Sri Lankan eCommerce under pressure with Coronavirus

Kapruka gets raided by CAA following steep pricing of essential items.

CAA advises on essential items pricing.

Delivery delays plague the current eCommerce landscape.

Importance of a good tech and logistics backbone. Examples from Singapore, China, and the US.

Appointment of a presidential taskforce, headed by Basil Rajapakse.

The prevailing situation has hit almost every sector in the country. As lockdown procedures takes place, communities across all walks of life are facing unprecedented challenges. Particularly grocery shopping for essential items. One would rationally expect eCommerce to come to the people’s rescue at such an occasion. However, to say that eCommerce has been struggling to cope with the current demand, is a gross understatement. The delivery logistics providers are facing their own set of surprises, and sadly the consumers are left to pay a steep price. The Kapruka fiasco was the latest example to hit the headlines.

Over the last few days there has been a massive heat directed at Kapruka. This was owing to the exorbitant prices listed on the Kapruka online store on groceries, particularly essential items. Even price-controlled items such as dhal and canned fish were as high as LKR 180 and LKR 550 respectively.  this was on top of an LKR 650 delivery charge. So, in case you purchased a canned fish from Kapruka, your total bill would have amounted to LKR 1,200. Naturally, people didn’t digest this well.

With multiple allegations on social media mounting, the Consumer Affairs Authority (CAA) raided Kapruka’s office on the 25^th of March and confronted its management. The CAA notified them that listed prices should be set at no higher than the relevant MRP and Control Prices. Additionally, Kapruka was also instructed to refund customers who purchased at higher prices accordingly. If you purchased 1 kg of Dhal from Kapruka for LKR 180, you will be refunded LKR 115 (as Control Price of Dhal is LKR 65).

Kapruka responds, but leaves much to be desired

Following news of the CAA raid, Dulith Herath, Chairman of Kapruka responded in a blog post. According to the statement, Kapruka’s list of 100,000+ items includes price-controlled items that were sourced from a local supermarket. These were apparently sold at the same price as the store. The statement also reads “we also have a list of products that are sourced from the general market and sold separately, which are not priced controlled items and pricing was based on the demand”. It goes on to state that the company was “compelled” to purchase items at a higher price.

According to Dulith, the issue was not aligning the pricing with the government’s price controls. Rather it was, “an oversight on our part” he mentions on the post. The reasoning doesn’t necessarily help to fill in the blanks. Furthermore, a look at previous pricing of ‘Delmege Mackerel Tin Fish’ lists at USD 2.97. That roughly translates to LKR 550 in today’s prices. So, was it a matter of USD to LKR conversion that resulted in the sky-high prices?

Advice from the Consumer Affairs Authority

Regardless of where you stand on this matter, one thing is clear. It’s vital that customers are aware of the current pricing on essential items and how it works with delivery logistics. For clarity, the following is a list of essential items by the Consumer Affairs Authority and their specified Control Prices as of 27^th March 2020.

As per the Consumer Affairs Authority, Essential Items cannot exceed the specified Control Prices. Take for example, a transportation cost of LKR 650 per delivery is justifiable. Although it’s still on the higher side. However, pricing of Essential Items such as canned fish at LKR 550 instead of the Control Price of LKR 100 is illegal.

Items that aren’t classified within the current 15 Essential Items can be fixed with a standard price with MRP(Maximum Retail Price) by the producers or manufacturers. This MRP cannot be manipulated till the goods reach the end consumer. However, for value additions like sourcing and delivery services, additional charges can be included to the end consumer, as long as it is clearly stated with breakdown as “Delivery Charges” and or “Convenience Fees”. So, in case, you come across incidents of unfair pricing, the CAA requests the public to inform them via 1977 or their official Facebook page.

Misjudging the demand levels

As if this wasn’t bad enough, the delivery delays didn’t help ease Kapruka’s situation either. On several occasions, deliveries were delayed by at least a few days. Adding insult to injury, the lack of communication only frustrated customers even further.

But this was a challenge that was admitted by many current delivery logistic providers. Saraketha, for instance, sent an email to all customers specifying the concern of being unable to meet current delivery demands on time. As one would expect, the email wasn’t exactly well received.

Lassana Flora, who’s in the business of delivering flowers, has also opted in for grocery deliveries with the dawn of this crisis. Like Saraketha, Lassana Flora is also going through delivery delays. According to their website, customers are to expect a lead time of 3-5 days for processing. The current delivery delays can be attributed to two possibilities. Firstly, the limited resources on the ground to meet this demand. Secondly, the misjudgment of consumer demand expectations. Even as several organizations voluntarily step up to cater to this flooding demand, none is at a capacity to handle the entire demand curve. This doesn’t bode well when people are dependent on timely deliveries for their next meal.

On the bright side, the government has already announced that it will facilitate groceries and essential item deliveries via wholesalers and retailers. The president stated on his official social media channels that there will be a “collaboration between Co-Op shops & supermarkets to deliver goods”. One of these efforts have come in the form of PickMe delivering groceries via Sathosa and Laugfs.

