Coronavirus: uncertainty for online retailers as some slump and others surge

Online retailers face uncertainty as the Covid-19 coronavirus forces change in consumer shopping habits

Online retailers are reporting a very mixed picture about the impact the Covid-19 Coronavirus outbreak is having on e-commerce businesses.

While some are seeing increased demand, other are already struggling. N Brown PLC for example, which owns online-only clothing brands JD Williams, Simply Be and Jacamo, today announced a range of measures to deal with a 40% slump in sales last week caused by the Covid-19 outbreak.

As a result N Brown, which employs more than 2,400 people in the UK, will immediately be taking a number of actions to reduce costs and preserve its cash.

This includes significantly reducing its marketing budget for the foreseeable future, stopping or deferring all non-essential capital expenditure, stopping stock purchases and working with Her Majesty’s Revenue and Customs (HMRC) to ensure all tax and national insurance payments are also deferred.

The organisation will also be completely freezing its recruitment while it reviews its organisational structure, as well as postponing its dividend payments indefinitely.

“In addition, the group is exploring all options in relation to the government and Bank of England support packages for business,” said the company’s trading update.

N Brown added that it is reaching the limit of its current funding arrangements so is now looking at additional loans and “exploring options in relation to maximising the value of its significant unlevered debtor book”.

The company said that while accurate guidance is impossible to give due to the rapidly changing nature of the situation, it is anticipating a material reduction in demand throughout the year.

A mixed bag: the impact on other online retailers

The impact of the coronavirus, however, has not been felt equally among online retailers, with others such as Amazon and Ocado experiencing a surge in demand.

Thomas O’Connor, a senior director analyst in Gartner’s supply chain industries and programmes team, wrote in a blog post about the disparate effects the coronavirus is having on different products and their supply chains.

“Affected markets are seeing a run on products such as medicines, cleaning items, toilet paper, and grocery staples. In addition, numerous retailers are advising Gartner that demand is shifting from physical stores to the online channel as consumers seek to avoid public places on the back of government restrictions on the movement of citizens,” he said.

“Nervous shoppers coupled with a reduction in tourist numbers and temporary store closures in some markets are driving significantly lower sales in product categories deemed non-essential such as luxury goods and apparel.

“Quantitatively, this can be seen in total retail sales out of China, the first country affected by coronavirus, where government figures indicate overall retail spend in the first two months of 2020 declined by 20.5%, with further reports indicating a 30-40% reduction in recent European fashion and apparel sales.”

On 18 March, Computer Weekly reported that online supermarket Ocado temporarily suspended its website and mobile app under overwhelming pressure from shoppers stocking up on essentials.

“Like all supermarkets, we are working round the clock to keep up with high demand and make sure all of our customers get what they need at this time – especially those more vulnerable and in isolation,” said Ocado CEO Melanie Smith at the time.

Two days before, UK supermarkets issued a joint statement through the British Retail Consortium (BRC) urging shoppers to refrain from panic buying and stockpiling items such as pasta, soap and toilet paper, and reassuring consumers that they are working flat out to keep both bricks and mortar and online stores stocked.

In the US, the pandemic has prompted retail giant Amazon to launch an out-of-season recruitment drive to hire an additional 100,000 full- and part-time staff in its fulfilment centres to ensure it has enough capacity.

“Getting a priority item to your doorstep is vital as communities practice social distancing, particularly for the elderly and others with underlying health issues,” wrote senior vice-president of worldwide operations at Amazon, David Clark, in a blog post announcing the move.

“We are seeing a significant increase in demand, which means our labour needs are unprecedented for this time of year,” he added.

According to market research survey of 304 retailers published 11 March by Digital Commerce 360, 47% of retailers expect some downside revenue implications, while nearly a tenth are expecting it to be significant.

On top of this, 58% believe the coronavirus will have at least some impact on consumer confidence, while 22% think the impact will be significant.

Reflecting different impacts the outbreak has had on the likes of Amazon and Ocado compared with N Brown, e-commerce businesses were also fairly evenly split in how they think Covid-19 will affect them.

Some 30% expect their business to be “up somewhat”, while 32% are expecting them to be “down somewhat”. A further 8% are expecting business to be “up significantly”, while just 4% are expecting the inverse.

Read more about Covid-19

  • Technology sector asked to develop new ways to help the NHS manage virus outbreak and support people who are most at risk.
  • TechUK positioning document reveals datacentre operators are putting their competitive differences aside to share best practice on how to keep staff safe and keep the UK online during the coronavirus outbreak.
  • A cross-departmental counter-disinformation unit will seek to protect and secure UK citizens from disinformation, scams and cyber security threats related to the Covid-19 outbreak.

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