What is the Impact of Coronavirus on the Retail Industry?

Published Apr 23, 2020 By Sanjay Jain

The coronavirus pandemic has, in many ways, altered the normal flow of human life. A virus that originally originated in Wuhan a city in China has posed a global threat and has drastically affected the lives of mankind. Due to the rising number of COVID-19 cases, most countries have embraced lockdown as a strategy to prevent community spread. However, this move has stagnated the economic meter of most countries due to the loss of business and the lack of economic activities. Not only have they brought a stop to the lives of humans but has crippled the economy of many developed countries.

It is something that has taken back people to the early age where all people can do is to stay at home and rest for their own good until this pandemic ends. Nor are they allowed to move around and nor can they continue with their business though there are a few exceptions in case of essential commodities and businesses. Thus we can well understand how this must have affected the business and retail industry

Fortunately, retailers have found new ways to deal with the rising demand for e-commerce supplies. Here’s a sneak peek into the performance of the retail industry in the current scenario across the globe.

Disruptions in the supply chain

Following the lockdown, eCommerce players have seen a rise in the demand for goods. But various disruptions in the supply chain have also caused them to grapple with the challenge of meeting consumer demand. Amazon is a case in hand. Most of its sellers have run out of the stock of the essential items amid the outbreak of the COVID-19 pandemic for some understandable reasons.

The outbreak of the pandemic compelled China to shut down its factories. There was no movement among the workers throughout the period as they were forced to stay indoors.

The move proved to be a double whammy not only for the manufacturing units in China but also for the retail industry across the globe. Bringing the production of various items to a grinding halt aside, it also halted the shipping of items across the waters.

Among other things, the situation rendered about 9% of fleets inactive, thereby causing Chinese manufacturing indices to hit the lowest ever level.

Limited supply - first come first served basis

The growing number of peremptory or insistent requests have had two implications for most eCommerce service providers. While some providers have decided to go with the flow, others have chosen to halt their operations for the time being.

Ever since the introduction to the lockdown phase, this has been the new trend in India and other countries across the globe. Whilst Amazon decided to march forward with limited supplies, Flipkart shut down its operations temporarily.

In India, Amazon decided to stop taking requests for non-essential items to ease the pressure of supply on its reduced resources and manpower. The rationale behind the move was to also ensure support to the government move in supplying groceries to people for their convenience.

Even after ordering items days ahead, people had to wait for a long time to get the delivery of their ordered items. The distribution of the ordered stuff was based on the serial number of orders rather than on the type of order which is the usual norm with most eCommerce service providers.

Mixed performance in terms of online sales

Thus far, the lockdown period has yielded moderate outcomes for the retail sector. If there was a rise in the demand for certain items, there was also a sharp decline for others.

For instance, the demand for clothes and apparel saw an unprecedented decline in the orders. Apart from the diminished income of buyers, this can also be attributed to the unavailability of apparels in view of the shutdown. A sharp decline has also been evident in the orders for electronic items for the same reason.

However, there was an increase in the demand for medicines, groceries, and beauty products. Sanitizers and face masks ran out of the stock within a few days’ time. All this happened due to the awareness that people had in their minds and demanded such products for adopting precautionary measures to fight against corona. Perhaps this happened due to an unexpected rise in their demand. Amazon and others had to apologize and cite the unavailability of these items as the major reasons for their reduced supply to consumers.

Notwithstanding the promising sign powered by the rise in the demand for certain items, the retail industry couldn’t avoid losses due to the onset of the pandemic. This has been the norm for all eCommerce providers across the board right ever since the announcement of the lockdown.

A rise in the use of retail applications

Following the start of the lockdown phase, there has been an unprecedented surge in the use of retail applications. This can be attributed to the buying habits of people.

Taking a cue from people who are used to online shopping, those who bought their products from concrete stores also followed suit. The combined effect of these two factors led to a rise in the installation and use of retail applications across all mobile platforms.

The surge was evident particularly towards the end of March from the extension when the lockdown extended to other countries due to the increasing number of cases of the coronavirus infection.

Interestingly, the surge in the number of installations led to a proportional rise in the use of retail applications. The rise in the use of the applications also explains the reason why the demand for the supply of various items saw a sudden surge on Amazon and other leading online stores.


Increased emphasis on health and safety

Health and safety comes under the essential service category and thus cannot be shut down in any case even during the outbreak of this pandemic. Health and safety have been the priority of the governments of most countries in the past. However, the coronavirus pandemic further increased the emphasis of governments of several nations on these two aspects.

