Impact of Covid-19 on e-Business in China
The onset of the Corona Virus Disease, also known as COVID-19 was unexpected. The ensuring pandemic came as a surprise to many policy makers and businesses. According to the World Health Organization (WHO), COVID-19 is an ongoing pandemic classified under the coronavirus disease 2019. It is caused by inflammation of the respiratory system due to acute and severe respiratory virus of class SARS-CoV-2 (Cruz & de Oliveira, 2020). The first instance of Covid-19 was reported in the Chinese province of Wuhan in December 2019. The virus was declared a public health emergency on 30th January, 2020 and later declared an international health pandemic. As of 7th June, 2020, the world has more than 6.99 million cases of coronavirus. The pandemic has so far been reported in 188 countries and has resulted into 410,000 deaths (Cruz & de Oliveira, 2020). More than 3.13 million of the patients have recovered. Coronavirus is spread whenever people are in close proximity to each other. It is disseminated as small droplets produced when a person coughs, talks, or sneezes. The virus can travel through the air or contaminate services for a prolonged period of time. This aspect makes the virus very infection.
There is no scientifically proven cure except supportive therapies using ventilator machines. Because of the difficulties in managing the disease, local and international governments across the world have resorted to doing intensive research on vaccines while also enacting policies to break the chain of the spread of COVID-19. This has resulted into measures that curtail the freedom of movement and interaction among people. Ozili and Arun (2020) categorizes these policy responses into four groups; monetary policies, fiscal measures, public health measures, and human control measures. Monetary measures are aimed at safeguarding the national and international economies from collapse. Fiscal measures are taken by governments to support local businesses and individual consumers. Public health measures such as public quarantine, border restrictions, border quarantine, stay-at-home policies and social distancing policies are aimed at reducing interactions and the resultant spread, while human control measures such as shutdown of businesses and institutions, and suspension of flights are all aimed at limiting interactions and potential exposure to the virus (Ozili & Arun 2020). As much as these policies are effective in limiting the spread of COVID-19, it has both positive and negative impacts on businesses.
- Problem Statement
In particular, the public health and human control measures have had a negative impact on most businesses. For instance, the curtailed movement of people forced the closure of companies and businesses around the globe. This means that manufacturers can no longer produce, while buyers are forced to work on a budget. This means limiting their purchase of non-essential goods while focusing on the basic commodities such as food. Lockdown of economies further mean no movement of goods and raw materials thus limiting the production capacity of economies. This is the case with China which is a universal manufacturer of different commodities sold on global markets. The country was first to experience COVID-19 which led to closure of industries. On the contrary, Ozili and Arun (2020) note that stay-at-home policies limited movements, thus forcing e-commerce businesses to deliver goods to people as physical stores were closed. This is an advantage for the few e-businesses providing essential goods and services. Providers of on-demand/ streaming services also benefited from the increased demand for indoor entertainment as millions of people were quarantined and curious to catch up with the latest news and events around them. This business research paper evaluates the impact of COVID-19 on electronic businesses (e-Businesses) in China.
- Rationale for the Research
Backed by this background, this research intends to ascertain the impact of the virus on e-business activities around China. The study is rationalized by the need to understanding how externalities impact electronic forms of businesses in a given geographical location. The research will be useful to businesses as it emphasizes the necessity of e-business. In addition, it informs policy makers on the need for effective fiscal policies to protect e-businesses during pandemics (Ozili & Arun 2020). It further educates students on the potential effects of externalities on the business environment and how to strategize in advance. Upon completion, this study will benefit all these interest groups by providing updated empirical data.
- Statement of Research Objectives and Purpose
- To establish whether e-business in China was and continues to be affected by COVID-19
- To evaluate the impact of coronavirus on consumer behavior
- To determine the extent of impact of coronavirus on Chinese e-businesses.
It is expected that the main findings will identify the negative impacts of COVID-19 on e-businesses. However, there are contrasting reports showing that coronavirus boosted e-business as the physical shops and stores experienced mandatory closure. These anticipated findings inform the hypothesis for this research.
H1: Is coronavirus responsible for the change in consumer behaviors in favor of e-businesses in China
H2: Is coronavirus responsible for the change in consumer behavior against e-businesses in China.
- Definition of Terms
COVID-19 – Coronavirus disease 2019, also COVID-19 is public health crisis and pandemic caused by the infectious disease of the SARS-CoV-2 family that affects the respiratory system.
e-Business – any type of business that is done through the internet and encompassed a range of digital processes used to ensure efficiency of supply chain and optimization of value proposition.
Buyer/ consumer behavior – the study of organizations, groups, and individuals and all the activities they engage in while purchasing and disposing services and goods.
