ECONOMICS OF INNOVATION IN E-COMMERCE WITH PANDEMIC EFFECT THROUGH ANALYSES OF TURKISH FIRMS
ABSTRACT
The use of the internet has gained great speed in recent years and caused huge changes in the sectors. The e-commerce sector, which has more accelerated its growth with the pandemic, has started to establish new large companies in this field and to affect traditional trade channels. The main purpose of this paper is to reveal how e-commerce and online shopping will affect traditional trade channels. A comprehensive e-commerce literature review was conducted for the e-commerce volume in the world, online shopping in Turkey, the effects of COVID-19 on e-commerce and consumers have been scanned and interpreted in related articles. In addition, the research has been made quantitative with data from reports, interviews, and reputable articles in these fields. Many different sales figures, sector growth, data of leading companies in Turkey such as Trendyol and Hepsiburada were analyzed, graphics were prepared and interpreted. This research has proven to us that the e-commerce sector has grown significantly in recent years. In addition, traditional trade channels that can adapt to the e-commerce sector have had the opportunity to increase their sales volumes and growth in an unprecedented way. Based on these results, it has been revealed that very successful and contemporary results can be achieved when both e-commerce sector-leading companies and traditional channels work together. However, those who continue their way only through traditional trade channels will give up their shares in this sector.
INTRODUCTION
The increase in internet use has led to many differences in traditional trade channels through commercial marketing, sales, and consumer behavior. Some small businesses cooperated with online firms. People started to buy their everyday goods from online shops, even their vegetables. The growing rate of internet usage and the changes in shopping behavior have created many new fields and economic opportunities. With the creation of these new fields people got the chance to start their businesses without the need of an actual store on the street.Once who were a consumer now have a shot at obtaining additional income from their homes. In recent years, the capacity of the e-commerce sector has increased tremendously. There has been a huge volume exchange between traditional and electronic trade. With the development of e-commerce, the traditional way of shopping has been evolving from face-to-face transactions to online trading. Banks and credit-card companies advertise online shopping by giving bonuses or small refunds for the payment that is made on an online platform. Covid-19 accelerated the expansion of e-commerce. Thus, this line of business experienced a growth more than expected. While trade channels and shopping behaviors are going through these alterations, small businesses are encountered with a change process. So, will the traditional trade channel be able to adapt to this modern sector or will it disappear?
LITERATURE REVIEW
The size of e-commerce in the world, its commercial effects, and its effects on traditional trade channels have been examined above. Also, beyond that, this topic has taken a different dimension with the outbreak of the Covid-19 Pandemic into our lives in 2019. It has caused many different changes on people, therefore on consumers. Thus, it would be an incorrect or incomplete approach not to include the pandemic in the e-commerce analysis carried out in 2021. The coronavirus changed people's lifestyles, jobs, behaviors, and commerce because people had to stay away from each other. During this period, consumers were afraid to go to traditional channels to shop such as shopping malls, bazaars, restaurants, etc. Bhatti mentions that approximately 52% of consumers try to refrain from traditional shopping and 36% do not want to do physical shopping without vaccinations (Bhatti, 2020). In a period when e-commerce is already on the rise, the fact that consumers are moving away from traditional commerce at this size explains the positive relationship between Covid-19 and e-commerce. This situation has caused different effects in areas such as retailing, grocery, clothing, food, etc. For example in grocery areas, in Turkey, Getir, Trendyol Hizli Market, and Yemeksepeti Banabi platforms quickly gained a large market share and consumer. According to Bhatti, in this period, worldwide American retail store chain Walmart grocery e-commerce channel sales increased by 74% (Bhatti, 2020). This shows that consumers are making similar behavioral changes around the world. As mentioned above, people have also changed the way they do business. Most companies switched to remote working and shifted their meetings to platforms such as Zoom, GoogleMeetings, Skype. Hence, consumers have started to stay at home and use more online platforms. Below, it can be seen the e-commerce volumes of the largest retailers during the pandemic period.
Table 1. The largest retailers e-commerce volume during Covid-19
In the table above, it is noteworthy that 6 of the 10 largest e-commerce sites are based in the USA. However, the article supposed that E-commerce has also grown in developing countries such as Pakistan, Malaysia, and Singapore (Bhatti, 2020). The Covid-19, which accelerated e-commerce, brought some difficulties with increasing sales rates. These are generally related to product & goods delivery, and new marketing and sales strategies.
