Will APAC's e-commerce surge last beyond COVID-19?

The psychological impact of the pandemic still pushes consumers towards digital channels.

The COVID-19 pandemic may have been the catalyst for the surge in e-commerce use in the Asia Pacific, but analysts are confident that this trend towards a high demand for online spending will last beyond the pandemic.

Across Southeast Asia, consumers have been spending more for essential goods on online platforms, and more than a quarter (28%) have tried a new e-commerce app since the virus broke out, a study by Bain & Company and Facebook revealed.

This is not expected to just last for a short term, and fade away once the virus subsided. Bain found that over four in five (83%) of those shopping online said that they are likely to continue their increased spending online after restrictions are lifted. A survey by GlobalData even found that more than a fourth (28%) of consumers in India agreed they prefer the online channel over physical channels.

This can already be observed in China after the lockdown in March. Figures during the month showed that online sales growth of food and clothing outperformed their brick-and-mortar counterparts, a similar trajectory during the lockdown in Jan-Feb. Online food sales leapt 32.7% YoY, outperforming the offline food sales growth of 19.2%. Online clothing sales, whilst still falling 15.1%, still did better than offline sales (34.8%).

Also read: How far will China's online food market thrive?

Though several countries across the region are relaxing lockdown measures, the psychological impact of the pandemic still prevails, resulting in a majority of the consumers still preferring digital channels for shopping, GlobalData’s retail analyst Hrishabh Kashyap explained.

“In light of the heightened concerns over hygiene, retailers must maintain the required safety norms to assuage apprehensions among the consumers and stay relevant in the evolving retail environment,” Kashyap said.

Fitch expects that this growth in demand for online shopping will act as a catalyst for the expansion of e-commerce players’ product offerings in the future.

Wooing price-conscious consumers
This rise in e-commerce is further expected to accelerate the trend of e-commerce players placing greater focus on private label development, which has also been driven by a deteriorating economic outlook globally, which is leading consumers to become more price-conscious, Fitch noted.

This has been observed within brick-and-mortar retail, and e-commerce players are expected to place greater focus on discount options and private labels before 2020 ends. In the UK, MGR Waitrose is relaunching its private-label brand “Essential,” which was first rolled out during the fallout from the Great Financial Crisis in 2009.

Bain’s survey confirmed this to be even more so the case for Southeast Asia. Value for money is a key purchase criterion for 57% of digital consumers, and around 60% said they plan to save more money in the future, a rate nearly twice that of in the US.

Further, though the region’s digital consumers have always been more open to try out new brands, over two in five (42%) consumers had bought more established brands in recent months. “Established brands have the consumer trust and robust supply chain to ensure their products are available and visible both in physical stores and online,” the report stated.

With these, Bain found that consumer goods companies that are likely to come out the strongest will be those that have adapted quickly to these long-lasting changes in consumer behaviour.

“For example, some companies have swiftly increased product availability and visibility online, targeted digital engagement across platforms or optimized pricing and value perception while offering a dynamic mix of SKUs. Some have focused on improving their supply chain resilience or adapting purposeful messaging and offerings. Others have redesigned their operating norms and consumer reach models,” the report stated.