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E-commerce in the covid-19 worlda challenge for workers and unions

The COVID-19 pandemic has profoundly impacted the global retail landscape and represented a stress test for the commercial sector as a whole. The lockdowns imposed across the world have exposed the strengths and the weaknesses of the different ways of doing commerce in extraordinary circumstances. While some pure e-commerce companies thrived during the lockdown, benefitting from increased online demand, others found their businesses impacted by the disappearance of whole branches, such as plane or entertainment tickets sales. Traditional retailers were also unevenly impacted: while some grocery chains continued to operate their  physical  stores and additionally  enhanced their delivery and click-and-collect capabilities, retailers in sectors where physical stores have been shut – such as fast fashion, home appliances, bookstores or hobby stores  –  found little compensation in selling online.

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Overall, the pandemic has been a boon for e-commerce companies. Global lockdowns and reluctance to  engage  in  physical  interaction  have  pushed  customers  to  electronic  shopping, leading to a substantial increase in the number of orders, as well as in sales volumes and revenues. Profitability has also been boosted, although some companies remain in the red due to continued large-scale investments. The pandemic has stimulated some breakthrough developments among pure e-commerce  players: Amazon’s international retail  division became profitable for the first time ever, Alibaba increased investment in grocery retail, but Rakuten decided to close its German operations since it did not reach a sufficient size to become profitable. 

Although some reports ventured to announce that the pandemic has vaulted forward 10 years in consumer and business digital adoption, we show in this report that the  temporary increase in e-commerce due to the pandemic was in fact lower among bigger companies and was slowed down by numerous bottlenecks among traditional  retailers with e-commerce branches. Even if the pandemic provided beyond doubt an impetus to online sales, its effects cannot exceed a couple of years if we are to express it in “penetration rates” judging on previous years’ growth rate.

A  more  significant  evolution  is  that  the  pandemic  has  enhanced  the  structural  divide  between pure e-commerce companies and traditional retailers in terms of asset utilization. While traditional retailers invest in inventory, plant and property in order to run their operations, e-commerce players have a very important share of their assets held in cash, short term or long-term investments. The trend has been reinforced, as pure players maintained an exceptionally good free cash flow level during the pandemic, not only benefitting from increased sales and margins, but also containing their capital expenditures. Pure players are now richer and more investors are pouring their money into these companies.

In  the  competition  with  pure  players,  traditional  retailers  were  already  losing  ground  before  the  pandemic  struck.  Bookstores and toy stores were bleeding for years, and more recently hypermarkets started to feel the pressure from e-commerce retail. Although large hypermarket chains have made efforts to adapt to market trends, competitive pressure from hard discounters, convenience stores and e-commerce has led to a decrease in their revenues, especially in the non-food  segment.  Their  investments  in  e-commerce  branches  have not proved to be lucrative, as delivering goods require huge commitments in resources. Recent reports showed that most  common  online  models  for  grocery  retail  are  running  on  negative  margins  and  are  not  sustainable  as  standalone  operations. However, grocery companies continue to invest in their e-commerce branches as this is required by financial market investors and is stimulated by the fear of missing out against competition if one day grocery e-commerce becomes profitable. The  case  of  Ocado  in  U.K.  is  illustrative  in  this  respect: the supermarket chain without supermarkets has yet to make a profit since its foundation in 2000, but has become the  second  most  valued  grocery  retailer  in  Europe  only  behind Ahold Delhaize.

Fast-fashion retail was hit particularly hard by the pandemic. Sales dropped dramatically in March-April as physical stores closed. The double- or triple-figure increases in online sales could do little to compensate for the losses, and profitability plunged to unsustainable levels during the lockdown quarter. The fast-fashion  business  model  is  based  on  a  stretched  supply chain in which goods are travelling fast from factories to stores with very few distribution warehousing capabilities. In this situation, structural bottlenecks limited the possibility to  promote  and  even  to  service  online  orders  during  the  lockdown.   Indeed,   in   the   fast-fashion   retail   industry   e-commerce is rather seen as a new function of the integrated business model rather than a separate selling channel. Even before  the  pandemic  major  retailers  from  the  sector  were announcing    impressive    expenditures    for    developing    omnichannel solutions, and the lockdown has only stimulated their investment appetite.

After  COVID-19  passes,  retail  companies  will  want  to  be  prepared  for  future  crises  and  will  likely  increase  their  investments in robotics and automation. Higher e-commerce demand  during  the  pandemic  led  to  an  increased  usage  of  robots in warehouses and automated checkouts in stores. In these  circumstances,  pure  players  seem  better  placed  to  succeed  in  an  automated  and  robotized  world,  at  least  because they hold large amounts of cash that can be invested in research and development.

Trends  towards  working  from  home  stimulated  by  the  pandemic  will  increase  the  use  of  cloud  services,  and  pure  e-commerce  players  such  as  Amazon  and  Alibaba  will  only  benefit  through  their  web  services  divisions.  The  increased  demand for cloud services will bring more cash to e-commerce giants, money that could be channelled into business practices that have little to do with modernization, such as capturing market    shares    through    predatory    pricing,    destroying    competitors and building monopolies that will sooner or later rise prices and capture all the profits.

It has been reported for a long time already that pure players’ labour standards are below acceptable levels. Amazon, which relies  on  hundreds  of  thousands  of  workers  in  warehouses  and delivery services, has notoriously put in place extremely low labour standards to get a comparative advantage against competition. Generally speaking, the explosion of fulfilment capabilities  for  e-commerce  across  the  world  has  increased  the number of warehouse jobs, but the quality of these jobs is far from satisfactory.

It  is  believed  that  e-commerce,  automation,  digitalization,  and artificial intelligence have the potential to increase wealth to  unprecedented  levels,  but  the  fundamental  question  is  how  this  wealth  is  going  to  be  distributed.  Unionizing  and  collectively representing workers in e-commerce has proven to be a difficult task – also due to openly anti-union policies put in place by the tech giants. Digital dividends are almost exclusively collected by executives, shareholders and venture funds, while workers are struggling to deliver under tighter and faster requirements with the added constraints imposed by sanitary regulations.

Besides  the  question  of  labour   standards,   the   rise   of   e-commerce  poses  another  significant  societal  challenge:  online commerce is notorious for its fiscal underperformance, and big tech multinationals are known for their tax avoidance. In the context of the COVID-19 crisis, this issue becomes even more prevalent, as the pandemic has exposed the structural underfinancing  of  health  systems  across  the  globe.  In  this  respect, trade unions are calling not only for respect for the rights  of  workers  in  the  e-commerce  sector,  but  also  for  a  fairer distribution of digital dividends in society as a whole, promoting  a  decent  level  of  social  protection  for  all  in  all  circumstances.

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