Coronavirus plagues e-commerce sector with supply-chain disruptions

Amrita Nair-Ghaswalla Mumbai | Updated on March 25, 2020 Published on March 25, 2020

Delivery percentages notched a clear decline of 9 per cent during the same period.

Amazon, Big Basket, Grofers and Flipkart have curtailed home deliveries. The run on essential items in supermarkets has reached a new high. As consumers panic due to stuck shipments and order delays, companies are scrambling to make sense of the supply-chain disruption due to the Coronavirus.

On the fulfillment and logistics side, e-commerce players were announcing delivery delays last week caused by spikes in online ordering related to coronavirus concerns, with the surge straining capacity. The 21-day shutdown has, however, derailed things.

As on March 23, e-commerce majors reported a record 230 per cent increase in return-to-origin (RTO), according to data from logistics intelligence platform Clickpost.

RTO refers to the non-deliverability of a package and its return to the seller's address.

Noting that logistics is the lifeline of the country, employing 40 million people and contributing $200 billion to the economy (prior to the Covid-19 pandemic), the report by Clickpost and Shadowfax states that order-fulfilment has become an industry-wide challenge.

Data showed stuck shipments (pertaining to orders for which no scan is done at a warehouse for more than 2-3 days) was at 9 per cent, while order delays (orders that have breached the expected delivery date) surged 21 per cent between March 10-20, as compared to the historical average for last month.

Delivery percentages notched a clear decline of 9 per cent during the same period.

What China did

In China, in the aftermath of the coronavirus outbreak, e-commerce reportedly drove the Asian country's stay-at-home economy. While Alibaba and Tencent-backed registered huge online sales of grocery, fresh produce and other essentials during the quarantine, it drove up the country's online retail sales of physical goods by 3 per cent to over 1 trillion yuan in the first two months of 2020.

Given its strong logistics network, China's online grocery market is now expected to grow 62.9 per cent in 2020 as compared to 29.2 per cent growth in 2019, according to a March 17 report by iiMedia Research.

Though a recent study in India had pegged 10.5 per cent annual growth for the logistics market, expected to reach $215 billion by the end of 2020, the Coronavirus appears to have put paid to some of these projections.

Course correction

Experts state that the logistics sector will have to undergo a course correction, even as e-commerce companies expect the consequences of the Covid-19 outbreak to negatively impact operations.

Doubling down on its efforts earlier in the month, logistics aggregator LetsTransport has been working on an ‘All cities’ business continuity plan', realising the criticality of maintaining uninterrupted supply chains during this crucial time.

Conducting mock drills and dry runs across 15 cities, including rotational shifts for on-ground staff, as part of contingency measures to contain the impact of the pandemic, the aggregrator has been working with its driver-partner network to ensure operations are least impacted.

Many e-commerce players are also utilising the “stuck period” to work with brand partners to forecast demand and effectively plan the supply chain so as to minimise out-of-stock exposure on their portals as and when demand resumes.

And resume it will. Digital platform Payoneer, which streamlines commerce, expects consumer demand to return in the long term and supply chains to stabilise, despite estimates of first-quarter sales volume plummeting between 20-50 per cent.

Payoneer has suggested e-commerce businesses lean on service providers from across the entire ecosystem to try and minimise losses at this time and has asked businesses to take the time to ensure redundancy and crisis-planning in every step of their value chain.

Pointing out that most marketplaces have been recommending best practices to e-commerce businesses such as selecting longer shipping time options and increasing the frequency of communication with buyers, the agency said some marketplaces have also been enacting policies to protect sellers from logistics delays, while a select few have waived penalties for refunds, which are also on the rise.

Published on March 25, 2020

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