CHAPTER 11: IT’S AN ILL WIND …
As the proverb from the Middle Ages goes, “It’s an ill wind that blows nobody any good”. It is strange that the proverb’s actual meaning seems to contradict itself – when things have gone wrong, some good may come out of it. In the case of the coronavirus pandemic, we have seen an ever-growing list of victims, both from a personal and a business perspective, but there have also most definitely been some beneficiaries. Here are some of their stories.
“Investors are a strange bunch, inoculating themselves from emotions and training themselves to look for investment opportunities during hard times.”
(Haill, 2020)
The pandemic has not been bad news for everyone, and some have clearly prospered. Anyone who invested in companies manufacturing PPE or COVID-19 testing kits may well have been on to a winner. Virus killing cleaning products have also seen demands soar. Conversely, anyone who shorted oil on the stock markets at the outset of the pandemic will have been delighted when the price plummeted in line with the fall in demand.
I have already spoken about some businesses that, in many cases, changed direction and started making something or providing a service that was suddenly in demand. In PwC’s Global Crisis Survey 2021, around 20% of responders said that the crisis had had a positive overall impact on their organisation (PwC, 2021).
Three of the organisations featured in this section, Amazon, Netflix and Zoom saw their share prices rocket. Quoted in $US, the Nasdaq shows that each of these three has now fallen back from the peaks they had enjoyed during the year. Even so, at year-end 2020, Amazon and Netflix prices were more or less double their respective March values, while Zoom had trebled.
Figure 29: Share price behaviour comparison30
Twelve months on, both Netflix and Amazon were up on their 31 December 2020 close, trading at $602.44 and $3,334.34 respectively. Zoom, however, had substantially dropped backed to $183.91 (Nasdaq).
Amazon
The Financial Times reported that online retail behemoth Amazon doubled its quarterly profits, while it also hired 175,000 new employees during the pandemic.
“Locked down shoppers drove sales 40 per cent higher, year-on-year, to $88.9bn, helping the company record $5.2bn in net income for the three months to the end of June.”
(Lee, 2020)
This surge in profits came despite Amazon’s COVID-19 related expenses, which amounted to $4 billion over the same period. Although representing a small proportion of these costs, the world also witnessed a charitable side of the organisation. Having long since been accused of being the nemesis of high street book retailers, Amazon stunned the industry by donating £250,000 to a fund in aid of bookshops hit by COVID-19 (BBC News, 2020).
Netflix
CBS reported that Netflix had added 16 million subscribers during 1Q2020 when the pandemic had barely taken off. This was double the company’s own forecast for the period. Deprived of entertainment from theatres, cinemas and concerts, many turned to online streaming services as an alternative. This represented the largest three-month leap in the company’s 13-year history.
Zoom
Google is much more than just a search engine, despite rival products, it has long since become a word that has entered the English language meaning ‘go and search online’ for information. This is a little bit like ‘hoover’ becoming synonymous with vacuum cleaners decades ago. I can also tell you that when I first joined IBM it was not appreciated if you referred to making a Xerox photocopy of something, especially as IBM made photocopiers, too. Today, we have another word that has entered the language, ‘Zoom’ or ‘Zooming’, and it has quickly become commonplace for people to say: “let’s Zoom next week”.
“If you go back to December 2019, we had a north of 10 million daily participants on the platform. In March it went to 200 million and in April it shot up to over 300 million daily participants on the platform.”
Harry Mosely, CIO, Zoom (Mosely, 2020)
Hospitality
Although industries, such as hospitality, tourism, events and much of the retail sector have taken a serious hit under the weight of lockdowns, there have been some success stories to tell. Fine-dining restaurants are unlikely to be patronised by individuals who would be prepared to pay $50-100 for a meal delivered in a polystyrene container. Moreover, in better days, these restaurants would usually place an exceptionally large mark-up on alcoholic beverages, especially wine and cocktails. All that said, any business falling into this category may learn something from the case study in section 12.10, Louis’ Steak House – Hong Kong, that survived six crises, including the economic devastation that Hong Kong experienced from SARS.
At the less expensive end of the restaurant sector, low end and fast food restaurants with the ability to provide a take-away option have certainly won out over the fine-dining brigade. Not only can customers click and collect, but they can also simply wait for food to be delivered to their door by the growing army of specialist companies, such as Uber Eats, DoorDash, Grubhub and Deliveroo. The restaurant food delivery business has certainly been booming during the pandemic as demand has soared. So too have standalone kitchens, not attached to restaurants, whose sole purpose is supporting the cooked food delivery business.
