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7IMPACT OF COVID-19 ON E-COMMERCE OF RUSSIA
Mahmodi M.R., Korenevskaya A.V.
MAHMODI Muhammad Rafi - 2nd year master's degree in international business, faculty of economics, Peoples' Friendship University of Russia (RUDN University). Moscow, Russia. E-mail: 1032195420@rudn.ru
KORENEVSKAYA Anna Vadimovna - senior lecturer, Department of national economics, faculty of economics, Peoples' Friendship University of Russia (RUDN University), Moscow, Russia. E-mail: korenevskaya-av@rudn.ru
Abstract. In December 2019, the World Health Organization (WHO) declared an epidemic due to the outbreak of the coronavirus in Wuhan, China. With the outbreak of the COVID-19 epidemic, it is still unclear how long the negative economic impact on the world will continue. In particular, the imposition of public or partial travel restrictions in many countries has led to widespread change in COVID-19, which has significantly altered consumer behavior and shaped the industry. While physical stores are plagued by epidemics due to customer actions and preferences, online retailers are increasing their sales volume and constantly gaining customers.
Consumers have begun to prefer e-commerce, which is the fastest and most practical way to meet their needs in an epidemic environment. E-commerce is a way to minimize physical interaction, apart from receiving burdens. However, direct access to the product is very important not only for health, but also for practical savings, time and energy. The aim of this study was to investigate the impact of COVID-19, an infectious disease, on e-commerce and to assess changes in demand for different e-commerce products and product groups during the COVID-19 epidemic.
Keywords: e-commerce, COVID-19, pandemic.
For citation: Mahmodi M.R., Korenevskaya A.V. Impact of COVID-19 on e-commerce of Russia. Economic Systems. 2021. Vol. 14. No. 2 (53). P. 58-64. DOI 10.29030/2309-2076-2021-14-2-58-64.
Introduction
The epidemic caused by the coronavirus, known as COVID-19, which first appeared in Wuhan, China in December 2019, affected the whole world in a short time in terms of health and economy. As of 10 May 2020, the novel Coronavirus has caused a total of 3,917,366 confirmed cases and 274,361 deaths (WHO, 2020 a). The World Health Organization (WHO) declared COVID-19 as an epidemic on February 11, 2020 (WHO, 2020 b). All sectors were adversely affected in the short term due to the coronavirus. Time will show what kind of impact the epidemic will have in the future, and the course of the virus will significantly affect the way people live (Alpago and Alpago, 2020: 101). E-commerce is one of the sectors that will be most affected in this process.
While the coronavirus (COVID-19) negatively affects all sectors, it is seen that there is an increase in the e-commerce world. Physical trade has come to a halt due to reasons such as people's avoidance of physical contact and curfews. Especially the retail sector; It has been one of the sectors most affected by the epidemic due
to curfews and measures, disruption and slowing of the supply chain. In a way, the coronavirus has seriously accelerated the transformation of the trade that is already taking place, in other words, the process of shifting from the physical environment to the virtual environment (Ticimax, 2020).
Today, companies serving in the e-commerce sector are striving to improve their technological infrastructure activities in order to meet the needs of users on the internet in many areas. Increasing access to frequently used institutions such as shopping, education, healthcare and banks with internet infrastructures indicates that a future-oriented technological revolution has been made and that living conditions will be redesigned accordingly. With COVID-19, a global epidemic that has entered our lives in recent days, a rapid orientation to digital has occurred in the world and in our country (Locavore, 2020).
Main part
From Retail Trade to E-Commerce. The world is facing a constant change and transformation. In order to sustain their activities, enterprises have had to adapt to changes in their internal and external environments. If businesses fail to adapt to these developments, they may face the danger of losing their profitability and competitiveness, and perhaps even have to end their activities. In the process of adapting to the latest developments, the methods of businesses reaching their customers and communicating with their customers have also changed (Akyazi, 2018: 604). With the use of the internet in daily life and its rapid development, changes in the form of commercial activities have begun. These shape changes have revealed a different shopping system than traditional shopping methods. This differentiation in shopping has provided the basis for manufacturers to operate in various fields and to be innovative (Yilmaz, 2010: 12).
