1 ISSUE: 2021 No. 40 ISSN 2335-6677 RESEARCHERS AT ISEAS – YUSOF ISHAK INSTITUTE ANALYSE CURRENT EVENTS Singapore | 7 April 2021 Online Grocery Markets: Impact of Pandemic on Consumers Cassey Lee* The Covid-19 pandemic created both demand and supply shocks in online grocery markets. Demand shifted noticeably from brick-and-mortar stores to online grocery markets. Here, a grocery store worker restocks eggs in a Singapore supermarket on February 8, 2020. Photo: Martin Abuggao, AFP. * Cassey Lee is Senior Fellow at ISEAS – Yusof Ishak Institute. The findings reported in this essay are derived from the project on algorithmic pricing and competition funded by the Ministry of Education under the Social Science Research Thematic Grant. The author thanks Divya Balakrishnan, Chua Jin Siang and Gloria Lin for assistance in data collection. He is also grateful for useful comments and suggestions from Jayant Menon, Francis Hutchinson and Nicolas Lainez. The usual caveat applies.
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ISSUE: 2021 No. 40 ISSN 2335-6677
RESEARCHERS AT ISEAS – YUSOF ISHAK INSTITUTE ANALYSE CURRENT EVENTS Singapore | 7 April 2021 Online Grocery Markets: Impact of Pandemic on Consumers
Cassey Lee*
The Covid-19 pandemic created both demand and supply shocks in online grocery markets. Demand shifted noticeably from brick-and-mortar stores to online grocery markets. Here, a grocery store worker restocks eggs in a Singapore supermarket on February 8, 2020. Photo: Martin Abuggao, AFP. * Cassey Lee is Senior Fellow at ISEAS – Yusof Ishak Institute. The findings reported in this essay are derived from the project on algorithmic pricing and competition funded by the Ministry of Education under the Social Science Research Thematic Grant. The author thanks Divya Balakrishnan, Chua Jin Siang and Gloria Lin for assistance in data collection. He is also grateful for useful comments and suggestions from Jayant Menon, Francis Hutchinson and Nicolas Lainez. The usual caveat applies.
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EXECUTIVE SUMMARY
• The Covid-19 pandemic created both demand and supply shocks in online grocery markets.
• Demand shifted noticeably from brick-and-mortar stores to online grocery markets. On the supply-side, control measures disrupted production and more stringent border controls slowed down the movements of goods.
• Intermittent episodes of stock unavailability were observed for some online grocery products and retailers. For some products, prices increased slightly but only for a short duration. Thus, the pandemic is likely to have impacted consumers’ welfare in online grocery markets through product unavailability (quantity) rather than prices.
• There is a need for policymakers and regulators to collect and examine real-time data in online markets to ensure that these markets remain competitive and robust against unexpected disruptions.
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INTRODUCTION The Covid-19 pandemic has changed consumers' shopping habits, perhaps irrevocably. Consumers have been buying more products and services from online markets. An indicator of this is the increase in the volume of e-commerce in 2020. In Singapore, online revenues from the sale of groceries in the period from mid-January 2020 to mid-May 2020 compared to the prior 3-month period increased by 45%.1 Some of the initial impetus for online shopping was driven by full or partial lockdowns, which severely restricted consumers’ ability to buy from brick-and-mortar or onsite retail shops. In many instances, the anticipation of this scenario caused the demand for daily necessities to surge temporarily. As a result, panic buying was widely observed in many countries worldwide. Though some semblance of normality has returned in these countries, especially after mobility restrictions were relaxed and onsite businesses were allowed to reopen, some of the gains made in online shopping are likely to persist in the future. About 91% of new digital consumers in the country will continue to use at least one digital service, post-COVID-19.2 For consumers, shopping online is often driven by a combination of factors, such as convenience, choices (variety) and prices. During the pandemic, fears about the shortage of goods have also been driving consumer demand. Though there were some disruptions in supply chains, the self-fulfilling prophecy of panic buying could have worsened such situations. Trends in online prices and product availability provide useful insights into how consumers’ welfare could have been affected by the pandemic. In this regard, a number of questions comes to mind. Have consumers ended up paying higher prices for groceries bought online during the pandemic period, especially when there was panic-buying? Were there disruptions in product availability