Covid 19, The Good The Bad And The Inbetween
You don’t need me to tell you that your life has just drastically changed. What we are buying has changed too, the pasta aisle at my local supermarket was so ravished the other day that I had to revert to gluten free pasta. The texture was horrific. The real question is how this change in our behaviours will affect Australian organisations within different industries.
Let’s break the industries into 3 categories:
- The good — industries that will benefit from this crisis
- The bad — the industries that won’t do so well
- The inbetween — the industries who could go either way
The Good
These industries have found themselves in a purple patch. Wrongly or rightly, there are always winners when the sh*it hits the fan in regards to the global economy. Whether caused by unethical financial practice as with the recession of 08 or a global pandemic seemingly caused by a bat soup gone wrong, some industries naturally thrive in these hard times. The natural strategy for industries lucky enough to find themselves in this position is to aggressively invest in expansion to support the new found demand for their products or services.
Online Retailers
Online shopping is now the preferred if not the only way people can buy stuff. Be that a new book from Amazon or a slow cooker from Kogan, these guys are winning. Some retail giants are even stretched to absolute capacity, with Amazon in the US taking on a whopping 100,000 new staff just to cope with the additional demand. As a trickle down effect, companies like AfterPay are seeing huge growth.
Supermarkets/Alcohol
Well, duh. We’ve all seen the scenes online or firsthand even. People fighting over toilet paper like two hungry lions scraping over the last piece of wildebeest. Both Coles and Woolworths are BOOMING. They have both had to limit the amount or products we are actually allowed to buy from them, that is how you know the sales are going berserk.
Another one that may not surprise you — this being Australia and all. Alcohol retailers are getting slammed. Similar to Woolworths and Coles, restrictions have been put on the purchase of booze to discourage hoarding. Dan Murphy’s released figures this week stating that there sales were up 87% when compared to the same period last year, with no indication of the lockdown measures in place being relaxed anytime in the immediate future, sales are predicted to stay constant. The fear in the mind of consumers driving these purchases is the looming threat that bottle shops will be forced to close at any moment. God help us if millions of thirsty Australians are made to go cold turkey.
Logistics/Delivery
This one is directly correlated with the increase of online purchasing mentioned earlier in this piece. This goes for companies like Star Track delivering products but also for Deliveroo who have been getting swamped in the wake of the lockdown. These guys will continue to be winners, until such a time we stop buying products online — even with the threat of recession looming, this still does not look likely.
Video Conferencing/Communication Tools
How many of your coworkers’ living rooms have you seen since working from home? Thanks a lot Covid. With the Australian Government putting work from home measures in place indefinitely it looks like Zoom, Hangouts and Skype will be the closest we get to meeting our teams and clients indefinitely. Which depending on your persuasion might not be ideal, but it certainly is more than ideal for the players in this space.
Moving away from work, platforms like House Party could not have encountered a more opportunistic crisis if they tried. Hundreds of millions of people currently sit at home bored on a Friday or Saturday night, House Party allows these people to connect with their friends for a night of games, and maybe even a few cheeky virtual drinks.
Entertainment, Streaming + Gaming
Lots of activities we used to do, have now been replaced by well, not much at all really. That is why entertainment services from Disney + to PornHub have been seeing some serious action (no pun intended). In addition and to my own personal dismay, TikTok has been going from strength to strength, feeds across the globe are filled with irritating and cringey dances. Seriously though, if it’s helping people maintain their sanity and puts a smile on their dile, who am I to judge?
Twitch, a streaming platform that specialises in online gaming has also experienced record volume due to the impact Covid-19 has had on the range of activities available to us during our down time.
The Losers
Well losing sucks doesn’t it? Even worse so when the game is taken out of your hands completely. At the moment it seems like a sisyphean task for some industries to not completely fold under the crushing weight of this crisis. Let’s have a look at who has or is likely to go titts up.
Airlines, Cruise Ships and Travel Agencies
These guys really went down like a sack of potatoes. Qantas, our national carrier is on the brink, along with their alt brands and it looks the same story for Virgin Australia. It does not take a brilliant business brain to work out this damning equation for airlines who already had paper thin margins closed borders = no flights, no flights = no revenue. Qantas is now hedging its bets on further Government assistance to prevent the airline plummeting (excuse the pun) into liquidation.
