PARIS — Whether it’s toilet paper, oatmeal or yoga pants ordered online during the coronavirus pandemic, getting the product to a customer’s door is proving more and more challenging.
Only weeks into lockdowns, strains are building on the infrastructure for deliveries, making e-commerce a more complicated lifeline for retailers and consumers alike.
France’s postal service has reduced workers to half the usual number at any given time, to cut exposure to other people, and restricted deliveries to four days a week. It has asked clients to focus on necessary orders.
On a recent visit to a logistics center, Mehdi El Alami, a partner at Oliver Wyman who specializes on transport and logistics, witnessed first-hand the challenges facing e-commerce.
“I’ve never seen so much toilet paper delivered through e-commerce! It’s quite improbable, and the machines are not made for this — it’s big, it’s wide, tall, and above all, not worth much, so it’s rather unusual for it to be going through these channels,” he said, noting that state-of-the art systems are suddenly being clogged up with unusual items — a lot of food and hygiene products.
“Coronavirus is having an unprecedented impact on consumer markets around the world, due to the number of individuals working from home or unable to leave their homes. This has placed a tremendous burden on the infrastructure of e-commerce retailers as consumers look to purchase necessary goods from their home and remain dependent on their country’s delivery infrastructure and supply chains,” Euromonitor said in a recent blog.
In Italy, where government restrictions limiting movement have been in place longer than elsewhere in Europe and the U.S., e-commerce is surging, putting supply and fulfillment logistics under pressure, according to Euromonitor, flagging a sharp rise in “out-of-stock” items on web sites since the initial stay-at-home measures that came in the second week of the month.
The RealReal has slowed shipping, temporarily closing warehouses in the Bay Area in the U.S. and reducing staff in New Jersey warehouses, while Net-a-porter just temporarily closed its London warehouse after similarly closing warehouses in the U.S. and Europe, until further notice. San Francisco-based styling service Stitch Fix closed a distribution center in Pennsylvania but still has four other centers open in the U.S. at the moment.
Deliveries in France are taking longer, noted Fevad, a grouping of e-commerce operators operating in the country.
“We are seeing an increase in delivery times, especially for products of mass consumption and related to computers, given an explosion of demand. This is also due to the reduction of workers in warehouses, complying with social distancing measures,” said Fevad. Some sites are focusing on food and products related to hygiene, and Amazon has indicated it will prioritize essential items for deliveries.
Citing the need to support social distancing efforts and focus on delivering to most-impacted customers who rely on the company for certain priority items, Amazon said it would temporarily stop taking orders on some lower-priority items on its web site in France.
In markets around the world, the shift of business to online is proving a challenge.
“Initially businesses are saying, ‘Wow. Demand is dropping, what do we do? Adapt store operations, lay off people, how do we react to this?’” said Marc-André Kamel, partner and director of Bain & Company in Paris and leader of the firm’s global retail practice. The firm has been working with clients in China since the outbreak there.
Local officials were soon ordering store closures, suddenly shifting the focus of retailers to their online businesses. “The lifeline of these businesses was online,” said Kamel.
While business has doubled or tripled as people stocked up to stay at home, the initial surge in business is settling down.
“It’s starting to come back to something a bit more normal — actually normal is not the right term, because we have the impression we’ll get back to something normal but actually it’s a decrease in volumes, because things that aren’t critical are not being ordered,” said El Alami.
Kamel also pointed to suppressed demand as people worry about their jobs, but noted labor shortages as well.
“It’s not so much the sickness — in some cases a few people are sick in the team, so the entire team has been confined — but because you have 50 percent of the population with kids at home, you have 50 percent of people who cannot go to work, so therefore everything is slowed down,” he said.
Some companies have even opted to close their online operations because it has become too expensive to run them.
“At some point, when you do the trade-off, the extra cash versus the gross margin, it doesn’t make sense given the cost,” Kamel said.
Times of upheaval can produce new, alternative ways of doing business, and there has been talk of turning to taxi drivers, idle restaurant workers or students for delivery work, he noted. But there’s always an economic calculation, which seems to be the biggest hurdle to fresh approaches so far.
However, despite the challenges, the crisis highlights the “indispensable nature of online commerce,” added Kamel.
“Omnichannel is really important and we need to be able to do online commerce profitably. People expect it to be free, but there are costs attached to that and value attached to that,” he said.
“It’s a wake-up call not only for those who are really behind to really move omnichannel, but also to everybody to really look at the economics of online — reducing the costs and improving revenues, including through pricing — to make sure that it is not a dilutive model. So if online takes a growing share of the business mix, retailers can continue to thrive,” he said.