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How COVID-19 is Impacting Ecommerce Businesses?

How COVID-19 is Impacting Ecommerce

How COVID-19 is Impacting Ecommerce

Coronavirus has practically taken our daily lives by storm. But what happened to e-commerce businesses? The internal world has found itself facing an unprecedented crisis, putting a strain on political organizations, health systems and especially companies around the world.

Not to speak of such a central theme today is impossible. But of course, we will not focus so much on the social part of the coronavirus, but on the economic part. And in particular how this epidemic has affected shopify online stores and dropshipping businesses.

In other words, how has the spread of coronavirus influenced e-commerce businesses? To answer this question, we did some online research, consulted with our knowledge network to understand other online entrepreneurs what was going on and we also looked at the data on China, which has already gone through the most important moment. Difficult and therefore could be an example.

The Influence of Coronavirus On Online Shopping

When the coronavirus started to spread, the main idea of‚Äčthose who do e-commerce was: If people close themselves at home, they will spend a good part of their time using smartphones, PCs and tablets.

So this can only mean more online shopping.

Is it true? Well in part, There has been a boom in online shopping, but..If you read an article by Sole24ore, the title says: “Triboo, with the coronavirus leap in e-commerce volumes”. And it’s about a 17% boom in online transactions. So, at least the title goes to support the initial theory: If people don’t shop in supermarkets or the mall, they will do it online.

However, if you look closely at the data, the trend is not exactly like that. There has been a boom in online shopping, but mainly for basic necessities. In practice, it’s not that people are shopping online like it was during Black Friday. Rather, they are turning to online stores to buy goods that they would have bought daily at the supermarket: sanitary products, sanitary ware, and food supplies.

So there has been a boom. But it is mainly in favor of the large retailers who manage this type of product. I don’t think you run a dropshipping site that sells shampoo and soap.

What is Really Going on with E-commerce?

So, now excluding the large retailers who sell basic necessities, what is the situation for small e-commerce? By researching online marketer Facebook groups and by questioning other entrepreneurs in our knowledge network, the sale of luxury products is decreasing.

Note however that by luxury we do not mean super-expensive products, but all those purchases that are not a basic necessity: clothing, cosmetics, supplements, electronic gadgets etc. The main trend is that Facebook advertisements regarding these products receive many clicks and views but few conversions.

The feeling of concern caused by the coronavirus leads people to appease the purchase desire that they would normally have had. Furthermore, the lack of social and public life totally blocks these purchases. After all, why should I buy a new pair of shoes if I can’t go out for the next 30 days?

What Happened to China?

This Nielsen study that analyzed the Chinese market goes precisely to support this theory: Not only was there a 37% drop in smartphone sales, but also a general 14% drop in the manufacturing sector (Little demand = little production).

Coronavirus and E-commerce

In addition, very positive data can be found in the study regarding the recovery in the second quarter of 2020. And although it is still early to predict what will happen, the economic recovery will be slow, but resilient and a boom in online sales is expected. However, this claim must be taken with forceps. The Chinese economy is very different from the Italian one. The Italian economy is mainly based on tourism, which in China is always suffering from coronavirus (-80% of bookings). And these sectors (hospitality and catering) will also suffer in the second quarter of 2020.

Advertising: What Google and Facebook Expect

The answer is quite obvious, if consumption falls, investments in online advertising also fall, right? Quite right! Analysts expect Google and Facebook to experience a drop in advertising revenue. Some predict a 15% drop in advertising spend on Google.

But Facebook, apparently, will suffer even more because of all the travel sector businesses that will pause all their advertising campaigns due to the coronavirus. And these represent 30-45% of Facebook’s advertising revenue for Facebook.

Opportunity But Also Damage

This drop in online advertising investment is sure to drop CPMs and CPCs in the short term. However, what is expected is that most marketers will keep the advertising budget for the second half of the year. So, for Q4 in 2020 we could expect skyrocketing CPM, because the 365-day budget will be concentrated in a few months.

Conclusions

Difficult to make conclusions in this scenario. If you are among the businesses that are continuing to have sales (there are: D), you are lucky and will likely benefit from the decline in advertisers’ competition. However, the drop in general consumption due to coronavirus will indirectly affect all sectors.

The Nielsen study named earlier, predicts that in Europe, in 2020, the GDP will drop by 23% in the best of scenarios (i.e. if governments act quickly) and by 92% in the worst case. However now, it is still early to make annual forecasts and we will have to wait for the virus to reach its peak to draw conclusions.

Author Bio: My name is Dave Wilson and I am the Marketing Head at Debutify. We here at Debutify help you to build a high converting Shopify store in minutes, not hours, without any technical knowledge at all.

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