How COVID-19 Has Impacted Both Supply Chains and Price Gouging

With social distancing and lockdown orders still in place around the world, the COVID-19 pandemic has caused a great consumer shift. Instead of walking into stores to purchase products, people are veering their attention to online shopping.

Pre-COVID, e-commerce was already a booming industry. But now, e-commerce is expected to surge in retail growth by $6.5 trillion within the next three years. E-commerce, without a doubt, has been instrumental in maintaining the global economy this past year. However, international and domestic supply chains alike have also experienced some troubles along the way.

According to a report from the World Trade Organization, there’s been some negative impacts on e-commerce, such as poor supply chain management and price gouging. Here’s how the global pandemic has impacted e-commerce today, and how it will impact the future:

Enforcing Price Gouging Laws

Due to the pandemic, retailers have attempted to take advantage of the sudden disastrous state of their economy by spiking the prices of products which are in high demand. But per the government’s request, supply chain businesses have become subject to new price gouging laws. Circumstance likes these cause for new rules and regulations to be put into place, most of which are unfamiliar to small businesses.

During the COVID-era, over 30 U.S. states have had to use emergency legislation to implement price gouging laws against food, medical products, and other key services. Back in March of this year, Attorney General William Barr issued a memo concerning the Department of Justice’s COVID-19 response to hoarding, price gouging, and other criminal activities. “We will not tolerate bad actors who treat the crisis as an opportunity to get rich quick,” he writes.

Barr goes on to discuss how activities like price gouging actually inhibit the government and healthcare providers from appropriately combatting the spread of the virus.

Barr continues, “The task force will develop effective enforcement measures, best practices, work closely with HHS [Human and Health Services] as they designate particular items and equipment, and coordinate nationwide investigation and prosecution of these illicit activities.”

Congestion In Supply Chains

The general flow of goods from one point to another has also been impacted. Not only has the virus affected workers literally — causing mass staffing shortages — but also the rate at which products are produced and shipped.

When it comes to food services, Wall Street Journal commodities reporter Kirk Maltais comments, “The process of being able to get it from the farm to processing to your store shelves, that’s the issue that’s come up.” Many farmers simply can’t transport their produce to the grocery stores fast enough.

Maltais goes on to say the effects COVID-19 has continued to present could have some longer lasting consequences. With numerous weeks of shipments to make up for, the virus has slowed down the production process which could take years to make up for.

Postal Services Struggle to Keep Up, While E-Commerce Looks Closer to Home

Another Wall Street Journal post discusses the delays postal package services are experiencing. With e-commerce growing at an even faster rate, the shipping services are struggling to keep up.

“The slow deliveries have complicated business for e-commerce sellers who rely on the Postal Service to ship packages at affordable rates, and tracking services have added to the frustrations, with some items appearing to get stuck at certain locations or vanishing altogether,” reports author Jennifer Smith.

Furthermore, with an increasing amount of restrictions on international shipping, it’s very likely that we’ll see more shipping and manufacturing strictly within the U.S.

According to an article from Practical Ecommerce, domestic e-commerce shipping has done very well compared to international shipping. While domestic carriers are still adjusting to the heavy volume of shipping and delivery, they have certainly stepped up to the challenge.

Mario Paganini, head of marketing for Shippo, says, “USPS, UPS, and FedEx have all remained very reliable for domestic shipments amid COVID-19 … Despite the well-reported delivery delays for Amazon Prime, we haven’t seen much to indicate degradation in speed or service from the actual shipping carriers.” This may be setting a precedent for the future of e-commerce.

Juan Marcelo Gomez, an expert in supply chain management, indicates that e-commerce business may begin to look for new and original shipping and delivery strategies instead of relying on outside existing services.

Moving Forward: Adapting to Consumer Behavioral Tendencies

While there continue to be concerns over how COVID-19 has affected supply chain management and price gouging, e-commerce and online shopping still seems to be the way to go.

The WTO report goes on to explain the future of online shopping and the behavioral change in consumers. Will consumers go back to shopping in stores, or will they stick to online shopping?

“The pandemic made a large segment of the population realize how convenient it is to shop online. It was a test drive for customers,” says Ming Hu, professor of operations management at Rotman School of Management.

Consumers have already seemed to settle into living their daily lives online. People tend to stick with what’s familiar, and now that customers have become used to shopping online, they may have created a practice they prefer to maintain.

There’s no precise method to ascertain how consumers will adjust to the post-COVID era, and whether or not they’re stick to online shopping. Regardless, businesses are certainly adapting to the growing online occupancy.

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