COVID-19: Never Let A Crisis Go To Waste! Winners, Losers & Business Opportunities From The Pandemic.

2020 has and will always be recorded in history as an extraordinary year. The world is completely different today when compared to the same period in 2019. The number of Covid-19 cases continues to increase rapidly even more so outside of China, shifting the economic ecosystem globally.

Economic activity is declining rapidly. Consumers are staying at home and businesses are shutting their doors. For the first time in history we are seeing shopping malls, schools and universities closed in many countries. Tokyo Olympics, Dubai Expo, ITB Berlin and several other major events are postponed by 1 year to 2021. Work from home, which is something most cultures are not accustomed to is starting to become the norm. It is truly an unprecedented time never seen before.  

Consumer trends are starting to shift. Based on a research by Stackline, the top 2 fastest growing categories are disposable gloves and bread machines. That’s right, bread machines are no 2. The E-commerce landscape has completely changed as many countries implement stay-at-home orders and “non-essential” businesses temporarily close to prevent the spread of Coronavirus. Not only are consumers shopping online more, but their shopping behaviours have noticeably changed as well. Previously true assumptions, in this case consumer interests, might no longer be true. 

Will We Return To the Norm?

China reported the first case back in December 2019. Fast forward 4 months later in April, the government has lifted the lockdown, but the usually crowded shopping street of Wangfujing in the capital was reported to be just a few shoppers patronizing what is usually the heartbeat of the city’s commerce and tourism. This raises concerns, that even as the curve of Covid-19 started to flatten, and the number of new cases starts to decrease, the economy will not return to its norm prior Covid-19 overnight. Goldman Sachs expects the US GDP alone to decline by 24% in the second quarter due to the Covid-19 pandemic, roughly 2.5 times the 10% drop of 1958. 

Given the two scenarios, it is unlikely that our daily routine which eventually will affect business norms will return to pre-covid-19 fast, with the “norm” expected to even take months if not years. 

Opportunities From A Crisis

The great Winston Churchill once said, “Never Let Crisis Go To Waste”. One may have to turn the crisis into an opportunity to do things differently, making the best use of available resources and leveraging on the demand at that instance. This crisis created not just losers, but also winners and opportunities. So who are the winners and who are the losers?

Big Tech & E-Commerce

In response to countries locking down borders and enforcing work from home, naturally there is an increase of usage of services that supports work from home including teamwork tools, Cloud etc. Microsoft reported to have seen 775% increase in cloud services in regions that have enforced social distancing and work from home. They have also reported a very significant spike in Teams usage, and now have more than 44 million daily users. Those users generated over 900 million meetings and calling minutes on Teams daily in a single week.

Social apps such as Facebook reported that messaging activity has increased by 50% in those countries hit hard by the virus.

Amazon is planning to hire 100,000 new staff to keep up with higher e-commerce orders. 

Video Conferencing

With the rise of social distancing as well as work from home, consumers are seeking out new ways to connect mostly in the form of video chat. Usage of zoom has been soaring and increasing by 400% according to SimilarWeb. With many countries implementing a lockdown, shares of Zoom was seen reaching an all-time high of $USD159, essentially doubling in value in less than 2 months. 

Video conferencing enables those in lockdown to work as well as learn from home. Classes are conducted online using Zoom or Google Classroom with meetings which were traditionally done in a face to face manner are now conducted using platforms such as Zoom, Google Hangouts and Microsoft Teams.

Winners and Losers

I’ve listed several sectors which we can safely classify as winners and losers based on data from Google Trends. We can see a sudden increase in search volume of search terms in groceries, e-learning as well as logistics and transportation of goods such as Grab groceries.

Interest in online learning platforms has risen significantly in March as many countries implemented a full lock down closing all schools as well as universities. Parents and teachers alike started to look for alternatives for their children. 

Apps such as Pandai.org saw a huge spike in traffic as much as 23 278% growth as compared to the month before as it tries to simulate the learning and assessment experience of a physical classroom, without replacing the need for social interaction that takes place in one. 

Google Trends also showed that search volume for tourism, conferences as well as events shrank drastically for Q1 this year. With limits on how many people can collect or gather at a single given area for fear of the spread of the virus, many events such as ITB Berlin, Tokyo Olympics and Dubai Expo has either been postponed or cancelled.

Trends in hotels decreased by almost 50% leading up to March worldwide with keywords such as Disneyland seeing a massive 70% drop.

Religion as form of Solace

Throughout history, with any catastrophic events or even a pandemic, religion is the solace of first resort for billions. With no cure in sight yet, Covid-19 is expected to drive people closer to religion as form of comfort going through the storm. Search terms such as Tarawih which is a special prayer for Muslims saw a massive spike in interest as we enter into the mid-phase of lockdown in many countries. 

Similarly, religious activities such as Zakat which is a form of alm (donation) starts to see a significant increase in interest as we enter the second week of lockdown in Malaysia. 

According to the State of the Global Islamic Economy 2019/2020 by Dinar Standard, investments in the Islamic Economy sector play an important role in driving growth even before the pandemic. $USD1.2 billion as invested globally in Islamic economy companies for the 12 months reflecting an increase of 399% compared to 2017 and with the global pandemic it is expected that businesses that cater for the soul would see itself in triumph post pandemic.

Those Who Adapt Will Win

Given the fact that the “norm” might take months to return to, businesses would need to adapt in order to survive the crisis, not just during the pandemic itself, but also post recovery. Companies would need to react quickly and adapt to the “new normal” and devise a strategy to penetrate another market while the opportunity is ripe. Companies such as ZeptoExpress, an on-demand delivery service for parcels has begun tapping into a new market of grocery delivery.

One other sector that is highly impacted due to Covid-19 is retail. With an estimated shopping traffic decline of up to 50% in certain shopping centres as the Covid-19 outbreak persists, Malaysia's retail industry is expected to post a 3.9% year-on-year contraction for the first quarter of 2020 (1Q2020), according to Retail Group Malaysia (RGM).

Businesses in retail such as De Leuca selling traditional cloths which has largely been an offline play, are starting to adapt an “offline to online” (O2O) dual strategy tapping into digitization as a new channel of distribution essentially moving themselves from “losers” to “winners”

This pattern mirrors that to the impact SARS(Severe Acute Respiratory Syndrome) had on purchasing behaviour almost two decades ago in China, giving rise and accelerated the growth of e-commerce in the country. JD.com started to sell their products online in 2004 and Alibaba created the C2C model essentially giving birth to Taobao. Both are now one of the largest businesses in China.

Success post-pandemic isn't just about keeping a long breath and hoping that the pandemic is over soon, but it is also about adapting, and reinvention.