How the War in Ukraine Affects eCommerce
General, Price-monitoring, eCommerce ·It’s beyond saying that human casualties are the most important consequence of any war. Unfortunately, during this month, the world has been witnessing another conflict - this time between Russia and Ukraine. The war in Ukraine has already begun to seriously affect the worlds’ economy, therefore, eCommerce as well.
Compared to the suffering of people who lost their loved ones, homes, and memories, economic considerations are minor. Nonetheless, political and business leaders are also deeply concerned about the economic effects. Therefore, it seems that everyone is trying to find a way to minimize the negative effect on their company and the economy in general.
As new sanctions against Russia are emerging daily, new problems for the eCommerce sector keep appearing too.
Let’s see what are the most important issues that the eCommerce industry is trying to solve.
Supply chain disruption
The global supply chain has still not fully recovered from the impact of Covid-19, yet, new problems came along. The economic sanctions are creating daily pressure on the supply chain, and everyone is trying to find the best way around it.
Interos, a supply firm from the US has provided some concerning numbers regarding this situation. According to their data, around 300,000 US companies are supply-dependent on Russia or Ukraine. A brand from the US can, for example, think that their manufacturer is also from the US, therefore, they won’t be affected by this crisis. But, what if that manufacturer gets the materials from Europe? As you can see, Interos is showing that many US companies are in fact facing similar problems.
Needless to say that the supply problems go far away from this. Russia is one of the worlds’ biggest exporters of gas, fuel, copper, gems, iron, wood, and precious metals. On the other hand, Ukraine is a big supplier of agricultural fertilizers and agricultural products in general.
The whole world is dependent on these materials, hence, every sector, including eCommerce will inevitably feel the consequences of the war in Ukraine.
Rising costs
When there are problems in the supply of raw materials, increases in the prices of all products are inevitable. The first price change felt all over the world was diesel. Food prices went up as well, mostly due to the wheat price since Russia and Ukraine make up a third of global exports.
When it comes to online sales, the decrease is visible in comparison with the same period last year.
Changes in consumer demand
As the economy has not yet recovered from Covid, neither have consumers. We all remember how consumers all over the world were creating supplies when the pandemic started two years ago. Due to the lockdowns, the eCommerce industry has faced probably the biggest growth ever. Consumer behavior changed, and even when the restrictions eased, many people continued to buy online.
Due to the current war in Ukraine, changes in customer behavior and demand are happening again. Since the supply chains are disrupted, prices have gone up, therefore, consumers are very cautious with buying non-essential things.
Thus, besides dealing with supply problems, eCommerce companies are also trying to address the changes in consumer demand. Inevitably, this requires monitoring the market and the prices more frequently than ever before. Price monitoring is the safest way for eCommerce companies to react timely to all market changes. Many companies were already using some of the price monitoring tools available on the market, but that number keeps increasing in these circumstances.
War in Ukraine and inflation
The war in Ukraine is already affecting inflation worldwide. Whenever the changes in inflation happen, interest rates and borrowing costs for companies and consumers change as well. Of course, these changes don’t go in favor of the companies and consumers. For example, the US Federal Reserve has already increased interest rates, and more raises are expected to happen in the following months.
Sanctions against Russia also include their banks being excluded from the SWIFT system, which only complicates the matter further. Additionally, companies such as Mastercard and Visa have also dropped Russian institutions and companies from their network, making cross-border payments even more difficult.
Even if the eCommerce companies such as Amazon or eBay have a huge market besides Russia and Ukraine, the flow of their shipments through supply chains will decrease due to the increasing costs.
Summing it up
The global economy is constantly under different changes, but many experts agree that this is one of the biggest crises since World War II. Even though eCommerce usually facilitates trades, in serious crises like this one, even the eCommerce sector can’t go unharmed.
In these uncertain times, new problems can arise on a daily basis, so it is very difficult to predict what will happen even in the very near future.
How is your eCommerce business coping with the war in Ukraine? Do you have any advice for your colleagues around the world? Feel free to share them in the comments.