by Sharina Ahmad
THERE is no doubt that the crisis caused by the global Covid-19 pandemic has created an incredibly difficult business climate. Many business sectors are suffering as the global economy goes into a tailspin.
While the e-commerce sector is believed to be benefitting as more people are ordered to stay at home and make purchases online, the online sellers are in fact facing challenges in terms of low inventories and rising transportation cost.
Logistics is the backbone of e-commerce and now with major airlines shutting down their operations, freight costs have skyrocketed resulting in a disruption in the e-commerce ecosystem.
Singapore-based e-commerce logistics startup, Anchanto Pte Ltd co-founder and CEO Vaibhav Dabhade said looking at the current e-commerce cycle of operation, online sellers will eventually reach low inventory levels, resulting in larger lead times to retrieve and start reselling online.
“Many of them will also possess old and near expiry stock that they would need to exhaust before the new stock, and there we foresee a cash and liquidity crush that risks sustaining for a while.
“Also, the majority of e-commerce sellers have low cash reserves, of a month or two max, but they’ll continue to have fixed costs which will create a cash flow imbalance if the shutdown continues for a longer period,” he told FocusM.
However, the current observation also reveals that the marketplaces continue to seize opportunities to enhance their market capabilities although the usual e-commerce seasonality curve has been badly hit.
“This means there’s an opportunity for companies with big/strong local markets to have a faster recovery. Other players in the ecosystem, apart from logistics, which are really badly hit are the retail companies,” said Vaibhav (left).
So after the economy recovers, the e-commerce industry will never be the same again, businesses will realise that being offline only will never be enough.”
He noted also a massive shift in buying behaviour across e-commerce categories. There has been exceptional growth in demand across daily essentials such as groceries, gym weight training equipment, dog food, hair colouring products, work furniture such as tables and chairs, craft kits and projects.
At the same time, there has been a sharp decline in categories such as travel accessories (cameras, suitcases and camping equipment), parts and event supplies, sunglasses and eyewear, and other outdoor equipment and gear.
This impact is expected to continue for another three to nine months, and may also stay for an entire year. “For smaller businesses, this means that there will be low cash flow and they would need to check their expenditures stringently and spend wisely,” he said.
To overcome this situation, the sector will require further support and boost from the government in terms of temporary amendments in certain policies such as a pause on interest in the capital of three months, rate cuts to boost lending and liquidity or deferment of interest and lease payments for a few quarters can go a long way.
These temporary policy changes will help local businesses to cope with their losses faster and come out stronger from this crisis.
Hence, the outbreak will come as a wakeup call for many businesses.
“E-commerce landscape will evolve much faster, and we will see more businesses embracing it than ever before.
From a transaction perspective, the domestic market is expected to pick up first followed by the cross border market. This means there’s an opportunity for companies with strong local markets to have a faster recovery,” said Vaibhav.
Whereas, online stores of all sizes stand to benefit from the switch of consumer behaviour to online shopping since they are already well-positioned to serve the increasing demand for goods and services.
Shopee Malaysia regional managing director Ian Ho said as a player in the e-commerce industry, the company has experienced robust traffic and transaction volumes during the movement control order (MCO) period.
“We have also seen demand for products related to health and personal hygiene such as disinfectants, hand sanitisers, surgical masks and more, as well as other essential household items like fresh produce (poultry, seafood, vegetables), rice, cooking oil, pasta, biscuits, flour, diapers, milk formula and more.
“During the MCO period, apart from purchasing hygiene products and daily necessities, we also noted a surge in demand for electronic devices and furniture for Malaysians to be able to work from home,” he told FocusM.
Additionally, Ho said, as Malaysians are staying indoors, buyers are seen to be searching for affordable home entertainment systems and products for indoor entertainment items such as PlayStation 4 (video games), mini swimming pools, yoga mats and many more.
Malaysians are opting to eat in more; kitchen appliances including air fryer, juice blender, bread maker and rice cooker are also popular now.
It was reported that 71.1% of Malaysian small and medium-sized enterprises (SMEs) have cash balances that can only sustain business operations for one or two months as a result of MCO.
“By the end of the day, we understand what it is like for businesses especially SMEs to have to go through because we were once there. By leveraging on our technology, features and network, we hope to be able to help and provide the necessary support for businesses at this time,” he said. – April 8, 2020
