26 May 2020

Lockdown: are platforms the winners in the Covid-economy?

By requiring many businesses to close during the lockdown, Covid-19 changed consumer behaviour overnight. Which retailers have benefited most, digital platforms or local independents?

 

175,000. This is the number of job openings in Amazon’s warehouses and delivery networks worldwide since the start of the lockdown. Meanwhile, in the USA, dozens of businesses have been forced to lay off millions of employees, causing workers and entrepreneurs alike to apply to work for the American web giant. So does this mean web giants are the big winners when it comes to the Covid-19 crisis?

 

A contrasting situation

According to the economist Daniel Cohen, the crisis will accelerate the development of a new type of capitalism: digital capitalism. What (or who) is driving this? Platforms such as Amazon, Uber, Deliveroo and Airbnb, through their ability to connect sellers and buyers via optimised data, are orchestrating this new market. However, not all providers are doing so well in this crisis. If Amazon has seen a massive increase in activity, the situation is more difficult for companies like Airbnb and Uber, who are more dependent on heavily impacted sectors such as travel and social activities.

 

What new consumer habits are forming?

More and more French people say they’re buying from Amazon (ObSoCo), and indeed its e-commerce market share rose to 22% en 2019 (Kantar). Post-crisis, we can anticipate long-term changes in consumer habits. From home deliveries to any-time ordering or using data to personalise interfaces, there are many indications that the changes will last. The Covid-19 crisis has prompted traders to adapt to new mandates.

 

Retailers are becoming more dependent on platforms

Retailers often rely on platforms to extend their market reach. Platforms sell their own and third-party products from retailers who have increasingly relied on these sites to compete with Amazon’s products, especially during the lockdown. A 2016 study confirms that rather than aiming to be no. 1 on the market, these large platforms aim to be the entire market, where all commerce occurs. This is a risky strategy for a small retail business if the majority of their sales are fulfilled via a large platform. Any decision by the latter, such as to only sell essential items during the lockdown, has a direct impact on their income.

 

Local initiatives are gaining in popularity

Where there is a crisis, there is creativity. In recent weeks, several online sales platforms have sprung up among producers, especially food. The Nouvelle-Aquitaine food agency brought together more than 1,800 producers and 40,000 consumers in just a few weeks via its local produce social enterprise. And these types of initiatives are emerging all over France, even in big cities. So will small traders and local independent retailers also have their day? This will largely depend on consumers, says the economist Philippe Moati. Worldviews coexist, but it’s too early to rule on definite post-crisis consumer habits just yet.