The pandemic declared last week by the WHO has undoubtedly a crippling effect on businesses and poses major challenges and unexpected obstacles to supply chain management. Nevertheless, as always in such crisis situations, there are also companies that come out unscathed of them, even in a better condition and with innovative solutions. Will the coronavirus be a black swan for the Polish market and will it further accelerate the fast-growing e-commerce sector? An analysis by Damian Kołata, Associate, Industrial & Logistics Agency at Cushman & Wakefield.
Online shopping and coronavirus
For the time being, it is certainly too early to name the examples confirming this thesis. We can only quote some press releases of the Polish companies which openly admit that in the first quarter of 2020 the share of e-commerce in total sales will be as high as never before:
Basing on some examples and Chinese business cases we can, however, present some "winning on the crisis" best practices, not only arising from the current pandemic but from the SARS pandemic of 2002/2003.
Development opportunities for companies during the pandemic
The examples of Alibaba, Taobao and JD.com, already well-established in e-commerce companies, show especially in times of crisis, opportunities for development and expansion should be pursued. Chinese companies are still searching and here are some examples:
Impact of coronavirus on e-commerce
Will the coronavirus pandemic actually change the way consumers behave and increase the importance of e-commerce even more? There are two reasons for this. Daniel Zhang, CEO of Alibaba has already called the pandemic a black swan. This is because, despite the huge level of saturation of the Chinese market with various e-commerce formats, in the last quarter of 2019 alone Alibaba recorded 38% growth compared to the same period last year. This allowed them to achieve a turnover of 23 billion dollars.
The situation is similar in the USA. Amazon is already planning to hire an additional 100,000 employees to its logistics centres and increase wages for all employees by $2 per hour. This step is associated with a huge increase in Internet sales.
“In Poland, apart from the examples given at the beginning of the article, so far Google Statistics indicates a growing interest in online shopping – in opposition to the cautious forecasts of analysts. According to Google Trends, the popularity of the phrase "online shopping" in Poland has increased 20 times over the past week,” says Damian Kołata, Cushman & Wakefield’s expert.
How will the coronavirus affect the warehouse market?
Will companies, bearing in mind the problems with deliveries from China, secure not only alternative supply sources but also higher stocks that require additional locations? It is difficult to give a precise answer at the moment. It hasn't been so long since we have been able to show the real cases or, to put it clearly, the bloomers, comparable to the one that Ericsson had as due to the lack of an alternative source of purchasing. As a result of a fire at a component factory in Albuquerque in 2000 the company lost $400 million and left the mobile phone market for good, giving up leading position to Nokia.
“Certainly, consumers who currently stay at home and shop online to avoid the risk of infection will also look more favourably on e-commerce once the pandemic is over. This will lead not only to growth in industries that are already popular (clothing, electronics), but also those that were marginal until the crisis, such as e-grocery, which has a 1% share of the total e-commerce,” says Damian Kołata.
The transition towards e-commerce will change the perception of logistics and warehouses, which will be increasingly seen as an element of competitive advantage and added value to the company's offer, rather than a factor to be minimized at all costs. An increasing number of offers will be made to consumers in the form of e.g. the same-day-delivery, which certainly cause operational challenges but also generate additional sales. For example, the Decathlon network launched such deliveries last year and noted a 30% increase in the average basket value.
It will, therefore, be beneficial to be closer to the end customer, enriching the supply chain with mini-hubs and small warehouse units located near the largest urban areas, and expanding large distribution centres with modern automated systems allowing fast picking and minimising employment.
Easy to write - difficult to implement. Nevertheless, the steps mentioned above will help companies in strengthening the market position and gaining loyal customers. The winners will certainly be courier companies. It is already predicted that in 2023 KEP operators will handle almost 850 million parcels in Poland (reaching the market value of nearly PLN 12 billion), which represents a doubling of the number of shipments sent in 2017 and an increase of 78% compared to 2018.
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