at online markets? These are some of the questions explored in this essay, in the context of Singapore. DEMAND AND SUPPLY SHOCKS IN ONLINE GROCERY MARKETS Since the outbreak of the pandemic, three events have brought about significant shifts in demand and supply affecting the online grocery market in Singapore.3 The first was the announcement on the raising of the Dorscon level from yellow to orange on 7 February 2020. This event brought a sudden and sharp increase in demand that manifested as a panic-buying spree for some goods in supermarkets across the island.4 The second event was the imposition of the Movement Control Order (MCO) in Malaysia, which was announced on 16 March 2020 and which took effect on 18 March 2020. The MCO severely restricted movements across the Singapore-Malaysia border, and triggered both supply and demand shocks. On the supply side, the MCO impacted the production of some goods in Malaysia and their export to Singapore.5 On the demand side, the MCO also sparked panic buying that emanated from fears about shortages of food-related groceries normally imported from Malaysia.6 The third event was the implementation of the circuit breaker in Singapore. This was announced on 3 April 2020 and took effect starting 7 April 2020. This lead to another demand shock that resulted in long queues in local supermarkets.7 The circuit breaker was lifted on 1 June 2020.
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All these three events brought about demand and supply pressures in both brick-and-mortar and online stores. Shortages in brick and mortar stores, whether real or imagined, could have prompted consumers to buy from online retailers. In addition, fears of Covid-19 infections and circuit breaker restrictions would also have increased online purchases. From an economic perspective, these demand and supply shocks could have impacted consumers’ welfare in online markets through increases in online prices and supply shortages. The former causes consumers to pay more for what they would normally do whilst the latter leads to unfulfilled demand (consumers are denied the opportunity to purchase a good even though he/she is willing to pay for it). HOW WERE CONSUMERS AFFECTED? The turbulence in the online grocery markets and its impact on consumers can be examined by analysing the prices and stock status of selected goods in these markets. For this purpose, data on prices and stock availability were extracted from the websites of four established online grocery businesses in Singapore. Three of the four retailers operate both brick-and-mortar and online stores. Data collection began on 18 March 2020 and hence did not capture the effect of the Dorscon announcement (Event 1) on 7 February 2020.8 Due to space limitation, discussions are confined to three products that are regarded as essential household grocery products, namely eggs, bathroom tissue rolls and instant noodles. Eggs The first case is the market for eggs. To ensure comparability across retailers, the price of the same product is tracked. In the case of eggs, the product is Chew’s Fresh Eggs With Vitamin E (10 x 60g). For this product, there appears to be some intermittent disruptions in the online availability of the product during the period from March to May 2020 (Figure 1).9 How did the online availability of eggs differ across the online retailers? In terms of stock status or product availability, only one retailer experienced minimal disruptions in stock availability (Retailer 3 in Figure 1). The rest experienced intermittent bursts of stock unavailability. In terms of prices, three of the four online retailers temporarily raised the price of their products from S$2.65 to S$2.75 (or 3.8%) during this period.10 The duration of the price increase differed amongst these retailers – 17 days (Retailer 1), 15 days (Retailer 2), and 13 days (Retailer 3). The timing of the price increase also varied – on 7 April 2020 (Retailer 1), 2 April 2020 (Retailer 2) and 4 April 2020 (Retailer 3). These price increases took place around the time the circuit breaker was announced, which was on 3 April 2020. The variations in the timing of the price increases suggest that the retailers might not have been using computer programmes to track their competitors’ prices and adjust their own prices in real-time automatically. 11 However, without further evidence, the use of other forms of computer programmes for dynamic pricing cannot be discounted. Though the sources of fluctuations in stock availability and price increase are unknown, the welfare of consumers has been affected by the price increase as well as the unavailability of product.12 Consumers have had to pay higher prices than they would normally have had to. Worse, even if they have been willing to pay higher prices, they would have been unable to do so.
