How will the global pandemic affect online businesses?

Opinion: the impact of the coronavirus on online business is not straightforward and continues to evolve

In recent years, we have seen massive growth in online expenditure globally and in Ireland. Analysis by Staistica for 2020 valued the Irish online market at over $3 billion with 70% of purchases from domestic businesses and a penetration rate of 73.5% and rising. These figures suggest that Irish consumers are embracing online commerce and supporting local enterprise.

But this was before we entered into the global pandemic we are currently experiencing. Our government, rightly so, has been cautioning citizens about the potential impacts of Covid-19 on all aspects of our economy in the months and years to come. Jobs will be lost and many companies will close their doors, temporarily or permanently. While it remains to be seen how this crisis will impact online business in the long term, it is interesting to explore changes to online business so far.

The current situation has altered many of our daily activities as consumers and restricted how organisations do business. For individuals, the stay-at-home order requires all but those in essential services to work from home. Social distancing and limited trips outside the house only for essential groceries or health appointments have altered our consumption behaviours.

Organisations are also impacted by these changes in consumer consumption and government restrictions. Across the different sectors, we are already seeing hugely varying impacts. Due to travel restrictions, the airline and travel industry has experienced a substantial drop in online bookings. Relatedly, as consumers are spending more time at home, it is likely that streaming services such as Netflix, Amazon Prime and the newly launched Disney+ will experience increases in subscription.

Social distancing has led to a massive surge in consumer take up of online grocery shopping, with Tesco asking able consumers to consider physically shopping in store to free up online delivery slots for older consumers. Consumer buying behaviours are also likely impacted by panic buying trends and changing perceptions of what purchases are necessary.

In terms of panic buying, fears around the virus and low availability in physical stores led to consumers flocking to the internet to source thermometers, hand sanitiser and surgical masks, only to find extortionate prices. While Amazon and eBay are seeking to tackle price gouging, some consumers have definitely fallen victim to this panic.

It is interesting to see consumers continuing to purchase what may be classified as non-essentials. DPD noted growth in online shopping deliveries in Ireland with increases in clothing (45%), cosmetics and hygiene (45%), electronic goods (200%), and others.

The current climate has caused some organisations to close physical stores and premises and airlines to reduce flights. In recent days, retailers such as Next and River Island have announced that they’re to cease fulfilment of online orders.

At this time, we are seeing an unprecedented volume of communications from organisations engaged in providing online products and services. Some organisations are providing updates to consumers on their response to the situation, detailing decisions to cease or promise continuity of online deliveries and, in many cases, offering discounts or other incentives to keep shopping. Consumers are watching how organisations are responding, and these efforts may add to consumer confidence or loyalty in the longer term.

In the travel industry, many online travel agents and hotel websites are offering free cancellations or changes to travel dates. Other organisations have announced non-commercial responses such as Ryanair making their fleet available to governments for rescue flights or transporting vital medicines and supplies. We have also seen organisations such as Cadbury making large donations. Many online retailers have extended return policies. As consumers, we can do our part to support local enterprise by purchasing from small local online vendors selling toys and activities to entertain children or buying vouchers online to support local restaurants or businesses.

The impact of the coronavirus on online business is not straightforward and continues to evolve. It will be interesting to see how dominant trends in this area are impacted. For instance, will growth in “buy now, pay later” methods such as Klarna be sustained. Returns represent a huge expense for online retailers so will the crisis help tackle this trend?

While there is no doubt that some online organisations will perish, we will also see innovation. For instance, it is likely we will also see the emergence of new online businesses and changes in how companies leverage technologies such as AI and virtual reality to reach consumers and augment product and service offerings.

Author: Dr. Grace Fox, Assistant Professor in Digital Business, DCU Business School

This article was first published by RTE Brainstorm on Friday, 3 Apr 2020 12:30