So far, there have been reports of health care professionals and cops - the frontline warriors in the current crisis situation - getting infected with the novel coronavirus. This happened despite the efforts of trying to maintain both safety and hygiene. One of the primary reasons for it is the lack of the protective gear which relates to the disruption of the supply chain during the lockdown phase.

Also, reports suggested the presence of coronavirus in the warehouses of Amazon in the United States. Such news stories increased the panic among buyers in connection with the safety in the purchase of items from eCommerce providers..

Thus, reputational damage has been an indirect consequence of the coronavirus pandemic on the global retail industry. Due to the lack of assurance, consumers are boycotting retailers. Even if the coronavirus crisis ends within a few months’ time with proper precautionary measures, its effects may linger for several months down the line.

Retailers are trying their best to serve the needs of consumers as far as possible

The COVID-19 pandemic has brought criticism for some retailers, whereas others have won critical acclaim both at home and abroad.

For instance, M&S and Morrisons’ efforts to launch essential food boxes for delivering the orders of those who have missed their slots in the UK has earned praises for both retailers. Going the extra mile, Morrisons has promised to provide food banks in the UK with groceries worth 10 million.

Waitrose’s decision to donate charity to needy people added it to the league of popular retailers on the mission to extend aid to both the people and the Government in the UK. This is an extra donation other than the retailer’s support for the Community Support Fund.

Another reputed retailer, Ikea has decided to go ahead with its support to NHS and Government in setting up testing centers for COVID-19 patients.

Also, it has come to light that the retailer has set up a special branch to serve the needs of the vulnerable, the elderly and the key workers who are working hard to lend a helping hand in dealing with the challenging situation created by the coronavirus pandemic.

There are also similar stories from other nations, apart from the UK. Amazon, for instance, has been working day in day out to ensure all its consumers get the supplies of essential items. Prominent among them is the supply of grocery items.

On the flip side, those retailers that have decided to halt their operations have come under severe criticism. For instance, the decision of Flipkart and other providers to temporarily stop operations citing the current coronavirus pandemic can make them look less reliable in the eye of consumers when they start their operations all over again.

The ones that are gaining in reputation in the current phase are the ones that are likely to make even deeper inroads in the retail industry.

A decrease in stockpiling characterized by lesser restrictions by some supermarkets

While the COVID-19 has generated several restrictive measures on the part of retailers on hand, it has also made some supermarkets ease up restrictions on the other. This can be attributed to the efforts of supermarkets to meet consumer demands.

Tesco’s expansion of capacity and the number of slots is a case in hand. The retailer is also mulling to further increase in the number of slots to help meet the demands of consumers to a greater extent.

Other reputed supermarket brands have also made changes to their policy or plan relating to restrictions. Some prominent names on the list in this regard include Asda, Morrisons, Waitrose, and Aldi. While the other providers have eased the restrictions on specific items, Aldi has decided to remove the restrictions altogether on all items.

In the current situation, wherein retailers are stretched for meeting consumer demand, these trends indicate a significant reduction in the stockpiling efforts of supermarkets

The rise in the claims of business interruption insurance

In some countries, such as India, mall owners are knocking the doors of the government and its authorities for claiming business interruption insurance. It is primarily due to the disastrous financial performance of malls due to the ongoing COVID-19 crisis.

Insurance providers, on the other hand, are citing the exclusion of epidemics or pandemics as the reason for not extending the business interruption insurance feature to small businesses. Though understandable from a legal standpoint, the move also aims at easing pressure on the insurance company for furnishing funds to insurance policyholders.

Also, the malls are requesting their insurance providers to ease the burden of premiums, citing monetary losses due to reduced or lack of business activities leading to poor output or productivity. Though the country’s central bank, the Reserve Bank of India (RBI) has provided a 3-month moratorium policy, it is a deferment of payment timeline. It is not a waiver for either individuals or businesses that have taken loans.

Final thoughts

Taking the aforementioned impact of coronavirus pandemic on the retail industry, it can be stated that it has had mixed outcomes worldwide. While the current extraordinary situation is not comparable to a recession, given that it is a recession caused by a pandemic, the well-conceived strategy by some eCommerce providers and supermarkets have been instrumental in keeping the retail industry afloat at the global stage.

Most experts believe the next quarter will be crucial for the retail industry and could set the tone for future trends. A lot depends on the elimination of the coronavirus pandemic and the loss of business caused by it. By and large, the perception in the retail industry remains positive. However, the providers are looking forward to the trends in the upcoming months down the line.

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