Recently, the world market has become universal in parallel with the technological developments. This form of commerce, which allows all kinds of commercial transactions to be carried out electronically and in a short time, is called e-commerce (Abdulselam et al., 2015: 263). E-commerce is a concept that has become more prominent in daily life with globalization. The development of the concept of virtual organization with the transition to the information society is one of theimportant reasons that led to the widespread use of e-commerce (Demirel and Eri§, 2019: 195).
E-commerce has found areas of application and improvement in all segments of economic life, with the widespread it has reached and the facilities it has provided. The main reason for these developments is that electronic commerce is instantly accessible on the internet. Electronic commerce is used in most areas of economic life thanks to its features (Gokmen, 2019: 30). With the increase in the world population, the worldwide trade volume is increasing. When we reach 2019, the world trade volume has reached 25 trillion dollars. Out of this figure, e-commerce sales reached 3.5 trillion. In other words, the world e-commerce volume within the total dimension of global trade reached 15% in 2019 while it was 3.6% in 2011. The most striking data in the world e-commerce statistics is that e-commerce exhibits a very rapid growth compared to retail trade. Today, with the digitalization in the world, retail trade is transforming into e-commerce in a coordinated manner (Kaymaz, 2019).
Internet Use and E-Commerce in Today. In addition to the increase in the use of the Internet and mobile devices, e-commerce is growing rapidly due to factors such as different payment methods, progress in product delivery and the increase in the number of conscious consumers. When retail e-commerce sales are examined in the world between 2014 and 2018, the sales volume increased from $ 1.3 trillion in 2014 to $ 2.5 trillion in 2018 (Oran, 2020: 173).
One of the biggest reasons for the increase in e-commerce sales volume is the increase in internet access in the world. According to the report named «Digital 2020: Global Digital Overview» prepared by Kemp, it was determined that 59% of the world population of 7.75 billion has internet access (fig. 1.). There is an increase of 7 percent (298 million new users) in internet usage compared to January 2019.
Fig. 1. Changes in E-Commerce Consumer Sales Source: https://commonthreadco.com
When fig. 1 is examined, according to Common Thread Collective data, while the product group with the highest increase in e-commerce sales was medical products, there was an increase of over 200% in baby products and cleaning. However, there was a decrease in the sales of product groups in the jewellery, clothing, automotive and travel sectors. Especially with the cancellation of holiday plans together with travel
bans, the product groups where the demand for sales decreased the most are travel and holiday supplies.
Another study conducted in this context is in the United States of America. The Slackline website, which prepares reports on the e-commerce sector in the USA, examined the online shopping in the country between March 2019 and March 2020 and listed the «fastest growing and fastest shrinking» e-commerce categories. As a result, it was revealed that the first products that consumers turned to during the epidemic were toilet paper, canned food and other household cleaning products. One of the categories with the fastest increase in demand was disposable gloves with 670 percent, bread making machines with a 652 percent increase, and cough and cold product groups ranked third. However, suitcases and briefcases are ranked as e-commerce products that have experienced the biggest decrease in sales by 77% since March last year. Meanwhile, the demand for cameras (-64%), swimwear (-64%) and bridal gowns (-63%) has experienced significant declines (Styrk, 2020).
On April 4, 2020, consumers across Russia bought 2.6 thousand metric tons of sugar, which was approximately five times less than the volume purchased on March 17, 2020, when the demand peaked due to the coronavirus (COVID-19) outbreak. Between March 31 and April 4, 2020, the demand did not increase for most product categories. These data are presented in fig. 2.