Supermarkets
Immense pressure was put on supermarkets when pre-lockdown panic buying came to town, but this had a very positive effect on their bottom lines. We have also seen how supermarkets with an online presence have experienced a massive and rapid increase in demand for this service. But, supermarkets have also benefitted from two other changes in our eating habits:
1. Serial restaurant eaters who were unable to visit their preferred venues needed to change their dining habits. Eating-in saw a rise in demand on supermarkets, especially those that offered easy-to-prepare meal deals, which generally included a starter, main, side dish and a sweet. Oh, and some even offered a bottle of wine, too.
2. Then there were those individuals who usually ate midday at work and suddenly found themselves at home. It seems that many decided to spend time baking bread and cakes, and preparing meals, and they would naturally need ingredients from their local supermarket.
Online retailing
Amazon aside, any retail business without an online presence would find it nigh on impossible to trade during lockdowns. In the UK, the Arcadia fashion empire is the umbrella name for several well-known high street brands. The organisation failed to modify its business model in response to a changing marketplace. Continuing to rely solely on high street footfall, especially in a pandemic, sounded the death knell for Arcadia.
Many of Arcadia’s competitors with online platforms, although they haven’t necessarily excelled with their high street route to market closed off, have so far survived. By comparison, there are other fashion retailers that only trade online and have certainly benefitted from the pandemic. Without the overheads of a high street store, online fashion group, ASOS (As Seen On Screen), has seen its customer base jump by three million to around 23 million in the UK alone. This represents 35% of the UK population, while its worldwide sales were up 19%. However, ASOS is concerned that its younger customers may become victims of the pandemic and lose their jobs, which will ultimately affect its sales numbers (BBC News, 2020).
Moreover, writing in Forbes, Chris Furnari reported that:
“As the coronavirus began spreading across the U.S. earlier this year, total e-commerce penetration experienced 10 years of growth in just three months’ time (March-May).”
(Furnari, 2020)
Sale of laptops and tablets
With so many people being encouraged to WFH, the demand for laptops and tablets rocketed. Many schools were also on the hunt for equipment to support their pupils’ home schooling needs. The Wall Street Journal reported that shelves were being stripped of laptops, while monitors were also in short supply.
“Equipment makers were already grappling with supply-chain bottlenecks before demand in U.S. spiked.”
(Neddleman & Tilley, 2020)
Hardly surprising was the associated increased sales of PC chips experienced by Advanced Micro Devices (AMD). Reporting for the Financial Times, Richard Waters commented:
“If anything, the crisis has only lifted its [AMD’s] prospects by fuelling sales of home PCs and bringing more demand for data centre capacity from big internet companies that use its chips.”
(Waters, 2020)
Online gaming
With millions at home looking for something to entertain themselves with, many turned to online gaming. This has provided many of the gaming industry players with a golden opportunity, and they have flourished in the conditions generated by the pandemic.
“Overall, video game sales in March approached $1.6 billion, representing a 35-percent year over year increase.”
(Smith, 2020)
While industry experts believe that sales will dip when the pandemic finally recedes, they are also hopeful that they can at the very least retain the patronage of online gaming newbies that they have acquired.
Gymnasiums
Many gyms in different parts of the world found themselves being the victims of lockdown closure orders from their respective governments. Some defied these lockdown regulations and remained open, but ultimately found themselves on the wrong side of the law.
The vast majority of gyms can offer substantial arrays of fitness equipment and serve their clientele usually by opening early and closing late. When they have been allowed to operate, they are expected to adhere to social distancing requirements across their entire premises, including the locker room. Moreover, if they do not have sufficient staff, can they depend upon every member to properly wipe off the equipment when they finish using it? This must take account of those doubting Thomas’s out there who remain in denial about the existence of the pandemic, or don’t believe it will affect them. To compound the issue, I have not come across any gyms, save one (see section 12.5) that was in any way prepared to face the pandemic.
On a personal note
It must have been towards the end of March 2020 that the world began to discover my book Business Continuity and the Pandemic Threat. I cannot remember a time in my career when I have been so much in demand for consultancy, training and webinars. I have had enquires from as far afield as Hong Kong and Singapore, India, the Middle East, Europe, UK and the US. And of course, my publisher wanted me to write this sequel, too.
With the subtitle of Potentially the Biggest Survival Challenge Facing Organisations, I still find it surreal that when the book was published back in 2016, people laughed at me.
30 The figures quoted above for Amazon, Netflix and Zoom were derived from a Nasdaq snapshot.