Turkey’s e-commerce sector has successfully met the rapidly rising demand during the pandemic but should be cautious of rapid expansion of operations, a joint study by EY-Parthenon consulting and leading e-commerce group showed Saturday.

The report, conducted by EY-Parthenon and the Turkish E-Commerce Association (ETID), surveyed senior executives of the country’s leading companies and small and medium enterprises (SMEs) about the coronavirus pandemic’s effect on businesses’ performance and revenues between May and June.

The report suggested that the high performance of the e-commerce sector ensured customers’ essential needs were met and helped soften the economic recession experienced during the March-June period.

According to the survey data, more than 78% of e-commerce businesses reported an increase in revenues during the pandemic as more people turn to online shopping to buy products they might have otherwise purchased in person.

However, not all businesses with the online shopping option experienced rising revenues. The report showed that 47% of SMEs saw declining revenues during the lockdown while 41% of them were able to increase revenues. One of the reasons behind the underperformance of SMEs was cited as a lack of adequate logistics and cargo capabilities and expertise.

Rapid growth could mean future risks for online businesses

The pandemic overall pushed many e-commerce businesses to rapidly expand operations in order to catch up with the rising demand. However, the unplanned booming growth put excessive pressure on operations, including in inventory and shipping.

The leading problems faced by e-commerce companies have been the lack of adequate supply and shipping delays according to the survey, 36% of companies experienced supply problems due to the coronavirus-induced disruptions in supply chains.

Long delays caused by shipping companies to deliver online orders has been cited as the second-largest problem experienced during the lockdown, 38% of participants in the survey said that they have experienced delivery problems caused by the shipping companies.

The shipping industry’s failure to expand operations as fast as the e-commerce sector will impose further problems in upcoming months and could create a double risk by causing customer dissatisfaction, the report said.

The survey revealed that 56% of online shopping businesses are facing the risk of damaging their brand reputation due to unplanned shipping and supply delays, and 50% of e-commerce companies could experience a decline in operating profits within the next year due to excessive growth.

Four out of five businesses that have joined the survey also mentioned liquidity as possible risks of rapid growth. The report showed that 70% of SMEs said a liquidity crisis could risk the sustainability of current operations.

About 94% of participants said the pandemic’s effect on the economy will last until the last quarter of 2020 or even longer. However, the executives mentioned that consumer behavior is likely to return back to normal in the next three months.

Meanwhile, e-commerce players that will emerge as winners from the pandemic will be the ones that ensure sustainable supply chains, the study said.

Players that have separate channels for digital and physical retail operations and those who already had high revenues from digital services before the pandemic will become even stronger during this process, the report added.

The volume of e-commerce in Turkey posted a swift increase of 48% year-on-year from January through May and reached TL 63.3 billion ($9.2 billion), Trade Minister Ruhsar Pekcan said earlier.

During the period, sectors showing the highest increase in card transactions were white goods and home appliances with a 75% increase, clothing, shoes and accessories with a 43% increase and the electronics and software sectors with 53% and 95% rise, respectively.

Spending on accommodation, travel and air travel dropped by 80%, 77% and 75%, respectively, in the first five months. The volume of e-commerce amounted to TL 136 billion in 2019.