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Figure 1: Eggs - Online Prices and Stock Status
Source: Author Bathroom Tissue Rolls Another product that was heavily demanded during panic-buying episodes was bathroom tissue rolls. In Singapore, the extent of panic buying for this product in early February 2020 prompted retailers such as NTUC Fairprice to impose a limit on the purchase of paper products such as bathroom tissue rolls, facial tissue papers and kitchen paper towels.13 This could have shifted some demand for this product from brick-and-mortar stores to online stores. From the data collected, there appears to have been some intermittent disruptions in online stock availability in March 2020 up to mid-April 2020 (Figure 2).14 Compared to the case of eggs, these disruptions appeared to have been less frequent in the market for bathroom tissue rolls. Unlike the case of eggs, the prices of bathroom tissue rolls were relatively stable despite fluctuations in online availability of this product. The price change observed for one of the retailer (1) was an upward increase to match the prices of other retailers.
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Figure 2: Bathroom Tissue Rolls - Online Prices and Stock Status
Source: Author Instant Noodles The demand for instant noodles rose significantly in Asian countries during the pandemic as consumers stocked up and consumed more convenient food items. Revenues for major producers of instant noodles increased by double-digit in the first half of 2020.15 Instant noodles were also one of the items affected by episodes of panic buying. The stock availability of instant noodles varied across the four online retailers (Figure 3).16 Two online retailers (1 and 4) experienced intermittent disruptions in March and April 2020. However, these disruptions ended by late April 2020. Unlike stock availability, prices of instant noodles did not change at all during the period surveyed. Thus, product availability rather than prices were likely to have been the key factor impacting consumers.
Other Products In the sample of other products surveyed, which included vegetables and poultry, prices remained relatively stable despite fluctuations in online stock availability. Though the data collected in this study are far from comprehensive, there is some evidence of market disruptions, especially in the months of March and April 2020. Since prices fluctuated less than the online availability of products, consumer welfare was likely to have been temporarily affected by the inability to purchase products online rather than by price increase.
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Figure 3: Instant Noodles - Online Prices and Stock Status
Source: Author CONCLUSION The Covid-19 pandemic brought about demand and supply shocks in the grocery markets. On the demand side, consumers shifted some of their purchases from onsite to online markets. This, together with uncertainties brought about by mobility restrictions, created unanticipated surges in demand for goods online. On the supply side, mobility restrictions affected production while stricter cross-border controls slowed down the movement of goods. The impact of the pandemic on consumers’ welfare was studied by observing trends in the stock availability and prices of products sold in the online markets. Based on data collected from online retailers in Singapore, there is some evidence that there had been intermittent episodes of stock unavailability. The online prices of some products rose temporarily but not in a sustained manner. Thus, product unavailability is likely to have had a greater impact than prices on consumers in Singapore. As e-commerce becomes increasingly important in the future, policymakers and regulators need to collect data and monitor online markets to ensure that these markets remain both competitive and robust to unexpected disruptions.
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Appendix Table 1: Key Covid-19 Related Events in Singapore
Date Event Description New Cases – Community
New Cases –Dormitories
New Cases – Imported
Cumulative Cases
3/1/2020 Singapore begins temperature screening at Changi Airport for all inbound travellers from Wuhan.
0 0 0 0
22/1/2020 Singapore imposes temperature screening at Changi Airport on all inbound travellers from China.
0 0 0 0
23/1/2020 All inbound flights from Wuhan are ceased & first Covid-19 case detected
0 0 1 1
4/2/2020 First Covid-19 community cases detected
4 0 2 24
7/2/2020 Dorscon level raised from yellow (minimal disruption) to orange (moderate disruption)
3 0 0 33
23/3/2020 All short-term visitors are no longer allowed to enter or transit through Singapore
0 0 0 89
26/3/2020 All bars, cinemas and entertainment outlets are closed.
2 0 0 93
30/3/2020 First report of large-scale breakout in workers dormitories
22 4 9 879
7/4/2020 Circuit breaker measures kick in. Most workplaces are closed, and dining-in at eateries is not allowed.
