Infectious diseases have shaped economics for numeral years – believe the Black Death, plague, cholera, Spanish flu and SARS. The new coronavirus (Covid-19) can in all probability be additional to the present list and become a part of our collective memory as an occasion that formed societies and economies. The speed of spread of global coronavirus has caused a huge shift in people’s behaviour, such as bulk-buying or self-isolating. The environment has become increasingly ‘liquid’, subject to change and operating without familiar context and predictable patterns.
And when the context and pattern in which people live changes, brands have to struggle to add value to the altered demands considering this new reality.
With these shifts in consumer behaviour, how must producers stay relevant to want their customers want?
Coronavirus means producers need to be flexible and adapt to change. As many brands seem uncertain about how, or even if, they should answer, they must pursue consumers in the right way and deliver value in a time of contextual fluidity. How they move in a fluid time can no longer rely on automatic behaviors, as they may inherit a mastery of a past that no longer exists. Because in a consumer centric economy, when consumer demand begins to focus just on pandemic related essentials, producers have to take a backseat. They either alter their productions as per prevailing needs or lose.
What happens when China – the most strategic player gets a blow?
China happens to be the agent of so many businesses getting goods onto shelves. From raw materials to finished goods, it rules trade. Possibly so because, production is that economic activity that is spread into many segments and each step is a part of the bigger chain that transforms raw material into finished goods. With China ruling multi-segmental production process and trade, production declines have been quickly felt by businesses around the world. Temporary supply disruptions could have been met by inventories, but the levels are lean due to just-in-time manufacturing processes and alternative suppliers cannot easily be obtained for specialized parts.
Relative to similar episodes in the past, such as the SARS outbreak in 2003, the global economy has become substantially more interconnected, and China plays a far greater role in global output, trade, tourism. This magnifies the economic spillovers to alternative countries from associate adverse shock in China. For instance Shoemaker Steve Madden, about 73% of its goods are sourced from China. For Best Buy, it is 60%. For online furniture company Wayfair, it’s about 50% of goods. Likewise, a million other companies with their working units in China suffer this massive blow- bringing their businesses to a standstill – or the bigger picture – Global economic standstill.
What is Consumer Behaviour telling us?
The producers and consumers are strategic players in the world economy, who coordinate the price of goods and govern demand and supply. Production is influenced by consumers significantly. First, in a consumer centered market system, what is demanded by a consumer is produced by a producer. Second, consumption expenditure on commodities is a major constituent of production income.
With this pandemic taking over, both factors have altered. The demand for essentials bloomed while that of merry-time goods took a backseat. A decline in non-essential spending has already started, while economists suggest that expenditure on food services, arts and accommodations will drop by 80% and public transportation by 67% if the pandemic continues. At a similar time, however, customers have inflated disbursal on sure merchandise (like surgical masks and alternative hygiene products) that has led to price gouging.
Production – Global gloom
As cases of the virus unfold, the business impact might be even as sweeping, inflicting profit warnings, store closures and credit defaults among firms that swear heavily on vast consumption power. As production is spread over many stages, production for global companies is also spread across the map. With worldwide shutdown, production suffers a hit.
For the less fortunate producer groups, as sales from stores that sell their products slide, with many either closed or open for shorter periods of time, the demand has moved online. Thus their business only prospers if it inherits the capacity to be carried digitally. As a result of government regulations amidst the misfortune, brands are also obliged to lower their prices. With lockdowns and immense fear, the transport industry is at rest, implying no tours from warehouses to production centres to the market.
Is Production blooming somewhere?
While, of course, it is good to avoid being seen as a crisis profiteer, there are a multiple ways brands can play enhanced roles in people’s lives in a span of time where people are out of their automatic behavioral rhythms. When the outbreak led to people shut in their homes, it inadvertently created a boon for e-commerce as shoppers bought their goods online. The outbreak also triggered a spike in online sales of provisional supplies from those would-be shoppers concerned about keeping their families safe from a viral outbreak, including brands selling immune-boosting products. Online sales of disinfectant by the Reckitt Benckiser-owned Dettol rose by 643%!
Pharmaceutical companies view Covid-19 as once-in-a-lifetime business opportunity. The world needs their products, of course. We need treatments, vaccines and tests kits. Multitudes of companies are now vying to make them. They’re all in that race and the global crisis will potentially be a blockbuster for the businesses in terms of sales and profits. The worse the pandemic gets, the higher their profit.
The pandemic did increase demand for online-based services, prompting mass hiring. While it left thousands lining up for unemployment, it has conjointly modified the hiring landscape for pharmacies, online retailers, tele-communications and shipping companies wanting to bolster staffing so as to fulfill the latest surge of demand. Major corporations like CVS, Amazon, Walmart, Walgreens, Kroger and more have all announced a number of new positions as their industries need more hands on deck than ever. Amazon is sought to hire 100,000 full and part-time positions at fulfillment centers and delivery networks across the U.S., considering heightened demand for delivery services as social distancing measures kick in.
As more people stay home, demand of entertainment services such as video on-demand and gaming increases and so video streaming services like Netflix, Disney plus and alike are also well insulated from the impact of the deadly disease. Companies also have to change the way they work with technology and get grips with it. For instance “Zoom video communications” is one of the companies which has seen its share price bloom.
All that time spent cooped up indoors is likely to leave many people in need of brisk exercise. Brands like Step forward Pelton Interactive provide live-streamed workouts to an army of millions of bedroom fitness enthusiasts and are sure to thrive at this time.
If there’s one factor this crisis has underlined, it’s what quantity we tend to accept China to form on the subject of everything, from automobile elements to medical equipment to clothes. China experienced the pandemic first, so global supply chains were disrupted almost from day one of the country’s lockdown. Just about anyone within the business of manufacturing things is observing a way to diversify their production lines, thus we expect new countries to emerge as producing hubs.
The sellers of some lesser-known products also seem to view the coronavirus as a novel business chance. These corporations are pushing the idea that gadgets like air purifiers, robots, and even spit-shielding hats could be useful in combating the virus. While some of these vendors are actively promoting the link between their products and Covid-19, many consumers are also making the connection themselves and seeking out their products.
Robot sellers took coronavirus as an opportunity to broadcast their bots’ abilities. Some robots are lending a helping hand in the battle, facilitating conversation between infected patients and hospital staff and delivering wants, together with medication. But at least one robot vendor has used natural event to push the talents of its “service robot,” an automaton that can be programmed to answer queries, quiz individuals on their health, give tours and even hand out face masks!
Post Epidemic economy
The physical analog world is being decimated and traditional analog businesses inclusive of hotels, restaurants and airplanes are in crisis. The digital world, however, is prospering. We are surviving this pandemic, thanks to technology. The entire world is sitting at home, and their window to the outside is their smartphone. In the post-pandemic world, technology will be as ubiquitous as it is in the present, if not more, and tech companies will become even more powerful and dominant. That includes small firms like Zoom, and the big players such as Google, Apple, Facebook and Paypal. Consumers will high lighten the gist of sanitation, healthy eating, fitness, automation that will ultimately knit global economy even more tighter.