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COVID-19’s Impact on Singapore’s eCommerce Market

Nathaniel Yim, Benedict Leong

Covid-proofing your eCommerce business in Singapore

Now that it’s been a few weeks into Singapore’s Circuit Breaker, there have been many changes to the way people live and how they conduct business. In order to curtail the spread of the virus, the initial split work arrangements and shift work in 2020’s first quarter evolved into full blown stay at home and work from home regulations starting from April 7th this year.

This has created a sudden and dramatic change in consumer behaviour, with more consumers turning to online shopping1, as non-essential businesses and offices are required to close their offices and stores. While circumstances caused behaviours to change rapidly, the reversion back to normal may take a lot longer, if it even reverts back to those levels. To help navigate these uncertain times, we’ll look at some of the key developments and changes that have affected eCommerce in Singapore and what it means for eCommerce businesses.

Supply-side Issues and Changes

Earlier this year, China extended their Golden week celebrations in an effort to curb the virus’ spread across the country. Starting from those extensions, global eCommerce supply chains have been disrupted with many companies running low or even running out of inventory.

Demand for eCommerce products did not reduce as fast as the acute drop in supply during that period, this caused a shortage for many shippers2. Customers across multiple major eCommerce platforms had their deliveries delayed, with some of the platforms even offering to facilitate cancellation of orders for those who wanted them. The resulting loss in revenue led to cash flow issues for companies, especially SMEs with some going out of business.

Even after factories in China reopened, the continued spread of the virus led to increasing instances of border closures and lockdowns, severely affecting air travel3. A sizable amount of cargo is transported via the bellyhold of passenger aircraft, and the reduction of flights caused a shortage in supply, causing rates to surge. This price hike caused many eCommerce merchants to be unable to secure freight space.

In addition, tighter regulations on business continuity and new measures to protect the safety of employees and consumers mean delays in shipping. The compulsory implementation4 of business continuity measures such as temperature screening, cleaning and disinfection works and shift and split work arrangements will slightly reduce the frequency of shipments. Some of the initiatives being explored to keep people safe could also change the delivery experience altogether, such as contactless delivery.

Demand-side Issues

There has been growing uncertainty around local and global business climates lately. With many businesses in various industries such as tourism, retail and F&B being severely affected by lack of tourists and even domestic consumption, consumer demand will likely reduce greatly across the board as people begin tightening their belts5.

Earlier in April, Janio conducted a survey on changes to consumers’ behaviour and expectations in light of the COVID situation. 76 per cent of our respondents believed that the economy will be in a worse state in the next 3 months compared to pre-COVID levels. Our respondents were nearly evenly split between a positive and negative economic outlook for the state of Singapore’s economy in the next 12 months.

As a result, purchase of big ticket items such as luxury items or consumer and home electronics could likely see a decrease. Four in five respondents to a survey reported in the Straits Times6 indicated that they were likely to decrease spending on luxury items in general, but felt that the Singapore Government’s responses to support the economy during the outbreak are better than those of other countries. In addition, with the circuit breaker in place and with split and shift work arrangements likely to continue after the circuit breaker is lifted, demand for categories such as office attire or formal wear will likely be reduced in the short term.

According to a Statista survey in March 20207, spending on overseas travel fell by 60 per cent. McKinsey8 reported that the initial demand shock for air travel is worse compared to September 11 or the 2008 Financial crisis. They estimate that International travel will likely take a long time to recover at an estimated 6 months minimum, hence purchases of travel-related products will take time to recover as well.

Current Consumer Trends

Covid proofing your eCommerce Business in Singapore - Infographic showing increased groceries changes, work from home related items, sports and fitness and board games and arts and crafts

While the situation now is indeed complex, opportunities still exist for eCommerce merchants to not only tide through the crisis but emerge stronger. For one, eCommerce consumption as a whole has surged greatly as consumers turn to the internet to make their purchases.

Statista9 backs this up with a recent survey showing that online grocery purchases have gone up in addition to online purchases of non-groceries as well. Companies like baby goods retailer Mothercare Singapore and home and living retailer Iuiga mentioned that online sales have increased significantly. Iuiga also mentioned that their online sales were sufficient to offset lost brick-and-mortar sales10.

With Singaporeans staying home, it is understandable that the best performing categories are groceries, health foods such as vitamins, home care products and products that help them work better from home. Work from home-focused products include monitors, webcams, and even home office furniture. Google search interest11 for computer monitors spiked in April this year.

Logitech advertisment for work from home products like computer mice, web cams and headphones

The increased time spent at home also means that people will be bringing home more activities that were normally not done at home. One example is sports and fitness, with eCommerce retailers such as Gymsportz.sg having received demand that is so overwhelming for some home gym products, orders were temporarily put on hold to clear the existing backlog.

Gymsportz website banner order limit April 2020

Other categories that could potentially see increased demand include toys and hobbies, with families turning to board games to bond with one another or working on craft products to pass the time. A Google trends12 report on board games search interest this year shows that interest in board games spiked twice this year. These were when Singapore’s government raised the Disease Outbreak Response System Condition (DORSCON) level to orange in February and again in early April coinciding with the Circuit Breaker’s announcement.

