Industry Insight

COVID-19 Shifts Consumer Behaviour to E-Commerce. Can Global Supply Chains Keep Up?

The evolving consumer behavior, government mandated lockdowns, and massive buying hysteria in 2020 was a catalyst for the changing grocery purchasing trends. In this article, we analyze the implications that COVID-19 had on supply chains, consumer buying behavior, and the push for constructing additional warehousing space.

The Perfect Storm

The first wave of lockdown caused a widespread panic and frenzy which triggered a perfect storm that would expose vulnerabilities in the global supply chain.  Very few companies had the inventory buffers to absorb the significant discrepancy between supply and demand. We also witnessed a backlog in customs processing at borders, which caused significant delays for many products crossing international lines. A labour strike at the port of Montreal certainly did not help to alleviate the pressures on Canadian manufacturers.   Frantic shoppers hoarded the most basic of necessities–panic buying at grocery stores caused a sudden shift in consumer behavior. Supply chains were strained causing a demand glut and shock that would be felt for months. To add further complications to the problem, temporary closures at food processing and packaging plants became a regular occurrence due to workers testing positive for the virus.

Cause and Effect

While the public was forced repeatedly to hunker down, a sweeping surge in e-commerce and home delivery took place. The pandemic transformed and created a shift in paradigm for supply chain models, causing an increased demand for storage and warehousing.   The pandemic drove demand for food and other goods in retail and direct to consumer (D2C) channels to astronomical levels, which increased the construction of general warehouses and storage space.

The Rise of a Trend

The surge in demand for e-commerce grocery deliveries and the challenges caused from the strain on supply chains prompted a rapid acceleration in the construction of additional warehousing space. McKinsey found that in “the United States, the penetration of e-commerce was forecast in 2019 to reach 24% by 2024; by July 2020, it had hit 33% of total retail sales”. Simply put, the “first half of 2020 saw an increase in e-commerce equivalent to that of the previous ten years.”  The increasing demand for e-commerce deliveries and fresh foods without preservatives fueled the growth of the supply chain infrastructure from end to end. These shifts in trends are emphasizing the additional space needed to house the yet to be delivered products. We are currently seeing a huge rise in warehouses and distribution centers as a direct result of needing space.

Every retailer, consumer-packaged goods (CPGs) manufacturer and producer of all perishable goods came out of 2020 with a rather important lesson: to evaluate, examine and analyze their supply chains. The tremors felt in 2020 served as a lesson to further optimize and enhance an ever-changing landscape, and to ensure that the lessons learned will lead to better preparation in logistical planning. In writing this article, we are seeing a massive undertaking in rejuvenating a deteriorated supply chain for some and a colossal mission to construct well over 100 million square feet of cold storage alone in the next five years across North America (an investment in capital north of $25,000,000,000 USD).    The technological advancements in automation are paving the way for state-of-the-art warehouses across North America. The battle of two tales–an ongoing saga between Amazon and Walmart–is at the forefront of this transformation. Both behemoths are investing large sums of money on hefty projects to counter the shift in consumer buying behavior and to capture market share.   One thing is clear, COVID-19 caught a lot of companies off guard, fueled the growth of some and prompted several to rethink their supply chain strategies. Light is at the end of the tunnel with the global vaccination campaigns, and we can all agree that this virus has acted as an agent of change and a propeller for companies to readjust the supply chain.

Matcom as a Leader & Trusted Partner

Matcom is perfectly positioned to support and to contribute to the expansion in general warehousing structures. Our team of skilled and experienced Project Managers, Millwrights, Pipefitters, Steamfitters and Welders along with the best tools are available to assist in any project. We are veterans when it comes to warehouse automation system and mechanical installations.

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