The economic impact of COVID-19 is being felt on a global level, and with specific sectors more severely affected, some may see a quicker bounce back than others once the crisis is over. With this in mind, John Williams, Head of Marketing at Commercial Property Specialists Instant Offices explores the industries that are most likely to be the most resilient post pandemic.
With travel restrictions and social distancing measures in place, mobile communication platforms, e-commerce sites and “home comfort” services have seen a significant increase in demand. Zoom, Netflix, Domino’s and Blue Apron all saw a notable uplift in their stock price index during the month of March.
The crisis is pushing many industries to adapt and adjust rapidly. For example:
- Most schools and universities have closed down but continued operations online, meaning the education sector has experienced a relatively low impact. Analysts predict that online learning will become the “new normal” as education institutions expand their online offerings
- On the other hand, the property and commercial real estate industry has been significantly impacted by the lockdown. Operators are quickly reacting to offset this by offering virtual tours to help companies gather information and plan the next steps for when restrictions
Lessons From Post-COVID China
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Trends in China are helping to shape our predictions for future bounce-back closer to home. A recent Statista survey on the impact of COVID-19 on Chinese society asked 5,859 respondents aged between 18 and 60 years which industries are likely to recover the fastest after the crisis is over:
Sectors most likely to benefit from revenge spending:
Many shoppers are waiting to splurge after restrictions are lifted, and this “revenge spending” will boost sales in several industries. We are already starting to see the revenge spending trend in post-lockdown China, with the luxury brand Hermes alleged to have seen US$2.7 million in sales at their flagship store in Guangzhou just a day after reopening. Here are the sectors that are most likely to benefit:
- Online education (e-learning) service providers: Demand here will be two-fold. Professionals will be looking to improve and expand on their skill sets as the job market transforms. Meanwhile, parents looking to make up for lost time in their children’s education will be more likely to invest in quality online learning.
- Sports and physical wellness: Consumers will be eager to return to gyms and fitness centres after being at home. Sports equipment and facilities are expected to see a rise in demand.
- Health care and pharmaceuticals: Families will be stocking up on supplements and replenishing their first-aid kits in anticipation of future events like the COVID-19 lockdown.
- Consumer electronics: These “non-essential” items will see a surge when they become available to purchase again. More consumers will be looking to upgrade or replace faulty electronics after the lockdown. Many will also be looking to set up more reliable telecommunication systems, to make remote working easier in the future.
- Logistics: More spending on imported products will lead to an increase in shipping demands.
It is predicted that the majority of this buying will be done online. Consumers will have grown more comfortable with virtual shopping and virtual entertainment, such as streaming movies and live events.
What Makes a Resilient Industry?
The industries that have experienced the least disruption – and will likely see the quickest recovery – are those which have at least one of the following in place (or which can adjust to make the following possible):
- Ability to work from home
- Scope for rebound
- Use of temporary employment contracts
- A robust online business model with a focus on business continuity
Let’s look at a couple of examples of this, specifically in retail and business services.
Resilience in Retail:
The retail sector can make use of temporary contracts to reduce overheads, and the rise of e-commerce is giving the industry better scope for a rebound. Some retailers are also experiencing a surge in demand as buyers stock up on food products and other essential items, for fear of possible future shortages.
However, other retailers (mostly non-food retail) are seeing a drop in business. Some customers feel safer staying home, some are concerned about their future income, and some shops have been required to close temporarily during lockdown. Retail chains that do not have online stores or click-and-collect options have experienced the most severe losses.
Retailers have been affected by capacity limitations in freight transport between China and Europe. Shoppers are delaying the purchase of larger items and luxury goods until stores begin operating as usual again.
Resilience in Business Services:
Advances in telecommunication mean the majority of the business service industry now has the ability to work remotely. This means the sector has the potential to rebound well and to adapt to future challenges.
Meanwhile, demand has fallen for “support services” like cleaning, catering and security. Data centre services and video conferencing providers are seeing a significant surge in demand as more businesses turn to these online applications.
Looking at the predictions from China and the trends emerging around the world, we can expect the most adaptable industries to bounce back the fastest, especially those that enable consumers to buy products, services and experiences digitally rather than physically.