Coronavirus slams brakes on online retail growth; drastically hurts 2020 forecast

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Updated: March 30, 2020 5:36:55 PM

The 21-day lockdown period and the long term impact of the disease on the businesses’ supply chain, logistics, apart from poor customer sentiments are expected to pull down the 2020 sales by around $7 billion from 2019.

The loss of sale during the 21-day lockdown period for the online retail sector is estimated to be around 1 billion dollars.

The Coronavirus pandemic is likely to have a significant blow to online retail sales in India. The 21-day lockdown period and the long term impact of the disease on the businesses’ supply chain, logistics, apart from poor customer sentiments are expected to pull down the 2020 sales by around $7 billion from 2019. The severe impact on services sector has hurt online verticals such as e-commerce, food delivery, movie tickets, cab booking and more. Companies like Amazon and Flipkart have restricted their services to essential goods while others like Ola, Uber have suspended their businesses during the lockdown.

According to the data from Forrester, the online retail sale was worth $33.5 billion in 2019 including movie tickets business. This was likely to grow by 26 per cent this year to $42.21 billion however the forecast is now down to just 5 per cent. This means that the sector would have to compromise with a marginal growth to just $35.1 billion this year. “After taking in account of the lockdowns and the long term impact on spending we expect the growth rate to slow in 2020 to around 5 per cent,” Satish Meena, Senior Forecast Analyst, Forrester told Financial Express Online.

Importantly, the loss of sale during the 21-day lockdown period for the online retail sector is estimated to be around $1 billion. However, if the lockdown extends beyond 21 days, “then we can assume that almost $40-50 million of sales every day would go away,” said Meena.

Comments Amazon, Flipkart, Grofers, Swiggy, and Zomato on business impact due to the lockdown are awaited. BigBasket declined to comment.

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Even before the lockdown, during the first two weeks in March, most services took a significant hit. For instance, mobility including cabs, auto and bike services went down by 45-50 per cent from the first 15 days of February. Similarly, hotel-tech, movie and event ticketing, and food delivery saw a decline of 65 per cent, 80 per cent, and 10-20 per cent respectively during the said period, showed RedSeer data.

“Foodtech is operating at 25-30 per cent capacity both in terms of the number of orders they deliver and the number of restaurants as customers are not ordering while there is only a limited number of restaurants. A large chunk of their orders came from offices for lunch which is not happening now. Even at home, customers are not ordering much as they are in fear mode,” added Meena.

Even as the grocery segment is witnessing growth as customers resort to panic buying of essential services that have been exempted from the lockdown by the government but there’s little that the segment, which has 2 per cent share in online retail, can do to offset the overall loss. “Online grocery is still less than 5 per cent of total online retail. In this also, they are facing issues of the supply chain, delivery as a large chunk of their delivery boys are not available. They don’t have that much manpower on ground and hence unable to make the best out of the situation,” said Meena. The segment is expected to grow by over 40 per cent for 2020 due to more households purchasing goods online. After the initial delivery challenges in the lockdown period, Grofers and BigBasket are now operational in most of the cities even as the backlog of old orders are cleared first before fulfilling new orders.

Moreover, panic buying is for one time as order once bought would last for more than a month. Also, offline stores are better accessible than online stores. Further, even if one orders more number of products, the ticket size doesn’t compare with large ticket items such as smartphone, large appliance etc. as around 70 per cent on online retail sales belongs to the two product types.

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