E-commerce and COVID-19 Wake-Up Call
While the novel coronavirus pandemic and subsequent lockdown have brought a wide variety of industries and markets to a standstill, one of the worst-hit sectors in India is the e-commerce industry. With projected losses crossing over $1 billion in a span of fewer than 60 days, things are looking pretty grim for the sector that was once titled India's fastest-growing industry and was expected to grow to $200 billion by 2026.
With new e-commerce laws taking effect because of the pandemic, this industry is only being allowed the sale and distribution of essential items. This means all of its bestsellers, including smartphones, electronic gadgets, clothing, and others. are currently unavailable for dispatch.
Other online operators like online ticketing for travel, hospitality, entertainment, and experiences are also seeing an alarming decline in business due to the lockdown. Experts have said that India's hospitality industry is likely to be crippled due to this pandemic.
Challenges during the lockdown
For starters, the definition of essential products lies in a grey area viz. what might be considered essential to one customer might not be essential for another. At this point, critical products include household staples, packaged food, healthcare, hygiene, personal safety products. Toilet paper is a much-debated essential product. The Government has loosely defined the term 'essential' and e-commerce companies have been asked to comply with Government norms to remain operational, but they are still unclear on the subject.
Perhaps the biggest challenge for e-commerce operators is maintaining operations during such a difficult time. After the arrest and detainment of individual delivery employees from an online food delivery company, most e-commerce companies have announced a contactless delivery system, which includes measures like online payments and slot wise delivery. But this is a challenge only at the last mile of the supply chain. There are specific challenges that need to be overcome at other points of the supply chain. e-commerce companies need to continually be in touch with manufacturing and supply chain partners to ensure seamless alignment of services. With local law enforcement shutting down warehouses, a massive shortage of labour at each point of supply, and lakhs of stranded goods trucks on national highways, getting to the last mile of the supply chain is becoming extremely challenging for e-commerce folks.
The reputation of e-commerce companies hangs in the balance as they are being bombarded on social media for delays in delivery, lack of essential items, lack of delivery slots, absence of delivery personnel. Staying on top of communication with the customers right now is one of the most significant challenges during the lockdown.
Tax relief measures
The Government has started to get warmed up to e-commerce companies during the lockdown because of their efforts to help maintain a working environment. They have offered relief measures like accelerated tax refunds and extensions on the validity of e-way bills. But even though such relief measures might cushion the blow, it is not unprecedented that the e-commerce industry is likely to face more significant problems once the lockdown is lifted.
Beyond the pandemic
They say you are your most vulnerable when you are on the verge of hitting rock bottom. The only way after you hit rock bottom is up. E-commerce companies trying to make their way back to the top will need to look at measures that will help them become more risk-averse than they were, prepare for crises in the future, and, more importantly, adjust to the new normal. A few of these measures will include diversifying their supply chain, stocking up on inventory, automating operations etc.
Diversifying supply chains
Just like manufacturers and importers dependent on China have learned the hard way, e-commerce companies depending on single sources of inventory, will need to diversify their supply chains. But first, they will need to deliver the massive backlog of orders that were issued before the lockdown and secondly to ensure that they can deal with the plethora of orders that are most likely to be dispatched once the lockdown has been lifted.
Experts predict that there will be a rise in demand after the lockdown is over, and meeting that demand is going to be challenging. Several in-store product launches have been rescheduled, and customers are going to make a beeline trying to purchase them online – carefully allocating online inventory is going to be a crucial step while making a comeback.
Even compliance-related operations that do not generate revenue like taxes or e-way bills can cost e-commerce companies time and resources if they do not streamline these manual processes. Automation of omnichannel operations will allow e-commerce organizations to stay ahead of the curve and work on the issues which generate revenue. They will need to stay on top of their logistics from first to the last mile, ensure they are saving time e-way bills are and be prepared for upcoming e-invoicing.
2020 is not over yet. There is a huge potential for brand owners to increase online sales in 2020. Once the lockdown is lifted, many industries will start making a comeback. Social distancing measures changed consumer behavior to a certain extent. This shift towards e-commerce means that businesses should focus on having an online presence along with a physical store and take the necessary steps to optimize their back-end processes, like omnichannel technology, e-way bills, GST compliance, to limit any potential interruptions in the way to grow their business. Providing a seamless customer experience and safeguarding business from the financial risks down the road once the lockdown is over is going to crucial since the e-commerce sector is one that is likely to be seen as the new front liners restoring normalcy to trade in India.