Fig. 2. Food consumption volume during the Covid-19 panic buying in Russia from March 17 to April 4, 2020
Source: https://cTonKopoHaBupyc.p^
Impact of Covid-19 Pandemic Crisis on Demand of Products and Product Groups in the Context of E-Commerce. As people make purchasing choices according to new and constantly changing global and local conditions, the product categories purchased are also changing. In the context of e-commerce, online sales of business-to-business and business-to-consumer physical goods have recently experienced an increase in demand for certain products due to the COVID-19 outbreak, and a decrease has been observed in some of them (WTO, 2020). Russia and the world's assessments relating to changes in demand experienced in some countries the scope for these categories is given below.
Health, Personal Care and Cleaning Products. As news of the COVID-19 outbreak spread and was officially declared a pandemic by the World Health Organization, people responded by stockpiling. Consumers have started to demand more medical supplies such as hand sanitizer and surgical masks, and products such as toilet paper and bread (Meyer, 2020). According to experts, the most important measure in combating the COVID-19 outbreak is hygiene.
In particular, experts warn that hands should be washed frequently and for at least 20 seconds, and also warn about contact with surfaces, items, and items purchased during shopping. This situation has led to significant increases in the sales of hand soap, disinfectant and hygiene products. The increase in demand for these products has started to force the stocks of e-commerce sites. The share of the media in the formation of this situation is also quite high. In particular, reporting on soap, disinfectant and cologne has significantly increased the sales of these products (Meral, 2020). Since the coronavirus has been determined to spread like flu, the demand for health-protecting and health-safety items is rapidly increasing. between 9-16 March in Turkey, compared to the previous week cologne sales 34-fold, sterile gloves 19 times, hand sanitizer, 10th floor, soap 4 times, medical masks 4 times, the toilet paper sales increased 3.5 times. Similar sales trends have been experienced in the USA. During the four weeks that ended on February 22, 2020, medical mask sales increased significantly. Hand sanitizer sales increased by 73% in the same four weeks (Nielsen, 2020). Data regarding this situation are given in fig. 3.
Conclusion
The COVID-19 pandemic crisis has significantly changed the consumption habits of people around the world. Because epidemic diseases have led to radical social changes not only in the period, they lived but also in the long term throughout human history. One of the most important impacts of COVID-19 is that social and commercial life is forcing digitalization to a large extent.
The continuous development of internet technology and the rapid spread of this development globally have affected the consumption cultures of consumers. In the previous years, the concept of consumption, which meant only shopping from physical stores, started to be replaced by online platforms, although not completely, by taking advantage of the opportunities brought by the internet. Thanks to the online platforms, consumers can easily access all the information they want to access about the product, as well as make a comparison of different products.
350
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150
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50 78% 179% 73% 319% 262%
0 54% 19% 47%
34%
1 Week 4 Weeks
Hand Sanitizer ^ Medical Masks 0 Household Maintenance Masks £ Thermometers 9 Aerosol Disinfectants
Fig. 3. E-сommerce Data on Healthcare Products
Source: E-commerce remains poised for growth. URL: https://www.nielsen.com/us/en/ insights/article/2020/nielsen-investigation-pandemic-pantries-pressure-supply-chain-amidst-covid-19-fears (accessed: 01.05.2020).
In the COVID-19 pandemic crisis, there has been a trend in e-commerce that has spread around the world, resulting from people closing home. Compared with the previous year same period when the data are taken as basis in Russia and it is seen that increased volume of e-commerce in the world. However, during this period, a significant increase trend was observed in the demand of some product groups, while the demand for some products decreased. During the epidemic period, consumers turned to especially health, personal care and cleaning products. There has been a decrease in the demand for clothing and accessories products and luxury consumption products.
This paper has been supported by the RUDN University Strategic Academic Leadership Program.
The article has been prepared within the framework of initiative research work No. 061607-0-000 entitled «A Comprehensive Solution for Improving the Economic Efficiency of the Coal Industry as a Condition for Strengthening Energy Safety of Russia», carried out on the basis of the National Economy Department, Faculty of Economics, RUDN University.
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