are selling groceries and food products.
However, not all e-commerce platforms reported an increase in sales during the coronavirus pandemic. E-commerce platforms that focus on selling non-essential goods saw a tremendous decline in sales (up to 40-60%), as people cannot go outside of their homes and they focus on buying more of their essential needs. This also led some businesses to lay off their workers or interns to keep the cash flow going. They also created new products such as designer face masks or hazmat suits for hospital workers in order to still gain sales. Small and growing online businesses are also affected by this pandemic and they have to survive by improving their marketing on social media.
Social distancing measures and a work from home policy is bound to affect the supply chain of many industries, including the e-commerce industry that relies heavily on supply chain and logistics to deliver their products to the customer’s doorsteps. In Indonesia, the logistics sector is still allowed to operate normally within a big scale social distancing policy. Most logistics company in Indonesia reported an increase for up to 80% deliveries of packages from and to various provinces of Indonesia. On the other hand, there are also other online marketplaces that have some issues within their supply chain. One of it is Amazon, which reported that the coronavirus pandemic has affected their supply chain. Those issues include shipment delays due to the overflowing demand for products and shipments, technical difficulties or human error, as well as labor shortages. Many products have also gone out of stock due to high demand, such as medical supplies and household staples. Due to that issue, Amazon has prioritized the shipping for essential products and the amount it comes into fulfillment centers. Businesses that rely on China as their main suppliers are also faced with a challenge, as lockdown restrictions are affecting Chinese suppliers to ship their products.
Other businesses that do not sell essential products are affected by this, in a way that their products are not prioritized by the e-commerce platform, which push them to sort out shipping by their own or wait for Amazon to process their shipping. This puts a strain into small business owners as they are usually helped by Amazon warehouses to pack and ship their products. In addition, the issue in supply chain also affects the workers in warehouses as warehouses become overcrowded and do not follow severalsafety measures. On the other hand, many workers are laid off due to the closure of several warehouses in countries that exercise lockdown policy.
As the pandemic progresses and is going to affect customer’s buying behaviors for several months, companies are going to have to adapt and change on how they do business in the long run. The most apparent affect is that many businesses are going to have to shift from their offline platforms to online platforms in order to sell their products. Many companies are going to find new innovative ways in order to sell online. Brick and mortar stores will face the most challenge in this pandemic. This is also going to make the market more saturated as businesses are going to compete online, catering to the market and how their habits have shifted into searching and buying their products from online websites. Businesses are also obliged to diversify their supply chain, as many companies have relied on China as their main source of supply for its cheap labor. Companies must find new ways to source and produce their product in the long run. The supply chain issue, if not solved, will create problems in the long run and will decline sales in the future, despite the increase of sales in e-commerce platforms. Companies must be opened to change in the long run. Social distancing measures are also being applied, and before a vaccine for coronavirus is found, researchers suggests that companies must have a strict social distancing policy in the future, even when workers are being put back to work.
Dr. Bryna Meivitawanli is currently the subject content coordinator and a lecturer in International Business program at the International Undergraduate Program (IUP) – Binus Business School. Her profile can be seen in this link.
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