Unprecedented Profitability of Online Platforms

E commerce has revolutionized the way people buy and sell goods. It has not only made buying products easier for the consumers but has also made it far more convenient for sellers to offer their products to a large group of people. A large portion of the growing popularity of electronic commerce can be attributed to the rapidly rising internet penetration all around the world. Furthermore, digitization of business has had a great impact on the growth of electronic commerce over the years. The digitization of business has not only cut down the operational cost for companies, it has also allowed it to remove friction points and make it as convenient for sell products to the target customer with relative ease with the intermediaries gone.

 

Widespread of the COVID-19 pandemic led to government lockdown orders in most nations worldwide. Consequently, the demand for daily essentials, health and wellness products and shelf-stable products has witnessed soaring demand. Consumers have flocked grocery stores and stockpiled these products as a result of panic buying. This has led to selling out of essential goods and empty shelves across majority of the stores. Furthermore, the closure of schools, offices, multiplexes, colleges, pubs & restaurants and work from home for vast majority of the population, has boosted in-home consumption and hence the demand for online grocers has experienced soaring demand with significant boost in orders.

 

As a consequence of the Corona outbreak, consumers are minimizing external visits to crowded places, including malls and supermarkets and instead finding it convenient to place orders for door-step deliveries. In India, companies such as Amazon, Bigbasket, Grofers, and Flipkart, have particularly witnessed exceptional spike in sales of about 20-30%. These companies have observed a growth in demand for items such as cereals, flour, rice, fresh fruits, pet food and personal hygiene products including soaps and sanitizers. E-commerce platforms in China also experienced a similar growth in demand for their daily supplies.

 

E-grocers are putting in additional efforts to monitor their delivery system and supply chain. They are also taking extra efforts to ensure customer safety by wearing masks and gloves on duty and also monitoring the delivery executive’s body temperature before deliveries. Moreover, the online retailers have developed a “no-touch” option wherein the orders are prepaid and can be left at the customer doorsteps in order to avoid direct customer contact.  This scenario is regarded as a golden opportunity for E-grocers to build trust with the customers.

 

Other than the 120-130% increase in volume sales of hygiene products and daily essentials, the E-pharma sector also witnessed a 50-60% growth in demand owing to strong growth in E-consultations/telephonic consultations and prescriptions. However, the case is not likely for catering and cloud kitchen food delivery sector since people have gradually stopped ordering online and instead prefer home cooked food. It is also perhaps regarded as the best time for distributors to go digital. Packaged food products, home care categories and personal health products are expected to experience continued growth through the E-commerce segment. In order to obtain smooth functioning in the supply chain, retailers are using digital apps to place orders with FMCG companies and distributors. For instance, Mobisy which has the Distiman app, enables retailers/wholesalers to order goods real time and work with brands to replenish stocks within 24 hours.

 

 

Author

Sumesh Kumar

Senior Research Associate

Consumer Goods Domain

Allied Market Research

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