- Literature Review
All industries and markets have been affected by Covid-19 and the resultant measures taken by governments to combat its spread. Firms have sought strategies to respond rapidly and avert the negative impacts. The global economy continues to suffer the negative impacts of the virus as it has disrupted the supply and demand dynamics. Ozili and Arun (2020) report that as much as the Chinese e-business sector was initially overwhelmed, it adapted quickly and thus, giving important lessons to other e-businesses around the globe.
- E-Business in China
The e-Business industry in China is in the growth phase of the industry life cycle. This means it is experiencing rapid growth. This statement is backed by Shan and Wade’s (2020) observation noting that e-commerce accounts for 35% of all the retail activities in China. In addition, Williams (2020) anticipate that by end of 2020, Chinese e-businesses would have reached half of the global markets. The aggressive growth dates back to 2016 when e-business transactions in China reported $2.1 trillion in value and a 25% annual growth (Williams, 2020). Because of these statistics, e-commerce has registered the most rapid growth in the world. The popularity of e-business is attributed to factors such as ease of shopping and the promise of door-step deliveries. Secondly, most of the towns and cities have access to fast and reliable internet. Third, access to cheap electronic devices such as laptops and smartphones which support the different applications for e-commerce. With the onset of covid-19, customers find it convenient and safer to order for deliveries online rather than visit crowded malls and physical stores. In addition, the e-commerce platforms are becoming more reliable, user friendly, and introducing safety and security features to protect consumers.
Some of the most preferred e-business sites include Tmall, JD.com, Alibaba, Suning, VIP, PinDuoDuo (PDD), Yihaodian, Gome, Amazon, and Yixun among others (Williams, 2020). Since COVID-19, consumer behavior has significantly changed as consumers changed their buying habits in favor of cleaning equipment and groceries. As a result, the initial spending on lifestyle products, fashion, and consumer electronics reduced. These changes in buying patterns are attributed to the anxiety among customers who worry more about food and basic household stock. Figures by Williams (2020) show that online sale of foodstuff increased by 26.4% in January and February. It is expected by end of 2020, the online grocery market in China would have grown by 62.9% compared to 29.2% reported in 2019 (Williams, 2020). The e-business space in the foods segment is dominated by JD.com’s 7 Fresh Supermarkets and Alibaba’s Hema, which offers4/7 food deliveries for online customers.
- Impact of Covid-19 on e-Commerce and Chinese Economy
COVID-19 has immensely affected the e-business industry in China. The industry is growing rapidly with many innovative B2C businesses formats emerging. Regardless, consumers tended to trust the established and dominant market players to make purchases during the pandemic (Williams, 2020). The customers made such decisions based on reviews by other customers. Likewise, their decisions were informed by information that the dominant e-business sites use super apps and integrated e-payment systems that are secure. The influx of e-business during the pandemic was backed by cultural differences where most Chinese customers use smartphones as transaction devices rather than for entertainment. Williams (2020) reports that the adaptability of the Chinese customers to e-business was faster than that of the Western consumers. After the SARS outbreak in 2003, China had intensely invested in e-businesses and this increased their preparedness and resilience in withstanding the human control and public health measures. The Chinese customers seem more comfortable using e-business compared to the traditional bricks and mortar stores. With this reality, Chinese e-business firms introduced innovative response strategies. The main challenge however is the fact that manufacturing operations were stopped during the peak seasons of the pandemic. Therefore, as much as customers shifted to using e-businesses, demand exceeded supply. The economy was negatively affected because of the monetary and fiscal measures taken by the government (Ozili & Arun 2020). The customers had to cut costs and reduce expenditure because of the uncertainty.
- Theories on Consumer Behavior
Theories of consumer behavior describe how consumers allocate limited resources in purchasing services and goods to optimize their utility. Consumer behavior can be explained using three dynamics; budget constraints, consumer choices, consumer preferences (Zhang & Benyoucef, 2016). The theory of reasoned actions argues that consumers actions are determined by anticipation of receiving a favorable outcome. The theory emphasizes that consumers are rational actors whose actions are aimed at giving them the best bargains. The Engel, Kollet, and Blackwell (EKB) model further notes that consumers make decisions after a critical thought and analysis of available options. The motivation-need theory as posited by Abraham Maslow further explains why customers opted to purchase basic goods and safety goods rather than pursuing other levels of the Maslow’s hierarchy of needs. Hawkins Stern Impulse Buying theory explains why some customers made impulse purchases and panic buying after the announcement of lockdown and stay-at home measures (Murphy & Dweck, 2016). The change in consumer behavior as a result of COVID-19 is summarized using the conceptual framework below.
Figure 1: Conceptual Framework on the Impact of COVID-19 on e-Business in China
This research uses case studies, qualitative and qualitative data to collect and analyze empirical data on the impact of coronavirus on e-business in China. The approach to research is governed by the research onion model which outlines the philosophies, approaches, strategies, choices, techniques, procedures and time horizons for the research study.
