Governmental authorities and policymakers are scrambling to contain the COVID-19 pandemic. With so much uncertainty about the spread of the disease, it’s hard to predict the effects of COVID-19 on B2B commerce. Here’s a look at the current state of the crisis and the measures to take in the short term as well as a look at how various industries are facing the challenge.
Business Implications of COVID-19 Coronavirus
No one knows exactly how long the pandemic will last or how many lives will be lost. The SARS outbreak of 2003 was much smaller and it cost the global economy a whopping $40 billion and China several months of economic contraction. Since then, China’s economic output has multiplied eightfold, from $1.7 trillion to nearly $14 trillion – and is tightly intertwined with the global economy. Here is the situation so far:
- New cases are slowing in China and South Korea while global cases climb past 300,000.
- Virtually all events, conferences and meetings are cancelled, resulting in missed partnerships and investment opportunities. These include Facebook’s F8 developer conference, Mobile World Congress, and the Geneva Autoshow.
- Many businesses have enacted a work from home policy and limited visitors to factories and offices.
- World markets decreased almost 30% month-over-month due to coronavirus, slumping oil prices, and reduced consumer spending.
- Consumers are cutting back on travel, tourism, beauty, and big-ticket purchases.
- Businesses faring well during the crisis include supermarkets, pharmaceuticals, hygiene product manufacturers, game stores, gun and ammunition stores, and delivery services.
- Amazon takes action to prevent price gouging on kitchen staples and sanitary products.
- Amazon hires 100,000 temporary workers to cope with rapidly increasing eCommerce demands.
- US President Trump signs the Coronavirus Aid Package, bolstering unemployment, paid leave benefits, and offering diagnostic testing for the virus.
- Nielsen estimates oat milk retail sales at 347% YOY for March and powdered milk products sales at 148% in the US.
- Among all US healthcare products, medical supplies are up 85% YOY for March, with first aid kits and cold remedies trailing behind.
- US businesses are bracing for impact: almost half are concerned with production delays, reduced customer confidence, and inventory shortages in the coming months.
- Movie theaters are calling for help. Domestic box office earnings are down 52 % in the week ended March 12 and 69 % ended March 19.
- US unemployment claims rise to 218,000, largest since 2017’s Hurricane Harvey in the week ended March 14.
- The restaurant industry sees a full collapse with nearly 100% loss of business across the US and internationally.
- Zara stores divert resources to manufacturing protective face masks to fight coronavirus in Spain.
- Italy leads the world in fatalities, with 62% of 6,000 deaths registered in Lombardy, the most populous and wealthy region.
March 30 updates:
- Cases top 734,000, with 34,000 dead, 152,000 recovered according to Johns Hopkins University.
- As US fatalities top 2,500, states down on testing. Canada sees a surge in coronavirus hospitalizations.
- Africa’s largest city is the first one to go into lockdown, joining more than a quarter of world population on some form of lockdown.
- The stock market swings wildly among coronavirus uncertainty.
- The outbreak puts 37 million US jobs at risk of layoffs in the short term.
- While German eCommerce suffers, Amazon expects a 22% growth in the US alone.
Bookmark this page and keep checking back for updates to this list.
In response to social distancing, many businesses will make their eCommerce operations a key priority.
7 Ways to Respond to COVID-19 Effects on B2B Commerce
Virtually every company involved in global trade feels the impact. Businesses around the world are impacted by reductions in output, labor, and production disruptions. Most authorities are warning organizations to prepare for the long haul. Here is what you can do right now to mitigate the impact of coronavirus on your eCommerce business:
- Understand that business as usual is not an option. Create a response team with a supply chain leader that reports directly to the CEO. Allocate financial resources, communicate top-down team responsibilities and ensure everyone understands every action needed to carry out the plan.
- Remember your B2B customers and their customers are relying on you to run smoothly. Synchronize your business systems and distribution centers to ensure online product information is constantly updated in real-time.
- Clearly mark out of stock items and ensure they cannot be ordered. During times of uncertainty, customers need the reassurance that items are in stock and will be shipped if they are ordered. If items are out of stock, provide a realistic ship date.
- Review complex pricing or shipping rules to ensure they don’t appear to increase profit during the pandemic. This perception negatively affects the customer experience and future sales.
