COVID-19 and E-commerce Operations: Evidence From Alibaba

Posted: 20 Jul 2020

See all articles by Brian Rongqing Han

Brian Rongqing Han

Gies College of Business, UIUC

Tianshu Sun

University of Southern California - Marshall School of Business

Leon Yang Chu

Cheung Kong Graduate School of Business

Lixia Wu

Alibaba Group

Date Written: July 18, 2020

Abstract

This paper examines the impact of COVID-19 on e-commerce sales. We investigate the effect of COVID-19 on behaviors of the buyers and sellers on the platform, the effect of government containment policies, as well as the operational drivers underlying the observed impact. Using detailed transaction and package delivery datasets, we construct a city-day panel data over six months (11/24/2019-05/27/2020), representing transactions for all buyers and sellers on Alibaba's e-commerce platform across 339 cities in mainland China. We identify the impact of COVID-19 through a difference-in-difference analysis and identify the impact of containment measures by leveraging policy changes across cities and deploying a fixed-effect model. First, we document a systematic decrease in e-commerce sales by 22% during the COVID-19 outbreak (Wuhan shutdown: 01/23-04/07/2020). However, e-commerce in most cities recovers fairly fast within five weeks since the shutdown. Second, during the post-outbreak period (04/08-05/27/2020), we find a significant increase in sales of 11%-26% for less frequent buyers and small to median-sized sellers, which indicates habit formation of buyers and online expansion of sellers in the long run. Third, except for the rare case of a complete shutdown, government containment measures in most cities only have a small impact on e-commerce, with a decrease in sales by 5%-11%. Fourth, we identify a key underlying mechanism and show that the constraints in logistics capacities significantly drive the decline and recovery of e-commerce sales. Overall, we provide extensive evidence of how e-commerce is affected by COVID-19 and containment policies, as well as the operational drivers. The evidence from Alibaba in the recovery phase can help retailers and policymakers design better strategies, and put more emphasis and investment in logistics.

Suggested Citation

Han, Brian Rongqing and Sun, Tianshu and Chu, Leon Yang and Wu, Lixia, COVID-19 and E-commerce Operations: Evidence From Alibaba (July 18, 2020). Available at SSRN: https://ssrn.com/abstract=3654859

Brian Rongqing Han (Contact Author)

Gies College of Business, UIUC ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

Tianshu Sun

University of Southern California - Marshall School of Business ( email )

3670 Trousdale Parkway
Bridge Hall 310B
Los Angeles, CA 90089
United States

Leon Yang Chu

Cheung Kong Graduate School of Business ( email )

Building No.5, 1&2/F
Hongqiao Wanke Center
Shanghai, 201107
China

Lixia Wu

Alibaba Group ( email )

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