How is coronavirus affecting online retail?

Coronavirus has dominated the global media since its outbreak in December 2019 and has created uncertainty among the world’s population. According to official data, 73,337 cases and 1,875 deaths (as of February 18th 2020) have been recorded. The first cases have been declared in the UK and the number of infected people is increasing rapidly.

Not only has the virus disrupted daily life, particularly at its epicentre in Wuhan, China, it is also affecting the global economy. Online retailers, especially those in the luxury sector, must take precautions to protect themselves from the consequences of the outbreak. Indeed, Chinese consumers account for £1 billion in spending each year in the UK and retailers are already reporting notable drops in their profits as a result of coronavirus.

However, retailers should not worry if they are well-prepared. Following the SARS outbreak in 2003, the six months that followed saw a 22% increase in inbound visitors to Europe. The following year this grew to 43%, suggesting that once consumers returned to normality they were ready to spend their saved cash and travel to Europe to do so.

Ausbreitung Coronavirus
The spread of the virus can be tracked in real time here (Source: John Hopkins)

Parcel deliveries and goods shipment to and from China disrupted

Whilst Royal Mail is still accepting parcels from China, they have warned that items may be delayed due to processing issues in China. With most direct flights to and from China suspended, packages may be held at a sorting centre until a normal timetable is resumed. As well as this, the collection, delivery and warehouse management operations in Hubei have been paused which will cause further delays to parcels from China.

Shipping companies based in China are reducing the number of seaborne vessels. This has the potential to massively disrupt global distribution and supply chains as China is home to seven out of the ten busiest container ports.

Online retailers can expect delivery bottlenecks

Since the area around Wuhan (over 50 million people) where the virus originally broke out has been quarantined, people are currently unable to go to work. Warehouses are closed and therefore new goods are not being produced. Wuhan is the largest manufacturer of iron products.

Amazon and Alibaba are also affected by coronavirus

Amazon expects bottlenecks and Alibaba is predicting a dent in their growth, with the virus having a negative effect on sales. The China-based company is experiencing staff shortages. Whereas Amazon is struggling with stock levels, as a large portion of their products come from China. It remains to be seen how extreme the effects will ultimately be.

What can online retailers do now?

Online retailers need to prepare and take special measures to avoid both delivery bottlenecks and out-of-stock scenarios. We’ve put together some tips on how retailers can combat the negative effects of the outbreak.

Keep an eye on inventory

It is particularly important that online retailers keep a close eye on their stock levels. New stock orders should be placed well in advance to account for the predicted delivery delays. Therefore, retailers need to carefully calculate when stock levels will deplete and need renewing.

Increase product prices

Another way that online retailers can protect themselves is to increase product prices to curb sales. However, this option does not guarantee that the item will not sell out still, so retailers need to be flexible. In addition, large-scale marketing campaigns and promotions should be postponed or cancelled.

Stand by the supplier

Above all else, retailers need to remain human. The suppliers must be shown compassion and understanding of the situation. Retailers need to remember that both them and the supplier is in the same boat and blaming either side does not help anyone.

Conclusion

It is not entirely clear what restrictions and consequences coronavirus will have for online trading. Precautions should be taken to protect businesses, after which we just have to sit back and hope the outbreak is contained quickly.

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About the Author: Katharine
Katharine is Head of Marketing Communications - EMEA. An avid shopper, Katharine is passionate about helping retailers understand the importance of efficient post-purchase communications. When she isn’t looking for the latest trends for our blog, Katharine loves discovering new restaurants in London.