E-commerce Industry Trend Prior to Covid-19:
The e-commerce sector was the underdog in India during the pre-covid-19 era. People preferred to shop from brick and mortar establishments rather than e-commerce platforms. The e-commerce industry was expected to grow at a slow rate of 4.1% from 2018-2021.
Graph1: E-commerce sales in India prior to covid-19
E-commerce Industry during the Covid-19 Pandemic:
The first wave of the covid-19 pandemic in India accelerated the growth of e-commerce industries as there was a considerable shift in consumer buying behavior. Indians preferred to spend only on essentials due to government-imposed lockdowns. Indians from tier-2 cities also started switching to e-commerce platforms resulting in the surge of e-commerce sales by 8%.
Picture1: Voice of e-commerce customer
The government of India paused the operations of brick and mortar companies which inevitably impacted their sales. Looking for a new way to earn revenue, these companies started establishing their online presence to keep up with the evolving trend. The new entrants into the e-commerce sector brought in a wider customer base, increasing e-commerce sales. The industry is expected to boom reaching INR 7227 billion by 2024 driven by the covid-19 pandemic.
Graph2: Online retail spending in India: 2015-2021
Reference: The Hindu Business Line
Impact of Covid-19 on the E-commerce Industry:
The onslaught of the covid-19 pandemic also resulted in panic-buying on e-commerce platforms, thereby creating a surge in demand causing them to choke due to the backlogs in orders.
E-commerce companies that were technologically driven failed to accept and deliver orders though they had sufficient inventory and stand-by delivery executives.
Picture2: Voice of customer
So, what went wrong with reputed e-commerce companies who were always a step ahead? Was the lack of automation in warehouses causing a hindrance to the growth of e-commerce companies?
Contrary to the popular belief that e-commerce warehouses in India are automated, the warehousing market is labor-intensive. Here are some of the key points which indicate the dependency of e-commerce companies on manual labor:
1. Pickers were paid approximately INR 10,000-12,000 per month and hence automation was not a priority.
2. Prior to the covid-19 pandemic, the availability of labor for e-commerce warehouses was bountiful and cheap.
3. E-commerce warehouses are emerging as one of the leading employers pushed by government incentives. As of 2018, the Indian warehousing market has provided employment to more than 22 million people.
However, The first and second waves of covid-19 created a severe shortage of laborers and the cost of hiring went up by up to 40-50%. About 50-60% of manpower cost is spent on picking orders in warehouses.