64 39 3 1,481
14/4/2020 Wearing mask becomes mandatory by law in Singapore
136 198 0 3,252
21/4/2020 Prime Minister announces that the circuit breaker measures will be extended till June 1. The measures are also tightened, with barber and bubble tea shops closing. A full lockdown of workers’ dormitories comes into effect.
61 1,050 0 9,125
30/4/2020 Changi Airport Terminal 2 suspends operations for 18 months
40 488 0 16,169
1/6/2020 The circuit breaker lifts and Singapore enters Phase One of reopening
0 408 0 35,327
2/6/2020 Schools reopen, but only some students have to attend daily lessons.
4 540 0 35,871
19/6/2020 Singapore moves to Phase Two of reopening. Dining-in is permitted, and households can receive up to five visitors. Some facilities also reopen.
1 141 0 41,650
17/8/2020 Reciprocal Green Lane (RGL) and Periodic Commuting Arrangement (PCA) for business and work related travel between Singapore and Malaysia.
0 85 6 55,875
22/11/2020 RGL and PCA tightened in term of stay-home notice (SHN) requirement at dedicated facilities.
0 0 12 58,220
28/12/2020 Phase Three of reopening 1 0 4 58,589 Sources: Ministry of Health, Singapore and Media Reports
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1 The comparison is between sales from mid-January 2020 to mid-May 2020 with sales in the period from September to Mid-November 2019 and two weeks of January 2020. See Accenture’s report on “COVID-19: Impact on Singapore's Digital Consumer” Accessed 19/8/2020, available at: https://www.accenture.com/sg-en/insights/artificial-intelligence/coronavirus-impact-singapore-digital-consumer 2 Google, Temasek and Bain & Co. (2020), e-Conomy SEA 2020 Report, Accessed 2/3/2021, available at: https://economysea.withgoogle.com/ 3 For a summary of key events related to the pandemic, see Appendix Table 1. 4 Source: https://www.channelnewsasia.com/news/singapore/coronavirus-covid-19-panic-buying-singapore-dorscon-orange-12439480, accessed 22/12/2020. 5 Sources: https://www.channelnewsasia.com/news/asia/malaysia-covid-19-vegetables-supply-movement-control-order-12579348, accessed 2/3/2021 and https://www.channelnewsasia.com/news/asia/covid19-most-fresh-food-imports-malaysia-arrive-chan-chun-sing-12552124?cid=h3_referral_inarticlelinks_24082018_cna, accessed 2/3/21. 6 Source: https://www.straitstimes.com/singapore/ntuc-fairprice-places-purchase-limits-on-essential-items-to-prevent-stockpiling, accessed 22/12/2020. 7 Source: https://www.todayonline.com/singapore/long-queues-supermarkets-after-announcement-circuit-breakers-contain-covid-19, accessed 22/12/2020. 8 One limitation of the data is the low frequency of data points. The price and stock status is updated randomly only once a day. A more accurate approach would require high frequence data e.g.hourly data. 9 The disruptions in online availability could be due to higher demand, lower supply or a combination of both. It is not possible to determine which of these are the drivers of these disruptions. 10 Jayant Menon has suggested that the prices of businesses with both brick-and-mortar and online stores may change less frequently compared to those with online online stores. There is no evidence of this phenomenon in the data. 11 The use of computers for dynamic pricing lowers the cost of changing prices. Note that the technology for dynamic pricing has been around since the 1970s in the airline industry. This practice accelerated with the advent of the World Wide Web in the 1990s. 12 Economists measure consumer welfare in terms of the difference between the price paid for a product and the willingness to pay for the product. 13 Source: https://www.todayonline.com/singapore/ntuc-fairprice-limits-purchase-toilet-paper-noodles-hoarding-wuhan-coronavirus-orange, Accessed 2/3/2021. 14 The prices and stock status refer to those of a specific product, namely, the PurSoft Bathroom Tissue Roll (unscented, 4ply, 10 per pack). 15 Source: https://asia.nikkei.com/Business/Business-trends/Asian-instant-noodle-makers-see-boost-from-pandemic-driven-demand, Accessed 8/3/2021. 16 The specific product covered is the Nissin Instant Noodle Chicken 5 x 82g.
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