FAO Investment Centre

The COVID revolution in food e-commerce

The COVID-19 pandemic established food e-commerce as a global phenomenon. Lockdowns and closures drove consumers online and led to a digital transformation, with profound impacts on food supply chains.

A new brief from the European Bank for Reconstruction and Development (EBRD) and the FAO Investment Centre looks at the unprecedented growth in food e-commerce triggered by the pandemic.

It considers how e-commerce has become a fundamental means of food distribution, and evaluates the impacts, challenges and opportunities of e-commerce penetration of the food industry – in particular for fresh fruit and vegetables (FFV).

It offers policymakers and investors strategies for building sustainable food e-commerce as part of more resilient, low or zero carbon urban food distribution systems.

“The food e-commerce explosion has opened up opportunities to help the agrifood sector accelerate its transformation towards more resilient business models,” said Natalia Zhukova, Head of Agribusiness, EBRD. “Food e-commerce can facilitate more diversified sourcing from global supply chains as well as shorter supply chains. Efforts must focus on seeking low or zero carbon options, and more inclusive solutions."

Food systems at crisis point

COVID-19 highlighted the extreme pressures on urban food distribution systems. Systemic issues were brought to the fore as globalised agrifood chains unravelled.

Vast amounts of food were spoiled and wasted, due to disruptions in globalized supply chains, trade blockages and border delays. Suddenly, millions of people were unable to access food shops and supermarkets due to lockdowns and public health concerns. 

The pandemic left a legacy of rising poverty, exacerbated inequalities in the ability of people to access food and exposed just how fragile food distribution systems really are.

Food e-commerce disruption and explosion

Yet, agribusinesses, producers and retailers responded to rapidly evolving demands generated by the COVID-19 crisis and rallied to make food systems work in a changing world. 

The pandemic prompted retailers to develop and adopt new services and delivery options to reach consumers, often in partnership with major e-commerce players and emerging new actors – especially in quick-commerce (q-commerce).

Since its inception, food e-commerce has been disrupting physical retail, as it expanded from large urban centres to small towns. COVID-19 accelerated this shift, contributing to a true revolution in the retail sector.

A huge array of delivery and other service providers have emerged in response to exploding demand. This has enabled traditional retailers to adapt their processes to e-commerce.

COVID-19 also fast-tracked the expansion of food e-commerce into FFV. 

“The COVID-19 crisis kick-started a wave of innovations and fundamentally shifted how our food distribution systems work, with long-term implications,” said Florent Tomatis, Agribusiness and Value Chain Specialist with the FAO Investment Centre, and co-author of the brief. “But we need to ensure this transformation maximizes opportunities for sustainability and food security, and leaves no-one behind.” 

Creating an enabling environment for food e-commerce

Governments and urban authorities are recognising the need to adapt infrastructure and develop e-commerce policies, while preserving livelihoods and the vitality of city centres.

Retailers are at the frontline of the food e-commerce revolution. Many large corporations have successfully upgraded business models and reorganized supply chains for food e-commerce. 

Meanwhile, many SMEs have struggled to stay relevant and meet changing consumer demands. Other small businesses have thrived online as niche initiatives supplying local communities.

A digital divide has emerged where some rural communities and small-scale or start-up agribusinesses are missing out on the potential benefits of food e-commerce.

This may be due to limited resources, low levels of digitalisation and tech adoption, difficulties in accessing new technologies, challenges with setting up integrated delivery systems or competition from larger players.

“We recognize the challenges and opportunities for food distribution brought about by COVID-19, and support governments, businesses and communities as they adapt to the post-pandemic world,” said FAO Investment Centre Director Mohamed Manssouri. “Food e-commerce needs to deliver for everyone – and policymakers and investors can generate an enabling environment for digitized production, processing and transport by strengthening digital access, logistics and infrastructure, while ensuring its greening and inclusion of all food distribution stakeholders.” 

Retail transformation trade-offs

The physical marketplace has been central to communities, economies, farming and food systems for most of human history, and still plays a dynamic and vital role in the urban environment. 

Transforming this established model to a more efficient food distribution system brings many challenges and trade-offs. 

Local food suppliers distributing through online community platforms may not be the greener option if they produce excessive packaging or operate inefficiently.

Large-scale food e-commerce platforms may exclude many specialized suppliers or marginalize lower income groups. The surge in food e-commerce may threaten the vitality of traditional urban centres – so critical for community interaction.

Yet, as a growing complementary marketing channel, food e-commerce has a vital role to play in the transformation to more resilient, efficient, diversified, and adaptive food systems.