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How COVID-19 has changed e-commerce for good

We’re buying more online than ever before. But how long will the good times last?  

RMIT Online
RMIT Online

It’s almost impossible to know anything for certain during the global pandemic. But if there’s one thing that comes close, it’s that the future of Australian e-commerce is looking bright.  

Deloitte recently found that, during the three months between March and May 2020, Australia Post facilitated an additional $2.4 billion worth of e-commerce transactions – compared to the same time last year. Regional and remote communities were responsible for a quarter of that growth. 

"Even with Australia’s surge in unemployment, the appetite for spending is still there."

 

KPMG has already categorised the COVID e-commerce boom into two distinct waves. The first wave is the one we’re currently in, where demand is driven by the shock impact of lockdowns, business closures and the death of bricks-and-mortar retail. We’re shopping online because, essentially, there isn’t much alternative. No big surprises there.  

The second wave is predicted to flow from rebounding consumer confidence: as people become more used to working from home, spending time at home, shopping at home, they should begin to spend more. Shoppers who traditionally favoured in-person transactions might be more amenable to online shopping, now that they’ve been forced to use it (almost exclusively) for the last six months.  

The KPMG report claims that, even with Australia’s surge in unemployment, the appetite for spending is still there. “[Consumers] may be more conscious of expenditure and buying different products, but they are still shopping. The queues are invisible, but they’re crashing servers and online fulfilment processes around the country.” 

“Retailers with truly omni-channel experiences will be best positioned to benefit during the early recovery period.”

 

Interestingly, we’re not just shopping online for essentials, either. A report by Australia Post in May showed that packages were surprisingly diverse. In the week leading up to Mother’s Day, fashion deliveries, arts and crafts, and beauty products all surged by 140 per cent. This ties with other data that suggests certain industries will benefit from e-commerce more than others—specifically groceries, liquor, cosmetics and homeware appliances.  

Of course, the success of both e-commerce waves relies on thousands of businesses rapidly developing their online platforms. Some companies will find this easier than others, but either way it’s going to be a bumpy ride. Existing online businesses will have to ramp up production and secure supply chains (we’ve already seen Coles and Woolworths struggle with this issue), while bricks-and-mortar stores will need to invest precious capital wisely, not to mention upskilling on the fly.   

KPMG reckons that businesses who manage this awkward transition will be in the best position to capitalise on the e-commerce boom. “Activity will return to shopping malls, but digital will likely play a much larger role,” the report’s authors say. “Retailers with truly omni-channel experiences will be best positioned to benefit during the early recovery period.” 

This doesn’t mean that e-commerce is bullet proof, of course. Global recession looms as a likely possibility, and countries’ GDPs are shrinking across the board (Goldman Sachs analysts believe America’s GDP will contract 5 per cent per in the second quarter of 2020, which would be its worst drop since the GFC). All we know for certain is that e-commerce is booming right now. And as long as consumer spending holds firm, it should continue to grow. 

"online transactions already accounted for 7.2 per cent of all Australian retail sales. The pandemic just sent an existing trend into overdrive." 

There’s some historical precedent for this, albeit on a small scale. In 2003, the SARS outbreak dramatically changed Chinese consumer behaviour. Because people were fearful of going outside, bricks-and-mortar retail shrank, and e-commerce platforms soared. SARS is partly responsible for the success of Jing Dong (one of China’s largest online retailers) and Taobao (Alibaba’s B2C commerce platform), who both pivoted in the wake of the outbreak.  

In fact, we’re seeing similar spending patterns emerge all over the world. E-commerce transactions jumped 81 per cent in Italy since February, and China, Iran and the US have seen comparable growth.  

Of course, e-commerce was already steadily growing before COVID-19. Australia was widely expected to become a cashless economy, perhaps as early as 2026; and by late 2019, online transactions already accounted for 7.2 per cent of all Australian retail sales. The pandemic just sent an existing trend into overdrive.  

Will COVID-19 hold its positive online trajectory? Will e-commerce become the new safe haven for retailers? It’s too soon to say for sure, but the early signs are certainly positive. 

 

Interested in studying E-commerce? Check out our E-commerce Strategy and Experience short course. 

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