Enhanced support measures on the table as e-commerce demand peaks
These initiatives allow them to strengthen their relationship with merchants in the longer term.
Several e-commerce firms across Asia Pacific for the past few months have rolled out support measures, aiming to help its merchants deal with operational challenges resulting from the pandemic.
In China, Alibaba offered to waive off the platform annual fee for all Tmall merchants in Q1 and Q2. Food delivery platform Deliveroo also reduced commission rates in Hong Kong to 5% for pickup orders until June. In Singapore, the government rolled out a package to fund 5ppt of commission costs from local food delivery platforms.
E-commerce companies have also been extending these measures to all merchants besides those affected by the outbreak, according to Deloitte Southeast Asia’s consumer industry leader Pua Wee Meng. For example, all merchants on Tmall and Taobao were able to use an essential online tool kit to revamp their online storefronts for free, whilst new users of its Cainiao logistics networks received a waiver of two months’ rent.
“By supporting merchants to tide over the impact of business slowdown, these e-commerce companies also enhance their image through corporate social responsibility and strengthen their relationship with the merchants in the longer term,” Pua told Retail Asia.
These measures are expected to negatively impact the bottom line of e-commerce firms. However, some segments have gained from the shift in consumer demand to online, with Alibaba, JD.com and online food retailer Meicai hiring thousands of temporary workers to fulfill demand to deliver products on time.
A report from Euromonitor also noted that JD.com saw online grocery sales grow 215% YoY during a 10-day period between late January and February. Alibaba has also offered products that would enable retailers to rapidly launch an e-commerce platform amidst the crisis.
Further, a note from Nomura stated that the ad hoc supporting measures implemented by Alibaba would have minimal impact on its financials. Though the company did not disclose how much revenue is generated in each quarter by platform annual fee and its storefront decoration tool Wangpu, it was estimated that the two combined likely account for close to 1% and 1.5% of revenue and EBITA, respectively, from BABA’s China marketplace business.
“In fact, many of the challenges that are faced by the merchants are not due to the lack of demand, but rather, the shortage of workers returning to work, reduction of cargo flights (especially in China) and the lack of production, where orders are unmet and deliveries are not shipped,” Pua said.
Moreover, based on the previous SARS experience, the recovery of e-commerce might be faster than their brick-and-mortar rivals, of which many have resorted to permanent or temporary store closure during this difficult period.
Euromonitor shared the sentiment. “Given the heavy shift to e-commerce during the height of the COVID-19 outbreak, retailers with a stronger digital presence prior to the outbreak are likely to fare better as consumers lean more into that channel. Concepts like last-mile delivery, omnichannel and click-and-collect that have been accelerated by the pandemic are likely to stay even afterwards and the bottom line is that technology is here to stay,” it said in a report.