In the conclusion, the volume of e-commerce has increased with the new consumer behaviors brought by the pandemic. Hence, in an era where consumers are so close to technology, sellers should understand the new customer behaviour trends.
Through all these reasons, innovations and digital marketing become a necessity for firms. In Pollák's research, researchers examined the European’s e-commerce behaviors with a sample of 14,000 Facebook users and 10 chosen e-commerce sectors. These markets were followed by researchers for the specific period in Covid-19. In the article, the authors focus on especially innovation and continuous changes in the market (Pollák, 2020). Today, the right product, the right price, or even the right technology may not be enough for a successful enterprise or business. Now, it is more important to use technology with customer-oriented, problem-solving software that offers the right option to the right target. Moreover, unlike traditional trade channels, the marketing communication of technology should be done through the right channels, and the commercial marketing budget should mainly focus on technology channels. Since the analysis is divided into two regions, specific cultural differences such as consumers' trust in digital platforms and their ability to use these platforms are also important. E-commerce offers consumers many options, quality, and price choice. Hence, firms have to determine both new and correct marketing strategies to reach consumers. These are the use of efficient information technologies, better CRM software, huge data analyses, and accurate use of marketing tools, etc. One of the biggest differences between online and offline commerce is the moment the purchase decision is made. External factors influencing this decision completely differ between e-commerce and the traditional channel. The competencies of the businesses that switch to e-commerce may not be enough, so they need to innovate and change. According to Pollák, accurate digital marketing and social media tools that take into account cultural, social, individual, and psychological factors are effective in growing the business (Pollák, 2020). Also, it is thought that the closure of many places during the pandemic may cause permanent behavioral changes in consumers. In the comprehensive study, researchers selected 5 major e-commerce sites in the Czech and Latvian markets.
They also divided the seasons as a first and second lockdown, this is seen in figure 3. According to the analysis, the study showed that in the second lockdown for Czech markets, the average interaction during the working days diminished, Sunday was the second most interacted day, and there was a decrease in general activities. Activities generally shifted to working hours rather than nights. This may be due to the fact that remote work has come to life. These all differences can indicate that companies and people are getting used to the pandemic and adapting.
Goldman and Herk (2021) examine the effect of strategic orientations on the usage of digital marketing strategies and, consequently, the international enterprise performance of small electronic retailers (e-retailers) on cross-border electronic trade. The study uses a sample of 446 small e-retailers obtained from 20 European nations to represent the larger population. The authors found that the deployment of digital marketing tactics positively impacts the performance of the international business for both emerging and developed e-commerce markets.
According to research done by Forrester Research (2019), as cited in Goldman and Herk (2021), business-to-consumer (B2B) cross-border online sales are expected to form about 22% of e-commerce sales by 2022. Goldman and Herk (2021) conducted a three-way approach to assess the impact of various digital marketing strategies on the financial performance of e-retailers on cross-border trade. Firstly, they evaluated the relationship between small firms' orientation strategies and digital marketing strategies. Secondly, they examined how digital marketing strategies improve small retailers’ global digital business performance. Finally, they assessed the impact of strategic orientation to assess how digital marketing tactics vary across developed and emerging markets.
Goldman and Herk (2021) use strategic marketing orientations to understand how small retailers' orientations impact digital marketing tactics in cross-border trade. They have studied the relationship between growth orientation and digital marketing tactics, whereby they hypothesized that a higher level of growth orientation led to e-retailers adopting the use of digital marketing strategies in cross-border e-commerce. They also hypothesized the relationship between customer orientation and digital marketing tactics. They determined that as customer orientation increased, many small e-retailers utilized digital marketing tactics in cross-border e-commerce—the relationship between foreign market orientation and digital marketing tactics. Foreign market orientations entail the processes required to learn about and effectively serve foreign markets. They concluded that a high level of foreign market orientation leads to e-retailers making use of digital marketing tactics in cross-border trade.
Additionally, according to previous research, the article hypothesizes the relationship between developed and emerging e-commerce markets, whereby developed markets are more competitive than emerging markets. The authors use a two-step process to classify countries analyzed in their study as either a developed or a developing e-commerce market. They classify countries as possessing a developed e-commerce market, when e-commerce revenues were above $250 per capita, and as having an emerging e-commerce market when e-commerce revenues were lower than $250.
