Covid-19: Could More People Staying at Home Mean an Increase in E-Commerce? Not Necessarily.
Updated: Jun 30
As Canada and the rest of the world braces for the full impact of the COVID-19 Coronavirus, the disruption to our economy has become very evident. Consumers are staying in and not spending money, and the impact of that is far-reaching.
At this time of year, airports are usually bustling with students going away for Spring Break. Now, many sit emptier as fewer airline tickets are sold; and hotels that are normally booked weeks in advance are reporting vacancies. Everyone across the supply chain is hurting, and lagging sales could be a harbinger of doom for the world’s biggest economies- as the threat of recession looms larger.
China- the epicentre of the Coronavirus; has taken very harsh measures to contain the virus- as cities are placed under lockdown; and local governments enforce strict quarantine measures.
All hope is not lost, however. Some experts are hopeful that Digital e-commerce payments may actually see an increase in activity; as consumers take to staying at home and shopping online, while avoiding public places like malls and restaurants.
Chinese consumers confined to their homes have turned to purchasing groceries online for their daily intake, and this has seen a rise in spin-offs such as delivery services and community food co-ops. Purchases of fresh produce over the Chinese Lunar New Year were up over 600%, for example. Housebound people were turning to online activities, such as games, exercising through application and medical consulting services.
E-commerce is still seeing unprecedented global growth; with retail sales in China alone forecast to hit over $2 trillion this year. Digital e-commerce payments systems and fintech service providers have had their work cut out for them, keeping up with the growth and demand for their services.
Despite the fact more people will be at home and services such as online grocery shopping are expected to increase here in North America- this still threatens to put a damper on overall economic output- as Paypal warned in a statement last week that they expect to see their first quarter revenue targets take a hit. It originally forecasts revenues of $4.7 Billion for Q1- now it has lowered projections by one percent. Smaller fintech companies are likely to feel the squeeze themselves- as despite more people staying inside their homes; this does not necessarily translate into making more purchases.
So while the Coronavirus is seeing demand for many niche delivery & consulting services take off, its massive size threatens to offset any of these gains; as overall economic productivity and output decrease. Less work and productivity means less economic activity and purchases, which means less e-commerce and digital payments.
If there is anything positive to come from COVID-19, it is the ingenuity and entrepreneurship that serves as the backbone of our economy. People are getting creative when it comes to providing unique services- as we are seeing in China with the influx of new food delivery apps, rideshares, and co-ops.
Hopefully, sooner rather than later, things return to normal; however, it will be a while before anyone can fully assess the damage that will be done- to both brick-and-mortar and e-commerce.