If we were a few steps ahead in digitalization, would corona effects be less?

While appearance of the corona virus Covid-19 is unrelated to how digitally advanced our world is, its spread should have something to do with how day to day transactions among people take place. The Chinese city Wuhan’s experience has suggested that despite an
environment where people do most of their transactions online from their jobs to shopping, the spread was inevitable because nobody knew initially that the virus was being transferred from one person to others. However, once that was discovered, common sense suggests that a world where people were digitally connected and physically distant, rest of the world could have prevented the spread viably.

You might have heard expert sociologists and analysts blame digital marketing revolution to have created a social distance among people by providing them opportunities to work, shop, and conduct business from home. So, the hypothesis that a more digitally advance world could have prevented the outbreak seems to have some truth. The internet revolution means people communicate increasingly online from distant locations substantially decreasing physical contact among people.

Digitalization affects businesses in two important ways: it affects how employees and other people working in the company interact; and how customers interact with the business and other customers. Some businesses have a digital model which significantly reduces customers' physical interaction with the business by accepting orders and payment online and then delivering products to home. Amazon is an appropriate example of this. But as you might have guessed, Amazon still employs many people who are working with it physically all the time. Because, lockdowns and curfews mean no or little transport, home deliveries might still be a problem for such businesses.

The other type of businesses is the reverse of the first category—they let their employees work from home but the customers still have to reach out. In both cases, however, physical interaction among people decreases.

With the fears surrounding the virus, people are themselves avoiding crowds and are trying go out less and less besides the lockdowns and shutdowns forcing them to stay home.

Moreover, as these data from e-marketer suggest, customers are more likely to avoid visiting a store than shopping online. This also implies that people are willingly shifting towards online channels; customers perceive them to be safer. This does come with some logic in fact because doctors are strictly suggesting social distance and preventing going out.

So, what we are trying to understand is how the situation would have been different given more regions and economies were digitally connected; for example, 80 or 90 percent of customers shopping online and larger share of worldwide employees working from home. The above-mentioned facts suggest that this outbreak should have impacted less adversely had the customers, business, NGOs, and government agencies been more digitally active rather than reliant on physical connectivity.

There are several side effects of the virus to consider, however, that affect online business at least as bad as brick-and-mortar. First, lockdowns—curfews in some countries and regions—mean no transport, which means products can’t be delivered to homes. Second, for some businesses a large number of employees have to come to work physically even if the outbound supply chain is digitalized as we talked about Amazon earlier. Third, and the most significant, supply chains are what is most affected by the outbreak. Even if a business is solely online, it still has to depend on suppliers, transporters and other supply chain partners that are shutdown due the corona virus outbreak.

Thus, while it is yet difficult to conclude if a more digital world would have been less severely affected by the virus or that containment and prevention would have been easier, what is quite evident is that the overall economic impact would have been less and recovery would have been faster in such a fortune situation.