The researchers conducted a quantitative, questionnaire-based study to test their hypotheses. The sample size comprised 20 retail firms across 20 European nations. They then assembled a list based on available uniform resource locators (URLs). The data was analyzed using lavaan (version 0.5-23.1097) in R. The analysis was divided into five parts. First, the Convergent and discriminant validity was tested using Cronbach's alpha, and the assessment of the heterotrait-monotrait (HTMT) ratio of correlations. Cronbach's alpha for growth orientation, customer orientation, and international business performance exceeded Nunnally and Bernstein's (1994) recommendation of 0.70. The invariance showed that the model was a good fit (chi-square/df=1.26, p=0.26).
Additionally, the authors found that structural equation model analysis was a good fit for both the emerging and developed markets.
Goldman and Herk (2021) established that foreign market orientation had the strongest impact on using digital marketing tactics in foreign markets of the three strategic marketing orientations investigated. Finally, the authors used an alternative model to compare their existing model to determine its accuracy. The structure of the alternative model showed that the model used remained largely unchanged.
The test, therefore, gave confidence in their chosen model since the structure remained constant. They established that using digital marketing tactics in foreign markets improves the business performance of small-scale e-retailers. The results suggested that small e-retailers from both developed e-commerce markets and emerging markets should invest more in their foreign market orientation within their firm's strategy.
Covid-19 has been significantly influential on consumption choices, especially with regard to online purchasing. The increase in the demand for e-commerce opened a new field for business owners as well as researchers. The need for new business development strategies and tools came to the foreground. To answer these needs, Kayakuş and Çevik(2020) conducted research on estimating how many visitors online shopping websites had during Covid-19 in Turkey by using ANN( artificial neural networks). They analyzed the monthly number of visitors to 4 of the most popular e-commerce websites in Turkey like Hepsiburada, N11, Sahibinden, and Gittigidiyor as well as the data of total and new Covid cases, loss of life due the Covid-19, recovery rates, the number of intubated people and Covid tests. Once again, it has been observed that issues regarding public health, isolation processes, and such alarming environments are very impactful on consumption choices.
This study provided the following explanation for the change in the usage of online shopping platforms in the Covid-19 period: After the global outbreak occurred, there was less demand for such platforms because of the risk of cargo services becoming infected with the virus and parcels being delivered in a timely manner. Then, people went into the compulsory quarantine period, that was when they exhibited preferences for online shopping for their daily necessities. Additionally, the demand for online shopping rose even further when shopping malls and trade centers were closed for a while due to the pandemic rules and regulations.
(Kayakuş & Çevik, 2020)
Analyzing the shift in the quantity of visits to online shopping platforms is crucial since that change impacts their total sales volume and revenue. This model in the research provides online shopping websites with information about their quantity of visitors as it analyzes the data change during the pandemic. Since such platforms can get an idea of the change in their number of visitors, they can generate new plans and strategies in terms of future investments,expenses and number of workers they need to employ (Kayakuş & Çevik, 2020).
The shifts in consumer behavior caused by the pandemic might have long-term implications. The research conducted by UNCTAD and Netcomm Suisse eCommerce Association, in collaboration with the Brazilian Network Information Center (NIC.br) and Inveon(2020), portrays that changes in online activities are likely to outlive the global outbreak as most of the participants, especially those from Turkey and China, expressed that they plan to carry on with shopping online and concentrate on essential goods in the foreseeable future.
(UNCTAD & Netcomm Suisse eCommerce Association, 2020)
While technology is growing and people are moving towards online platforms more and more, digital marketing plays an important part for small size enterprises by paving the way for them to enter the larger sectors and markets. It is crucial because traditional commerce methods would not be able to provide the same opportunity for such businesses.Hence, in this time of Covid-19 outbreak, keeping up with the change in the market environment and being able generate new business plans and strategies to promote themselves and get in touch with a wider consumer base are must-have qualities for the businesses. The ones that use online websites and platforms have exhibited huge growth rapidly, obtaining new sets of business advantages even during the pandemic (Vapiwala, 2020).
