Businesses that Thrive in a Pandemic
And What Companies Can Learn from Them
Companies may have planned for economic downturns, but a global pandemic is a whole other set of circumstances. The health crisis not only caused a significant number of businesses to close to the public, sending people to work from home or idle on unemployment, the pandemic is affecting economies worldwide. When supply chains are disrupted on such a massive scale, whole industries are affected.
However, some businesses are seeing lots of new and returning customers during the COVID-19 crisis. Could there be lessons here to help other surviving businesses come out stronger?
How COVID-19 is predicted to affect business and industry
One economic model developed by the University of Alabama predicts a roughly 11% decrease in U.S. gross domestic product (the economy’s total output of goods and services) from March 2020 to March 2021. The decrease is attributed to direct effects of businesses closing, such as reduced trade. Future uncertainty is the other component, as businesses and households spend more conservatively and reevaluate long-term investments.
However, there are signs of structural changes in the global economy, that could actually be a benefit in the long run. A significant consideration is weighing efficiency versus resiliency in supply chains, including where we get the materials for production and trade.
Getting supplies at a good price from a single source, let’s say in China, and then suddenly having that supply cut off as a result of a pandemic or a trade war, puts the whole supply chain at risk. Diverse supply origins, including more domestic ones in the U.S., reduces dependence foreign suppliers, increases domestic production and helps the reliability of the supply chain.
What types of businesses are thriving
Tech companies
Currently, any business focused on exchanging goods and ideas without the need for in-person interaction is positioned well. For example, big tech companies like Google, Facebook, Apple, and Microsoft are weathering the storm pretty well. Right after the U.S. reported its first quarter 2020 GDP nose dive, Microsoft reported its sales were up 15 percent, seeing little effect from COVID-19. And even though Facebook earns 85% of revenue from advertising, Facebook also had strong first quarter earnings. Many that had never heard of remote work software company Zoom, now recognize it as a household name.
Food related
Grocery delivery apps are bringing home the bacon. App intelligence and research firm Apptopia compared the average daily downloads in February, 2020 to March 15, 2020. Instacart, Walmart Grocery and Shipt have seen their daily downloads surge by 218%, 160% and 124%, respectively. Prepared food delivery through apps like GrubHub and UberEats have also skyrocketed.
The biggest financial winner in the retail goods space is Amazon. The company reported revenue of $75.5 billion for its first fiscal quarter of 2020, aided by a surge in grocery sales. This is compared to revenue of $59.7 billion at the same time last year. The company has committed to donating Q2 profits to COVID-19 recovery.
Video games
Since both adults and kids are stuck at home, it’s nice to know they are using their time productively playing “Call of Duty” and “Animal Crossing.”
Market research group NPD reports sales of “video game hardware, software, accessories, and game cards” topped $1.6 billion in March— the biggest sales month for the game business in more than a decade.
Home Improvement Centers
The coronavirus pandemic has demolished much of the brick and mortar retail industry, but home improvement stores are a major exception to the rule. Why? Well it helps that these establishments were exempted from business closures as “essential services.” People were home from work with extra time on their hands to complete repair or remodeling projects.
Then the nice weather of spring broke out, and like wood ducks and robins returning to nest, people flocked to Home Depot and Lowes, wiping out gardening supplies with a surge of spending. Perhaps because of COVID-19 concerns, interest in backyard gardening has bloomed across the country. Reuters reported that U.S. seed company W. Atlee Burpee & Co sold more seed in March than any time in its 144-year history.
Analytics company Placer.ai found that visits to Home Depot and Lowe’s spiked 1.2% and 1.9% year over year in Q1, and continued to rise into April. Home Depot’s weekly store visits jumped 31.3% For the week of April 20, above its typical baseline, while Lowe’s experienced a 71.8% rise in visits. In online sales, Home Depot saw a 13.3% increase while Lowes noted a 4.9% jump.
Sales could grow higher, but contractors are not starting as many large-scale projects this spring. Depending on how long the COVID-19 pandemic affects the economy, this could dampen impressive returns for home improvement centers.
Small businesses that are thriving
Small businesses that are thriving in local communities are ones that are nimbler to respond to consumer demands for essential items, and delivery of services that help people avoid face to face contact. As you might expect, local grocery and liquor stores are doing well, but so are services like home delivery companies. Demand for cleaning for all types of businesses, including offices, restaurants, homes, commercial buildings and medical facilities, has risen sharply.
There have however, been a few surprises as small businesses adapt to current circumstances. Here are two:
Drive-in movie theaters
An icon of a bygone era, drive-in movie theaters have seen a sudden resurgence as standard movie theaters are closed. There is still the feeling of getting out of the house and taking in a show, but from the social distancing bubble of your own car. Don’t forget to bring your own popcorn!
Bidet sales
When consumers started to have a collective meltdown over toilet paper shortages during COVID-19, internet company HelloTushy.com saw its bidet sales skyrocket. Tushy makes portable, self-installable bidets, allowing users to clean themselves with water rather than toilet paper. Bidets are popular in many countries, but have yet to catch fire in the U.S. But Tushy hit the market at the right time. Because of sanitation and toilet paper supply concerns amid COVID-19, the company saw sales double, then quickly triple. Sales are now at ten times that of pre-pandemic levels.
Businesses that also do well in a recession
When you compare the businesses thriving in a pandemic with those that have thrived in a recession, a pattern emerges on the consumer end. Businesses that help people be more self-reliant or save money survive. For example, grocery stores do well because people are cooking more at home than eating out. Home improvement stores do well because people are fixing up their homes instead of moving. Auto repair shops, and other businesses where people are fixing instead of buying new, have a good chance of surviving as people become more fiscally conservative.
Going Forward
Many local businesses were caught off guard as to how to pivot to online or delivery sales, or how to respond to increased customer inquiries during COVID-19. Now and in the future, companies can benefit from improving disaster plans, listening and communicating directly with customers.
Now is a good time to review those “what if” scenarios and have a plan in place. For example, make sure all of your business listings are updated at least annually. Detail out how phone lines are transferred and who will answer them if your brick and mortar location is closed to the public, but you are still operating.
Monitor Facebook groups and definitely your own social media channels to see what people in the community are talking about related to your business. For example, my favorite Thai food truck was open, but their phone number was wrong on social media. For my own selfish purpose I let them know via Facebook, and boom, they responded and corrected the error. I’m back in the pad Thai noodles! But can you image how many phone orders they lost? So, make sure your online info is correct and that someone is answering the phone during business hours, not just a recording.
Finally, consider if you could diversify your business to add online sales or continue working with remote employees post-pandemic. It will not only help you ride out another crisis like COVID-19, it is the wave of the future.
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