PickMe delivers gas and groceries

One possible way to tackle the delivery constraints is to limit the operation radius of the service areas. PickMe started delivering gas from 22^nd Sunday to a limited area. This was followed by the grocery delivery service on 25^th March, with a 6km radius from Vauxhall Street. Over the next few days, the operation showed swift gradual expansion. Grocery delivery now operates in multiple areas within Colombo, with gas delivery operating in the Colombo, Gampaha and Kandy districts.

According to Mevan Pieris, Head of Operations of PickMe Food, the current operations are expected to expand to the whole of Colombo and Kandy regions within the next few days, with Kurunegala, Kalutara, and Gampaha districts to follow. Sathosa is expected to open 10-20 more outlets in the coming days to facilitate this process.

How PickMe is handling operations amidst the crisis

For starters, PickMe partnered with Sathosa, a government entity, for its grocery delivery operation. This means that obtaining approvals are much faster. From a business standpoint, it is also more feasible for their staff to operate during curfew. Then there’s the matter of limited radius of operations, followed by gradual expansion. But most importantly, it comes down to an understanding of logistics paired with technology to move products and people from point A to point B.

Globally, we’re seeing this to be a common factor among those services delivering groceries during lockdowns. Earlier this year, Singapore raised its Disease Outbreak Response System Condition (DORSCON) level from yellow to orange. When this happened, Lazada claimed its grocery service saw as much as a 300% spike in orders. Similarly, the demand for food deliveries shot up as well. Deliveroo, saw a 20% increase in orders. However, the company noted that its resources weren’t strained. It had turned to data analytics to ensure it had enough delivery riders to meet this increased demand.

Looking at China, when the city of Wuhan was locked down, its 11 million residents were faced with the same issues we are dealing with now. But as supplies of essential goods reached the cities, they were able to place orders online and receive them within 20 minutes. Yet, in the early days of the outbreak, Chinese eCommerce giants too were plagued with delays. Nevertheless, they were quick to adapt.

China’s success here can be attributed to the trust consumers have with eCommerce platforms and digital technology being extensively utilized at all points of the supply chain. An example of the latter being Alibaba’s Cainiao network, which uses AI to support supply chains of merchants by allowing physical stores to serve as extended distribution points.

Of course, utilizing digital technology in the supply chain, doesn’t necessarily mean success. In the US, Amazon has invested heavily in developing a robust logistics network. One that can promise delivery within 24 hours. However, the coronavirus outbreak has forced the company to suspend that promise while restricting orders. Traditionally, it has dealt with periods of high demand, such as the Christmas holidays, by hiring more workers to staff its many large centralized warehouses. But with the outbreak causing labor shortages, experts’ question whether this centralized network can be as flexible as those by the Chinese.

Returning to Sri Lanka, PickMe’s record isn’t spotless. It too has struggled with delivery delays during this period. Nevertheless, the company’s experience with logistics and use of digital technology, has allowed PickMe to remain largely unscathed amidst the crisis.

The sudden explosion of restaurant deliveries

You would have also noticed the sudden explosion of restaurants doing deliveries. Mc Donald’s, Sen Saal, Barista, Pizza Hut and a few others have already announced they will commit to limited deliveries. On the one hand, one could question the feasibility of this given the pandemic situation. These wouldn’t necessarily fall under essential services.

On the other hand, these are also businesses that need to function. People depend on the functioning of these businesses to be able to earn their living. Additionally, with curfew restrictions in place, procuring enough groceries is a daunting task for the average household. Restaurant deliveries helps mitigate this challenge to the end consumer.

The government’s intervention

The COVID-19 pandemic is also causing human resource restrictions across multiple verticals in the supply chain. Supermarket chains like Keells, Arpico and Cargills find it challenging to tag team with delivery services with the lack of ground staff. Restaurants listed on Uber Eats and PickMe Food are struggling to function properly without their chefs in the kitchen. Delivery services itself are swimming against the tide to keep up with only a handful of drivers. The human resource shortage is only gradually amplifying the current calamity.

Nevertheless, if the PickMe example is any indication, it’s that the Sri Lanka’s government entities and the private sector needs to join hands together. The likes of eCommerce platforms cannot cope with the current demands alone. However, judging by the president’s communications, the government is expected to take more active measures with essential item deliveries moving forward.

Issuing a gazette notification, a Presidential Taskforce, headed by Basil Rajapakse has been appointed to address the current situation. Accordingly, the taskforce will “coordinate and monitor the delivery of continuous services for the sustenance of overall community life”. Among its list of responsibilities includes, “organizing and operating Lanka Sathosa, cooperative network, Cargills, Keells, Arpico, and Laugfs retail network to supply agricultural products direct to customers.”

Additionally, the government has also decided to offer low-income families and labourers with food cards. These food cards can be used to obtain free food parcels. The measure has been taken as a result of daily wage workers losing their livelihood owing to the indefinite curfew period. All in all, as the pandemic continues to affect every one of us, efforts to cater to the community’s needs will also continue. Services in operation will unlikely be at full operational capacity and that alone will pose its own challenges. Hopefully, with the government’s intervention, the gaps for the society’s current needs will be closed. Fingers crossed, here’s hoping for the best.

Featured image credits: Nazly Ahmed