Hence, it is crucial for e-commerce marketplace platforms and online sellers to modify their business plans to the shifts that seem to have quite a long-term impact on the economy in this ever-changing market environment. Vapiwala(2020) suggests that adopting new e-marketing strategies like embracing authentic and empathetic approaches, tracking trends, leveraging time for local SEO, and enhancing social media exposure can benefit online businesses even after the pandemic comes to an end.
All things considered, it's safe to say that consumer behavior has been reshaped by Covid-19, and its impact is most likely to be long-lasting, especially in the area of e-commerce. It is pivotal for online businesses to use analytical models and tools to develop their business further and adapt to the new digital marketing strategies if they want to survive and prosper in the new market environment even after the pandemic.
CASE OF TURKEY AND FURTHER RECOMMENDATIONS
Even before the Covid-19 outbreak, e-commerce was a growing trend in Turkey. However, it is evident that this pandemic has played the role of a catalyst and rapidly increased the volume of e-commerce in Turkey since the pandemic has transformed consumers' shopping habits all around the globe (Turkish Ministry of Commerce,2020). In this period of a global outbreak, digital platforms and technologies provided an alternative route for continuing commercial activities, social contacts, and consumption during the periods of rigorous preventive measures such as lockdowns that are implemented according to the “Stay at Home" campaigns of the Ministry of Health of Turkey. During these lockdowns, traditional commerce channels have appeared to struggle. Many of them reverted to online shopping platforms to gain back their customers and reach a broader consumer group without the need to host them in physical stores. This could be one of the reasons for the increase in the e-commerce volume in Turkey, as discussed in the data analysis part of the paper. It is observed that after Covid-19, there occurred a substantial consumer base for online shopping in Turkey. The study by UNCTAD and Netcomm Suisse eCommerce Association, in partnership with NIC.br and Inveon(2020), showcases that many Turkish consumers are shopping more often online than before. The same survey found out that consumers in Turkey express a high liking for purchasing through digital platforms rather than in actual stores in terms of their future shopping channels (UNCTAD,2020).These findings are crucial for businesses in Turkey to shape their channels according to the changing taste of the customer base in Turkey.
(UNCTAD & Netcomm Suisse eCommerce Association, 2020)
In response to this increasing demand from the consumer side, e-commerce channels also increased in numbers. The chairman of the Association of E-Commerce Operators (ETID), Emre Ekmekçi, shares that the quantity of small and medium-sized enterprises(SME) that are involved in electronic commerce grew from about 70.000 to 100.000 in 2020 after the pandemic occurred (Şahin, 2021). Ekmekçi further states that new business models have come to the forefront to potentially back up the increased demand and supply. He lastly points out: "All small or large-scale companies that have overcome the physical restrictions imposed because of the coronavirus with investing in e-commerce and providing service online have won in this period." (Şahin, 2021).
To sum up, these statements above portray an important image for the future of traditional and electronic commerce in Turkey. It is obvious that there is a shift in consumer preferences in terms of where to purchase goods and services, and e-commerce has come to the spotlight after the Covid-19 outbreak. Moreover, the effects of the pandemic on online activities are likely to be outlasting for Turkish consumers(UNCTAD,2020). Therefore, it is essential for traditional trade channels to keep up with these online trends. Making use of online platforms to market their goods and services while continuing their offline stores could be a fruitful
option for them as they will reach more and more customers through these online shopping websites like Trendyol and Hepsiburada.com. For e-commerce channels, it is crucial to implement new strategies and business models to be able to keep up with their competitors. Using social media platforms to stay in touch with consumers and innovative advertising could be beneficial options and bring satisfying business outcomes. In short, it seems safe to say that in this growing trend of e-commerce, businesses in Turkey need to step up their game to stay in the game even after the pandemic.
CONCLUSION
In conclusion, it is true that the development of e-commerce has changed the shopping routines of many people. However, it created new sources of employment such as shipping, warehouses, data business analyses positions, influencer marketing, trade software systems, cyber security and transactions. Also, because of e-commerce’s characteristic features, small businesses are able to reach a wider audience by using these platforms. Therefore, for small establishments that can adapt to the changes in commerce & the ones that can use both e-commerce platforms and traditional commerce ways are going to change for the better. It is vital that these traditional trade channels adapt to the e-commerce ecosystem and become more innovative in their products,marketings and sales strategies. As for the businesses that cannot make use of this opportunity; they might not have a chance to survive in such a competitive market in the long-run.
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