- Establish ways to reassure customers about order fulfillment. During any crisis, everyone has more questions than answers. Businesses are cautious about visiting offices and factories and monitoring workers. Inform customers about you are keeping employees safe and how you are handling and shipping products.
- Communicate any changes in product in delivery and shipping, including changes in suppliers or logistics. For example, Walgreens implemented several policy changes, including delivery fee waivers for prescriptions.
- Share new hours of operation and any areas of business, that will be moved online. For example, Apple is closing all of its retail stores (until further notice)
- Explain the measures you are taking to maintain a safe work environment. Virtually every organization from Amtrak to Marriott are stepping up disinfecting and hygiene-related functions to protect their customers.
- Consider creating a portal or blog to keep customers updated as the situation develops. For example, Delta Airlines hosts a coronavirus portal to answer common questions.
- Check out the response toolkit from the American Chamber of Commerce to help you get started.
- While customer demand may drop, it may also switch to other markets. Monitor sales and ensure product data stays discoverable through search and suggestions. Add up-to-date links to relevant authorities that help explain your disruptions or shortages.
- Understand that employees may need time away from day-to-day roles to focus on personal crisis response. Encourage them to spend time with families or volunteer in their community.
How Businesses Manage COVID-19 and B2B Commerce
While the coronavirus is affecting every business, manufacturer, distributor and retailer is responding differently. Regardless of their industry, B2B merchants are doing all they can to minimize losses during this difficult time. Here is how COVID-19 effects B2B commerce and how B2B web merchants are dealing with it.
Distributor anticipates slower sales
Customers of warehouse equipment retailer Warehouse1 are feeling the effects of the coronavirus on their business. Warehouse1’s customers are manufacturers using lean principles associated with reduced waste and just-in-time (JIT) inventory. “When the global supply chain slows or shuts down for a period of time, they can’t get the parts they need when they need them,” says Gary Selvera, president. “So, they must also slow or shut down their operations.”
Daren Froeschle, marketing manager agrees. “The impact will continue to hit U.S. manufacturers that depend on foreign parts that are incorporated into US finished products”, he explains. In response, Warehouse1 diversified suppliers to increase stock to meet customer needs in the coming months.
Manufacturer grapples with uncertainty
English Blinds, a major shutters and blinds manufacturer, is experiencing difficulties in virtually all areas of operations. Public and policy responses to coronavirus also contribute to mounting worries surrounding logistics. Moss fears that as new cases are diagnosed, people will get taken out of the workforce – either due to being afflicted or as a preemptive measure. “We currently have a shipment from China in transit that may potentially arrive as planned…yet just as likely…it will be turned away or quarantined,” says John Moss, CEO. “If we knew the shipment won’t reach us,” he continues, “we could be making plans with alternate suppliers right now; but we cannot hold double the quantities…due to lack of warehouse real estate.”
“We are quite literally waiting for our ship to come in, or not come in, as the case may be!”
Other industries see record sales
It’s not all doom and gloom for every business. Some industries have seen an increase in sales. As a reseller of electrolyte products, Powder Mix Direct has seen February’s year over year sales up considerably, and March is off to a great start as well. “Typically, the bulk of our revenues come during summer from businesses that need to counter the effects of heat stress”, explains Tom Matun, President. This time he’s sure it’s the pandemic. “We believe it’s businesses and customers preparing for a coronavirus outbreak.”
Most importantly, don’t wait to act
Large organizations are rarely agile. Managers may resist changes, and this leads to inaction throughout the organization. “If anyone thinks they can wait on their eCommerce strategy, the coronavirus situation should spell out otherwise”, says Yoav Kutner, CEO of OroCommerce. The B2B eCommerce environment is unpredictable and businesses cannot afford to miss out on increased sales wherever they can find them.
“One of our B2B OroCommerce customers had $1 million in online sales in 1 day – that’s double their record, triple their average numbers.”
Even if distribution centers are able to cope with strong demand, if inventory isn’t digitized and synced with online customer portals, a business may oversell or miss a sales opportunity. “Right now, B2B needs all the help they can get,” continues Yoav. “When demand is strong, customers count on B2B eCommerce platforms such as OroCommerce for accurate product data.”
How will you manage the effects of COVID-19 on B2B commerce?
As everyone pulls through this difficult time, it’s important to remember this is all temporary. The Oro team hopes you stay safe and healthy.
This post will be updated with more information as soon as it becomes available.