The Surge of E-Commerce during the Covid-19 Pandemic

The COVID 19 pandemic is by far more than a health crisis. It is affecting societies and economies at their core. Assessing the impacts of the COVID-19 crisis on societies, economies and vulnerable groups is fundamental to inform and tailor the responses of governments and partners to recover from the crisis.

Various sectors in the economy have been impacted negatively leading to close of businesses, such as tourism and hospitality. The decline in economic activities has been the order of business as some companies shut down while others are laying off a significant number of employees. This further exacerbated the existing problem of high unemployment.

The lock-down restrictions led to a disruption of supply chains for both intermediate and finished goods. Low levels of liquidity due to reduced disposable income and high levels of uncertainty of the pandemic resulted in reductions in the aggregate demand as the pandemic triggered precautionary behavior among consumers.

In addition to safeguarding the lives and health of citizens, governments through fiscal and monetary measures are trying to salvage the ongoing economic crisis.

COVID-19 has transformed how consumers interact with merchants. But will these changes be temporary, or has the global pandemic changed the face of commerce forever? Amidst all the uncertainty, the world has shifted to online buying and selling of goods. Also known as E-commerce (Electronic Commerce).

Due to the ‘disease of inequality’, the consumption of low, middle, and high-income earners varies significantly. The pandemic further widened the gap as it resulted in job losses, furloughs, and salary cuts. Those who depend on one stream of income, with little to no savings face financial pressure and further reduced consumption. Low-income and vulnerable persons are torn between satisfying necessities, for example, food over shelter.

Distribution and sales are preceded by production in product flow. According to the KAM-KPMG impact of COVID-19 on manufacturing, the sector is facing an array of challenges including limited production, increased cost of procuring raw materials, highly controlled movement of goods and services, diminishing stock, and low demand especially on the non-essential goods.

The e-commerce shares of total global retail sales stood at 14.1% in 2019 and was estimated at 16.1% in 2020 before COVID-19 (Annual retail e-commerce sales growth worldwide from 2017 to 2023- Statista). Despite the significantly high performance of in-store/offline sales compared to online shopping; e-commerce has shown an upward trend.

The growth of online shopping is attributed to the prevalence of smartphones, internet access, and the value derived from it. Online shopping is available 24/7, time saving, convenient, and the user can compare prices. During the pandemic, the growth has been boosted by the safety it extends to users; fear of contagion has 2contributed to limited shopping trips. Partnerships among e-commerce, transport & logistics companies, and retailers have been of significant benefit during the global pandemic.

E-commerce can be classified as domestic or cross-border/international online trade. The used payment method of e-commerce includes cards, e-wallets, bank transfer, and cash delivery. E-wallets are projected to be the most used in 2024 according to Statista. China has already embraced this form of payment while for Europe and US cards are the most used in e-commerce payments.

In Kenya, M-PESA is the most common mode of payment. Furthermore, this mode of payment has been boosted, by the CBK’s intervention to go cashless by introducing emergency measures to facilitate free transfer of mobile money across financial service providers and person to person transfers.

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