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e-retail logistics firms benefit as more people shop online but supply chains under stress—Ti report

Both retail digital platforms and the logistics and last-mile delivery companies that serve them are among the net beneficiaries of the coronavirus pandemic, according to a new report from Transport Intelligence (Ti).

e-retailers and the e-retailing logistics sector have indirectly gained from the health crisis as consumers turn to e-retail platforms to fulfil an immediate perceived requirement for home delivery of a range of fast-moving consumer goods (FMCG), according to a Ti whitepaper on coronavirus winners and losers, released March 17.

“E-retailers are benefiting not only from customers’ stockpiling behaviour, but also from their desire to avoid public contact in physical shops,” said the paper. “End-recipients do not even have to come into contact with a delivery driver if they don’t want to.”

According to Amazon, there has been a big increase in volumes of groceries bought over its platform, especially staple items. This has resulted in the company looking to hire 100,000 new employees in the US and raising pay in the US, Canada, Europe and the UK by US$2 per hour (or equivalent).

However, as with traditional grocery retailers, the demand is creating stress in the supply chain.

Amazon commented, “As COVID-19 has spread, we’ve recently seen an increase in people shopping online. In the short term, this is having an impact on how we serve our customers. In particular, you will notice that we are currently out of stock on some popular brands and items, especially in household staples categories.”

This is also impacting on “delivery promise” times which are being extended.

In China, the two major e-retailers, JD.com and Alibaba, have shown a remarkably robust performance, noted the report. In fact, the distribution infrastructure was a key factor in the mitigation of the impact of China’s lock down policy in many parts of the country, particularly in Wuhei, the epicenter of the outbreak.

JD.com’s latest guidance estimates its net revenues to grow by at least 10% in the first quarter, compared with the same quarter in 2019.

Its FMCG categories—fresh produce, home products, health care products—have been selling particularly strongly. However, volumes of “big ticket” items have struggled during the period, although a bounce back is being anticipated.

Moreover, there are also potential long-term upsides. Many people are working from home during the period that offices have been shut. This has led to more people ordering fresh food, necessities and groceries from home via the internet.

In countries where over-70s have been encouraged to self-isolate, a new generation is learning to rely on e-retailers rather than traditional shops or supermarkets. Large numbers of new customers are being forced to learn digital skills which to date they had not considered necessary.

As part of this trend, in China, Alibaba has found that more consumers in smaller cities and rural areas are starting to use its platform.

In terms of product category, there may also be long-term implications for online purchases, the report said.

“Whereas previously the major platforms have been successful at penetrating the consumer electronics and fashion sectors, grocery and FMCG have been harder to crack,” it observed.

“This may now change as consumers’ buying behaviour adapts although it is yet to be seen whether once the Covid-19 crisis abates, consumers will revert to bricks and mortar retailers or whether they remain attached to digital purchasing.”

Image by wal_172619 from Pixabay

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