Coronavirus (COVID-19) pandemic has negative effects both on people and business processes. It has effects on supply chain organisations, consumption and e-commerce logistics. Before entering to e-commerce and cross-border e-commerce, it is important to know about logistics procedures and costs. Additionally, it is necessary to follow e-commerce and logistic trends. Because companies that file to follow logistic trends face with the risk to lose competitive advantage and lose consumer interest. Well, how did consumers, brands and sector players reacted to logistic challenges during a pandemic? What are the e-commerce and logistic challenges caused by COVID-19 pandemic?
E-Commerce During Pandemic
COVID-19 took the e-commerce demands to an incredible level. Many people are introduced to e-commerce due to pandemic. Leads of e-commerce firms are converted to real customers. Some of them had their first e-commerce experience. Experts show the e-commerce boom as one of the most striking events during a pandemic. Especially vertical development is visible in food e-commerce. E-commerce is considered as the safest and most practical shopping option due to pandemic risk.
According to e-commerce reports in Europe, the share of food in the e-commerce market increased from 6% to 10%. French-based market research institute Echos Etude research showed that it is estimated that online food sales will grow 38% in 2020. Additionally, online food product sales will double in the next 5 years and reach 21 billion Euro. According to experts, pandemic only accelerated the mutation of the sector.
Which Trends Will Pandemic Create for E-Commerce and Logistic?
Since the start of the pandemic, e-commerce sales show an upwards trend. New e-commerce customers joined the ecosystem. These customers got the chance to see the benefits of e-commerce and they will continue with e-commerce. Therefore, the pandemic will significantly affect the market share growth of e-commerce. In this process, the distrust between the customer and seller will decrease. Various customers will develop the habit to order remotely. The number of these customers will increase.
Another important thing is access to cities will decrease. The number of smaller warehouses in cities will increase in e-commerce and logistic processes and warehouses will be closer to customers. E-commerce and logistic firms will care about the delivery date more to meet the expectations of e-commerce customers. At this point, e-commerce and logistics will be keywords. The future of the logistics will be build when the distance process information of the products are well-known.
4 Main Challenge of E-Commerce Logistic During Pandemic
Pandemic disturbed the global supply chain. Great logistic processes occurred everywhere but these challenges are not unsolvable. The basis of this solution has technology, people, tools that connect them, communication and data. Coronavirus crisis revealed the importance of logistics from personal protection equipment supply to health workers to supermarket stocks.
Here are the four basic logistic challenges that push the ecosystem to find new solutions during a pandemic:
During the pandemic, logistic capacities have vanished. In normal times, maritime shipping typically accounted for around 90% of the global trade volume. However, pandemic decreased the supply of goods produced in Asia at the beginning. Then, the entire world fluctuated and the demand for goods transported with maritime shipping sunk. Maritime shipment companies answered by increasing the shipment capacities in the market. In the meantime, driver problems and cross-border limitations decreased road transportation capacity and led to long redundancy and delays. Maritime shipment capacity sunk and this became more stable.
On the other hand, other circumstances emerged as well.
- Maritime shipment shifted to airline even though they had high shipment rates.
- Technological product manufacturers saw that the demand for technologic products such as laptops and headphones increased as millions of people started to work from home.
- Charters increased for urgent and high-valued shipment.
- In addition to cargo load of the empty passenger planes, these planes are transformed into “passenger-load ships” that can carry cargo in passenger cabins.
- Charter sharing and freight consolidation emerged between competing carriers or shippers.
- Alternatives modes such as railway from China to Europe and cross-border long-distance transformation were adopted.
- Alternative airports, ports and truck routes with extra capacities are determined.
COVID-19 increased the transition of the consumers to online purchasing. For example, e-commerce sales in consumer goods in Italy increased by 81% in 1 week. Businesses that survived the storm focused on online buying and in-store pickup models. Smaller firms and LED operations emerged with multi-channel inventory strategies transforming websites to point of sales and restaurants that turn into delivery service.
However, retail sales approach created logistic barriers. E-commerce and logistics at the same time mean cheap and fast ordering and delivery for the consumers. Solutions include alternative inventory storage. Storage, distribution and supply centres closer to the destination became important. The strategic use of maritime shipping as “floating storage” has increased with the transformation of these areas into warehouses or the planned timing of orders and deliveries.
In addition to e-commerce and logistic challenges, the pandemic crisis enabled supply chain to re-assess its position. When the production stopped in China at the beginning of the pandemic, fashion retailers that supplied the majority of their inventories from these countries faced challenges. The problems in their industry-led electronics retailers with 10-week delays in shipments. The same thing happened to brands that manufacture in other countries.
Will the pandemic crisis change global manufacturing and resourcing models? Will companies manufacturing or resourcing in Asia expand and diversify their production? Or will they be encouraged to adopt consolidating strategies close to the shore? It will be hard for most of them to break or loosen their connection with China. There is efficient, large and trained labour for the supply chain and the market is large and expanding. The production in China is integrated into inputs in other Asian markets and production in these markets. For example, China is an important fabric resource for ready-made clothing manufacturers. This makes taking China out of the equation challenging. And alternative strategies for China for spreading the supply chain risk is potentially expensive.
Most companies with the flexibility to move did this due to the commercial conflict in 2016 between the US and China or increased labour costs in China. The survey revealed that 70% of the companies that have the operation in China plan to continue them despite global commercial conflict and other fluctuations before COVID-19. This might continue after the pandemic. Therefore, the logistic-focused solution could be the best way to decrease supply and demand.
Covid-19 has caused changes in consumer demand, along with e-commerce and logistics, that lead to large fluctuations in the supply chain, long-term problems for production and supply. Stocks were out for single-use products such as toilet paper in 1 week and then, there was been an excessive stock increase. The pandemic created inventory chaos in delayed goods and undesired goods.
The biggest lesson of this crisis is that technology has little value without people! Companies that reacted fast to supply chain problems due to pandemic generally did this because technology itself cannot be beneficial; people make the technology beneficial. Customers with the existing high-level digital supply chain can be better, more flexible and faster with certain logistic integration systems. However, cooperation with customers and suppliers is part of the culture. It seems that traditional trade, e-commerce and logistic challenges will continue to be the handicap of industries in the short, medium and long term. Therefore, logistic challenges of traditional global commerce brood on the commercial environment rather than challenges of e-commerce and logistics.