Google Trends - Interest for Board Games 12 months ending 21st April 2020

With Ramadan fast approaching, certain product categories that usually see a surge in purchases such as home and living may also see increased demand in the coming months. However, this festive demand this year could be dampened due to the current COVID-19 situation. If you’d like to find out more, you can check out our earlier article on Singapore Ramadan eCommerce insights.

 

Opportunities

With society spending more time online, merchants now have a great chance to focus on online marketing and to engage with consumers in a meaningful way.Given the current climate, consumers have expressed the need for eCommerce retailers to be more communicative, providing more updates on shipment statuses and communicating promotions or changes to inventory more frequently and openly.

Our survey on changes to consumers’ behaviour also asked questions related to eCommerce experience expectations in light of the COVID situation earlier in April. In our survey, 43 per cent of our respondents said they expect merchants to be even more communicative regarding the above compared to the pre-Covid state.

The reasons they provided was that they’re hoping that merchants will keep them assured of the status of their deliveries. While respondents expressed that they understand that volumes will be higher during this period, communicating clear expectations on deliveries, product availability and promotions will go a long way in fostering customer loyalty. Some also expressed frustration about the lack of communication regarding delayed deliveries. During this period, it may make sense to invest more in customer service and to ramp up the frequency of updates to customers.

Additionally, brands would do well to ensure that any communications or actions take into consideration how their audience is feeling and demonstrate sensitivity. Brands such as IKEA’s “Make Home Count” campaign13 have shown how to maintain brand consistency while creating messages that resonate well with consumers during these times, while integrating it with their eCommerce platforms.

Communications that show empathy and resonate with your audience can ensure that your business can continue to run while building brand loyalty with consumers, which will pay dividends in the long run.

For traditional retailers who haven’t moved online, now is a good time to make the move and leverage existing brand equity to create a strong digital presence. As discussed earlier, Mothercare SG and omnichannel retailer Iuiga benefited from this14. With user-friendly platforms such as Shopify and online marketplaces like Lazada and Shopee, it is easy for retailers to begin listing products and selling to consumers15.

To ensure that their businesses can continue to operate, merchants will need to ensure that their supply chains are robust, sufficiently diversified and that there is sufficient capacity to ensure smooth delivery experiences for their customers.

With many international brands shifting supply chains out of China or investing in sources in addition to those in China to reduce their dependence on a single supply source, manufacturing in Southeast Asia is rapidly taking off, with countries like Vietnam and Indonesia leading the way16. A China-plus-one sourcing strategy could pave the way to more sustainable business in the future.

While international air freight may be facing complications due to the reduction in flights, sea freight is proving to be a reliable way to move freight. While turnaround time might be slower than using air freight pre-COVID, the certainty of shipments will more than compensate for the wait for air freight space due to air freight supply scarcity.

Sea freight shipments from China to Singapore will take about 8 days while shipments from South Korea to Singapore will take around a week. Keep a look out for logistics partners who can provide with you supply chain recommendations to keep up with changes like these.

For last mile or cross border B2C deliveries to consumers, ensuring that you have a diversified network of service providers to fall back on in case any complications arise helps ensure sufficient capacity for deliveries. Working with logistics service providers that have business continuity plans in place also help provide you and your consumers peace of mind.

The COVID-19 situation has shaken up conventional wisdom, but where there are crises, there are opportunities to adapt and thrive. Similar to how Singaporeans have shown resilience and adaptability to these new circumstances, businesses can also find ways to reinvent the way they serve and communicate with customers. From providing more assurance and showing empathy through more frequent updates to customers to reinventing supply chains in light of new circumstances, the resilience built today will serve businesses well long after this situation ends.

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References:

  1. Big Commerce – Understanding the COVID-19 Effect on Online Shopping Behavior 
  2. Today Online – Covid-19 outbreak: Orders on e-commerce sites from China delayed, retailers there unresponsive 
  3. Straits Times – Singapore retail sales sank 8.6% in February as coronavirus hit tourism, F&B 
  4. Ministry of Manpower – General Advisory for Workplace Measures
  5. Straits Times – Coronavirus pandemic deals fatal blow to struggling businesses 
  6. Straits Times – Coronavirus: Most Singaporeans think recession likely, will spend less, according to survey
  7. Statista – Singapore: COVID-19 induced change in consumption habits 2020
  8. McKinsey – COVID-19: Briefing materials 
  9. Statista – Singapore: COVID-19 induced change in consumption habits 2020
  10. Business Times – Online sales help some retailers cushion blow from outbreak
  11. Google Trends – Interest for Computer Monitor and Exercise 12 months ending 21st April 2020
  12. Google Trends – Interest for Board Games 12 months ending 21st April 2020
  13. Make Home Count with IKEA 
  14. Business Times – Online sales help some retailers cushion blow from outbreak
  15. Straits Times – Help for SME retailers to start selling online 
  16. Straits Times – Epidemic may speed up supply chain move from China to Asean 
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