How are Commercial Businesses Faring in the Time of Corona?
The spread of the COVID-19 pandemic across the globe has necessitated the restriction of social interaction to prevent transmission. As a result of social distancing measures, physical retail stores, restaurants, and other public spaces have been closed. This has had an unprecedented impact on the global economy, causing the closure of small businesses, mass unemployment, stock market decline, and warnings of an impending recession. While certain industries such as hospitality are undoubtedly suffering at this time, there are, however, others like consumer goods that are enjoying increased popularity. This article charts this uneven economic impact of Coronavirus on various industries to understand the pandemic's impact on commercial businesses.
Unsurprising, the industries struggling the most in the wake of the COVID-19 pandemic is travel and hospitality. Governments around the world have enforced lockdown measures and enforced strict travel restrictions in an effort to prevent the transmission of the virus. The International Air Transport Association (IATA) has predicted that this will result in a US$314 billion dive, or a 55 per cent decline, in global passenger revenues as a result of the pandemic. This is mirrored in the hospitality industry, with the closure of public spaces and social distancing causing a 67 per cent decline in British hotels’ revenue and severely undermining the nation's pubs and restaurants. This has wider implications of the British economy as the hospitality industry constitutes more than the automotive, aeronautics, and pharmaceutical industries combined and provides £120 billion to the country’s economy. The hospitality industry also employs 10 per cent of Britain's workforce and its decline, therefore, risks the loss of hundreds of thousands of jobs. Recovery post-Corona has been predicted to be slow and gradual with companies demanding loans and financial aid from governments in order to recover from economic losses during this period.
Retailers have also been impacted particularly hard by the pandemic with small and large businesses alike struggling to cope with the financial implications of COVID-19. Barclaycard, which constitutes around half of the United Kingdom’s credit and debit card transactions, noted that fears surrounding Coronavirus impacted non-essential industries as early as February 2020 with nearly 30 per cent of citizens avoiding high-street shops to minimise the risk of transmission. This has only been exacerbated in the last few months with the enforced closure of retail shops. The Binder Dijker Otte (BDO) High Street Sales Tracker illustrated this through their report of a 34.1 percent plummet in total in-store sales in March across various sectors from fashion to lifestyle and homeware. Sophie Michael, head of retail and wholesale at BDO, noted a decline in sales of non-essential goods as people strive to reduce expenses and save money in light of greater job insecurity and financial concerns at this time. This is also reflected in the luxury goods industry which heavily relies on Chinese consumers shopping both domestically and as tourists in other countries. Travel restrictions, closure of stores, and personal financial struggles during the pandemic threaten the survival of these brands. The financial decline of retail sectors has led to various companies filing for administration and is predicted to cause the closure of several businesses and the widespread loss of jobs.
Nevertheless, while retail stores selling commodities and luxury products are taking a hit, those providing essential consumer goods such as groceries are not suffering the same fate. As people are forced to stay indoors and public eateries close to patrons, there has been a rise in home-cooked meals, causing grocery stores to enjoy a surge in consumer demand. This has been intensified by panic buying with supermarkets consistently selling out of stock and reporting shortages of goods such as toilet roll, frozen food, disinfectant cleaning products, soaps, painkillers, and non-perishables such as canned food, pasta, and rice. Therefore, it is clear how Coronavirus’ economic impact is inconsistent across the retail industry as it offers greater financial growth for certain retailers while causing a decline for others, particularly those considered "non-essentials".
The closure of physical shops and restaurants to reduce the risk of transmission has caused a shift to online retail, boosting the e-commerce sector. The BDO High Street Sales Tracker reported that despite a significant decline in in-store sales in the United Kingdom over March, there was an increase in online orders. Similarly, Doug Anmuth, lead analyst at JP Morgan Chase & Co note that companies such as Amazon which offer contact-free shopping experiences and stock a wide variety of products, particularly household essentials, are best adapted to the current climate and are therefore enjoying a greater share of the market. Earlier this week, Amazon's stocks reached an all-time high. Similarly, there has been a rise in food delivery services, to the benefit of companies such as Deliveroo and Uber Eats. This growth in the e-commerce sector is expected to extend beyond the pandemic as it offers a more convenient and sustainable way of life.
As people self-isolate and refrain from entering public spaces, they are increasingly reliant on virtual technologies for entertainment and social interaction. Home entertainment providers such as Netflix and Spotify have enjoyed a rise in subscriptions while fitness and work-out apps are also benefitting from the closure of gyms as people strive to keep busy during isolation. Moreover, social media platforms, which allow people to keep in contact with friends and family dispersed around the world, are also experiencing greater consumer engagement. Facebook, for example, reported that messaging has increased by over 50 per cent and video calling has more than doubled in the last month. Similarly, with a transition towards remote working by several companies and e-learning by schools and universities, video-conferencing technologies such as Slack and Zoom are experiencing increases in their stock market values.
On the whole, the COVID-19 pandemic has had varying economic impacts with the changes it has wrought differing across all industries. While the COVID-19 pandemic has undoubtedly severely hindered several commercial businesses such as non-essential retail stores and restaurants, it has simultaneously favoured virtual industries and services such as online shopping and digital communication apps. Measures to combat the pandemic by limiting social interaction and physical contact have caused a shift in consumer practices in favour of digital technologies. This is predicted to have a long-term impact and extend beyond the health crisis as people slowly settle back into their "normal" lives and adjust to public life once again. Growth in the industries which are currently suffering such as travel, hospitality, and retail is also predicted to be slow as people tackle unemployment and financial strains to prioritise essential spending over luxuries such as holidays and shopping.