The coronavirus took us all by surprise. Many of us are dealing with the uncertainty and anxiety of the situation in our personal and professional lives alike. At the same time, we know that the bad days never last – the dust will eventually settle and the world will recover and thrive.

Above all, how quickly and strongly you can recover relies on how quickly you can adjust to a new normal. To quote Darwin, “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.”

We’ve always championed learning from the best, and today we’re going through how the top marketplaces deal with these uncertain times, stay ahead of the game and what you can learn from them.

The Impact of the Coronavirus on Ecommerce Marketplaces

You wouldn’t guess it, but pandemics and marketplaces have always had an interesting history together. It was an epidemic that brought about one of the biggest ecommerce companies in the world currently – JD.com.

During the SARS epidemic of 2003, Richard Liu was running a chain of electronic stores around China and he had been hit particularly hard by the economic slowdown due to the virus. Trying to find a way to boost his sales, he turned to chatrooms and internet forums to sell his products – a move that saw JD.com turn into the US$60 billion ecommerce behemoth that it is today.

Marketplaces have always been affected by pandemics, but what will change this time?

Boom for ecommerce?

To begin with some good news, ecommerce marketplaces in Asia and the US reported spikes in sales due to ‘cocooning’ – a term used to describe people staying home due to fear of contracting the virus. Sales of fresh food on JD.com rose by 215% in China and sales by disinfectant brand Dettol rose 643% last month. Overall US ecommerce sales have risen by 2-3% since and is expected to continue its upward growth. This is in line with our own data, showing positive growth in the short term. 

sales growth chart coronavirus

Overall, ecommerce marketplaces are benefiting from this event, with specific categories spiking harder than others: health, beauty, groceries and food delivery have all experienced sharp increases in sales. However, amidst the short term explosion in sales, it’s important to look at the longer term downsides that are becoming apparent for marketplaces:

Staff Shortages and Logistical Constraints

Since the explosion of new cases within China, a large proportion of cargo ships have now become inactive – estimated to be up to 8.8% of global capacity. Many assumed that Chinese factories would return to full operation and resume shipping, but we now know that the worsening situation has resulted in factories remaining closed and suppliers cutting production, causing an 18.3% decrease in imports overseas. Major companies have warned investors of the upcoming slowdown, with 38% of companies listed on the S&P500 listing the term ‘coronavirus’ in their earning calls.

What you should do to weather the storm

Spread the risk

Finding alternative sources of inventory is crucial to any ecommerce marketplace hoping to ride out this period. At Silverback, we’ve always advocated for acquiring the right sellers. If you’ve diversified your seller base, then your marketplace would be in a much stronger footing to mitigate this risky time. Seller acquisition teams should continue their hard work – not only by seeking more sellers, but sellers in various regions

Walmart is a great example of an online marketplace that has done exceedingly well during this coronavirus event. Even with the massive rush of panic buying amongst their customers, it was still able to maintain its inventory, largely due to the fact that it previously diversified its suppliers. Walmart sources its products from 100 countries around the world and it is estimated that only around 15% of its suppliers came from China, which was a lot less than most of its competitors. Having this strong base helped it mitigate the shock, and is a shining example of diversification done right.

Strengthen communication  with sellers

Having a strong relationship with your sellers has always been key to a successful marketplace. Be in touch with your top sellers and find out the situation on their end! At this very moment, sellers across the world have been held up with shipping delays of weeks and its likely that you’ve already been affected by it. Top marketplaces maintain strong relationships with key sellers, and this is a point we have championed to improve seller retention . Ongoing dialogue with these important members of the marketplace allows you to manage your inventory a lot better. Take Amazon for example:

Amazon is stocking up on 6-8 weeks worth of inventory from certain Chinese made products, more than double the usual 2-3 weeks it usually holds on, reducing the chance of a supply cut in the midst of growing uncertainty. At the same time, they’ve sent our surveys to European and Chinese sellers to enquire about the location of their supplier’s factories and whether they’re at full capacity. This commitment to breaking the visibility barrier and finding out the Tier 1 suppliers on Amazon’s part is highly commendable and definitely something that you should be doing in your marketplace now while you can!

Another good example of this is Flipkart, India’s largest ecommerce marketplace, that has been working closely with its sellers to ensure that crucial products such as masks, disinfectants, antiseptic liquids and hand wash still available. They’ve utilized the Flipkart Seller Hub to reach out and expedited delivery to their warehouses, resulting in a constant supply of these products on their site. 

Make sure your customers are in the loop

Finally, it’s crucially important not to forget who you’re securing your inventory for – your customers! Engaging your customers and keeping them informed about the processes that are going on within the marketplace and helps soothe anxieties.

Redmart, a Southeast Asian online grocery marketplace, sent out an apology letter to customers when they experienced delays due to sudden spikes in demand. As they adjusted, they also created a series of infographics to assuage their customers of the safety and cleanliness of their handling:

Conclusion

This Coronavirus has put a huge brake on the start of 2020 for marketplaces across the globe, but as with all setbacks, businesses and economies will bounce back. What you can control is how quickly and strongly your marketplace snaps back –  your best bet to lead the way is to put in place three strategies that we outlined: diversifying your sellers, strengthening communication with sellers and engaging with your customers. Having these measures in place will propel you to the forefront of the ever-growing ecommerce world. 

At Silverback, our first priority is everyone be safe and healthy. And while we hope that conditions improve soon, we prepare ourselves for any of the scenarios that may play out. As the situation is still very volatile, we are focusing our efforts on being proactive in helping our customers to minimize the coronavirus’ negative impact on their business. But in the meantime, it’s good to step back and ask the question  – how are you preparing for this “black swan” event yourself?