- Research Onion Model
The research uses the interpretivism philosophy since it requires researchers to visit and interact with the research population to collect data. This philosophy was used to collect objective data. It contrasts the positivist philosophy which encourages researchers to use subjective findings in their research (Saunders, Lewis & Thornhill, 2009). Given that this research uses hypothesis to explore the impact of COVID-19 on e-businesses in China, the deductive approach will be used to explore underlying factors that determine correlation between the dependent and independent variables. The research strategies used include case studies, desk research, interviews and surveys. The research used both the qualitative and quantitative research choices, also known as mixed methods (Saunders, Lewis & Thornhill, 2009). They complemented each other in ensuring a balanced paper that justified the quantitative values using qualitative observations.
Research participants were selected using the research sampling methods. For this research, participants were selected using convenience sampling. This approach to sampling is easy since it entails grouping respondents and eliminating those that fail to meet set research parameters. The use of convenience sampling was set on the Survey Monkey online software to help identify 60 respondents working as managers and sales executives for the top e-business platforms in China. Some of the demographic variables considered include; gender, age group, income, and occupation.
- Research Design
The data collection process was divided into three main sections to cater for the mixed methods research needs. The process begun with the identification of reliable and credible case studies on the impact of COVID-19 on e-business in China. The second approach to data collection was using the survey monkey online tool to collect data from the 60 research participants. The third approach was identifying secondary sources with relevant qualitative data that was used to analyze the primary data collected through the survey (Sahay, 2016). The raw data was analyzed using the IBM’s SPSS software.
- Data Collection Plan
The surveys were conducted online thus eliminating the need for physical instruments of collecting and recording data. Sets of survey questions were forwarded online to the respondents who were given two days to respond. The responses collected were then tabulated and analyzed.
- Proposed Analysis of the Data
The analysis expected to establish the connection between the two variables for this research. That was identifying whether COVID-19 had negative impacts on the e-businesses in China or whether this business model benefited from the shift in consumer behavior and buying patterns in favor of online channels. The proposed results inferred that there is a strong correlation between externalities and the performance of e-business sector in China. As a result, the data will help policy makers to make progressive and futuristic policies in anticipation of the unknown. Students will have current information on the impact of coronavirus on e-businesses, while the executives in the e-business industry will gain an insight on consumer behavior and how they can align their value propositions to capitalize on the change in purchase behavior.
An analysis of the raw data collected using the survey monkey online tool led to the following demographic variables.
Figure 2: Summary of the Demographic Variables
The demographic variables are a representation of the age group, gender, occupation, and income of the research respondents. This data was analyzed using the SPSS software thus assigning percentages to the variables. As shown in figure 2, more men were involved in the research than women. The dominant age group was 26-30 years. This group is considered both tech savvy and has a disposable income. As evident in the income bracket, their annual income range between $20,0001 to $25,000. The respondents selected for the research worked in the sales executive and management capacities.
- Reliability Tests
The variables were subjected to a reliability test to establish their contribution to the research. The findings are summarized as follows.
Figure 3: Reliability Test
Reliability tests measure the consistency of the findings and the research process as a whole. As evident in figure 3, the Cronback’s Alpha is less than 1.00, which justifies hypothesis H1 noting that coronavirus encouraged positive change in consumer behavior in favor of e-business.
- Impact of COVID-19 on e-Business in China
In general, the statistical testing affirm that coronavirus had a negative impact on e-business in China. As much as the e-business industry registered a 26.4% increase in demand for food and cleaning products, the demand for other products especially fashion and cosmetics stalled. This creates a scenario where the consumers changed their behavior out of panic and not motivated by rational thinking as explained using the consumer behavior theories (Ajzen, 2015). Apart from these findings, it is notable that the coronavirus has a negative impact on e-businesses in China as demand exceeded supply. This was a result of the closure of manufacturing processes and industries. The overreliance on e-businesses to meet each of the needs posed by the customers led to an instant surge that led to overstraining of the current e-business infrastructure (Hasanat et al. 2020). Likewise, the resultant shortage due to increased demand infers that some of the e-businesses strained to work under the lockdown which potentially tarnished their image. These views are expressed by 77% of the respondents who observe that as much as their e-commerce sites attracted more new customers, some were disappointed by the stockout of essential commodities that were being bought in panic.
This research report established that COVID-19 had mostly negative impact on the e-business industry in China. In spite of the positive outcome such as shifts in consumer behavior in favor of e-commerce sites, as evident with the growth in number of new subscribers by 29.2%, the e-business industry reported a rapid surge in demand which surpassed supply. This translated into disappointed customers. This research informs the future of policies in China where the government should invest in improving the e-business infrastructure as it can contribute towards economic growth even in crisis. Managers in the e-business sector should invest in upgrade of platforms to accommodate surges in number of registrations during pandemics in future. Students should acknowledge that externalities have both positive and negative impact on productivity of different sectors. They should therefore be critical in their analysis of the impact of externalities on a business.
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