Ah Cruise Ships, the so called floating RSL, or Sizzler on the sea as it is colloquially called. I dare say anyone who has been on a cruise ship in the last 90 days and been forced into quarantine or is still stuck onboard one, will not be easy to coerce back into going on one again. P&O, Carnaval and all the other operators are in serious trouble here. Not only from a complete stop in revenue but also due to legal issues stemming from their handling of their poor customers who had the holiday from hell.
Flight Centre closed 100 stores last month. As the intermediary between consumers, travel and accommodation naturally their doom was going to go hand in hand with their providers.
Oil and Gas
Oh no everyone recoil in fear, the oil companies are taking losses and fuel is really cheap. While I can’t say I feel particularly bad about cheap petrol, I’m pretty sure the board over at BP isn’t stoked with the current oil prices. On 1st of January 2020 a barrel of crude oil went for $67 USD, at the time of writing, the current price for one barrel of crude oil is $27 USD. If you were lucky (or unlucky) enough to own an oil field, it’s oil reserves would now be worth less than half of what they were at the beginning of the year. Yikes.
The demand for oil has grown annually since 2009 and in February of this year it was forecasted it would increase again. What they did not predict and probably could not predict is one seriously pesky virus.
Traditional Retail and Hospitality
You would now be aware that your local pub is closed. Nothing will quite hit like that first ice cold schooner in a beer garden in the company of friends after this is all over and done with. In the meantime pubs, clubs and all venues in between are doing it hard. In nearly all cases letting all casual staff and most full timers go. Restaurants are still hurting but new regulations have allowed them to take orders for food and alcohol that customers can get delivered or pick up. While this might not make them particularly profitable it may be just enough to keep them afloat.
Now traditional retail, let’s have it right brands like EB Games and Jeans West went bust before this crisis. Why? Well it’s because they were outdated and had no unique selling point. They also did not have a strong online presence and relied too heavily on their bricks and mortar locations. I feel slightly Darwinian about this topic. If retailers don’t adapt to the changes of an evolving market, they can’t be surprised when their customers leave them behind for a better deal elsewhere. A lot of traditional retailers with big rents and low sales are getting screwed now more than ever and for better or worse, a lot of them will not survive the purge but they were on borrowed time anyway.
The Inbetweeners
These guys are on the precipice. It’s time to adapt or die. A lot of company’s in the below listed industries will not survive, but some of them will find a way to strive. If they find a way to do this well, they could be set up for continuing success that will outlast this crisis.
Banking
Banks are currently working with their customers to take the burden off mortgages and business loans by offering relief in the form of a deferment. The bottom line is that a lot of people and businesses may not be able to honour their loans due to a loss of earnings. If that happens too often, the market for financial products goes down the toilet.
The opportunity exists for banks in the temporary solutions that their customers will need to see them through this crisis, this being in the form of small and medium sized loans.
Healthcare
This one is on a knife’s edge. Some companies will innovate new ideas and stay ahead of the demand curve and others will completely capitulate and never come back.
Baidu, a Chinese tech giant created an app that provided the people of China with real time updates and reliable information on Covid-19. In addition they have created a consultation that has seen over 100,000 doctors replying to millions of inquiries.
Manufacturing
This one again, will depend on what you make, or even what you have the ability to pivot to make. Liquor companies are making hand sanitizer, we’ve also seen a variety of manufacturers adapt to create facemasks. This is the kind of thinking organisations need to survive. On the other hand, if you are a supplier to Amazon or manufacture goods for a product category that is still in high demand, you should be thriving.
Everything Else?
There are many other industries that slot into each one of the categories now, and more that will in the coming months. To bring it closer to home, how is your business tracking currently? We have been speaking to a lot of organisations around Brisbane, and it has been interesting to see how they have pivoted to meet the demands of a changing and even new to world problem (in our lifetime at least). While it may be hard now, or even it may be booming. What we can take comfort in is that eventually we will return to some kind of normality.
