The Great reset: COVID-19 and its market impact. Source: depositphotos.com
Covid-19 has shaken global economies and continues to disrupt their development. Today, we’ll analyse the impact of the pandemic on different industries and the inherent risks it still bears for markets.
Most and least impacted segments
As we know, industries that rely on personal interactions or travel have been the hardest hit. Entertainment, recreation, fitness, accommodation, HORECA, and airlines – have all been impacted by the continuous regional lockdowns, social distancing, and travel restrictions. Although these industries and businesses are experiencing a rebound along with economies in general, their growth is severely impeded as it still depends on the epidemiologic situation in a region which is hard to predict.
Not all the economic sectors were hindered by Covid-19. According to S&P Global, the least impacted industries include health-care technology, insurance, life-science tools and services, household products, semiconductors and related equipment.
Although domestic tourism may be less impacted by constantly changing travel restrictions, globally the industry is devastated. Global tourism’s direct gross product rose 19% in 2021 compared to 2020, reaching $1.9 trillion, as per the UNWTO report. Rising vaccination rates and the easing of travel restrictions produced a small rebound, but the spread of the Omicron variant in December triggered another downfall in both travel bookings and industry optimism. Therefore, the tourism industry’s revenue still barely surpassed half its 2019 levels.
The global restaurant industry was also seriously impacted by the pandemic. Social distancing measures and general caution towards public places caused many consumers to dine out less. According to Statista, the year-over-year change of seated diners in restaurants worldwide, compared to 2019, was -18% on December 6, 2021.
Entertainment and media lost a great deal of revenue in 2020, with production delays and theatres/cinemas either closed or restricted to visit. In 2020, the entire global theatrical and home/mobile entertainment market totalled $80.8 billion, the lowest figure since 2016 and a decline of 18% from 2019. The sharpest decline was in theatrical revenue.
Industries that flourished
Not all sectors were impacted negatively by Covid-19. Any crisis is both a challenge and a source of unexpected opportunities. The pandemic is not an exception. It accelerated already ongoing trends, such as industrial automation and contactless payments, and boosted some of the industries that would otherwise be developing much slower. With technologies like virtual reality, 3D printing, or telehealth, the pandemic has changed the course of the industries, enabling companies to demonstrate the value that, until now, consumers have been unable or unwilling to see.
Thus, with the restricted capacities of traditional healthcare capacities and increased risks of getting infected at hospitals, patients have turned to telemedicine as a safe alternative to in-person visits. Telehealth technology is expected to grow further and is estimated to be a $64.6B market, according to CB Insights’ Industry Analyst Consensus.
Companies already working in telemedicine have seen an enormous boost to their businesses. The largest American telemedicine provider, Teladoc, reported a 50% week-over-week growth in services the week after stay-at-home orders were implemented across the US. The company continued reporting strong results in 2021 as well. In Q2’21, for instance, Teladoc software facilitated 4.5M sessions between care providers and patients, up from 2.7M in Q2’20. In 2020, Alibaba reported its Ali Health app was receiving over 3,000 consultation requests per hour, while Tencent’s WeDoctor serviced 1.5 million consultations in a few first months of the year.
Stay-at-home orders and restricted public gatherings meant there has been a heightened demand for digital entertainment lately. People are enjoying more paid and free options for streaming video and music services. Some movie studios opt to make a film available for home viewing and in theatres simultaneously. Video conferencing and live-streaming brought entertainment into living rooms around the world. The trend toward digital entertainment accelerated in 2020 and global revenues climbed to $61.8 billion, an increase of 31%. The number of online video subscribers worldwide grew to 1.1 billion, up 26% from 2019. Streaming video-on-demand (SVOD) is projected to grow at a CAGR of 10.6% to 2025, making it an $81.3 billion industry.
Video gaming is also growing enormously, especially with new Metaverse trends and play to earn opportunities. Video game and esports revenues continue their rapid ascent, reaching $147.7 billion in 2020, with a 5.7% CAGR projected to expand the segment to become an almost $200 billion business by 2025.
Virtual reality (VR) has become the fastest-growing entertainment segment, boosting in-game experiences, facilitating online music streaming in the form of virtual concerts, and even simulating work processes for enhanced professional training. Use of VR will rise further to offer virtual experiences such as museums, art galleries, and historic sites.
Guggenheim, the Sistine Chapel, and the Great Wall of China have already started offering virtual experiences. Besides, real estate companies are also expanding their VR tours due to the coronavirus. According to the IDC, global shipments of AR and VR headsets increased by a staggering 348.4% in 2021, whereas standalone VR headsets occupied nearly 90% of the market share. The organisation estimates that this growth momentum will continue until 2025, with a compound annual growth rate (CAGR) of 45.9%.
Besides, many more people are turning to social media for entertainment and news. There was a significant increase in the average time users spent on social media in 2020. The amount of time spent on social networking is expected to remain stable in the upcoming years. Market leader Facebook was the first social network to surpass one billion registered accounts and currently has more than 2.89 billion monthly active users. Tik Tok is another social media platform that has reached 1 billion monthly active users. It was the most downloaded non-game app in H1 2021, with 383 million installs for the period. The video-sharing platform has also become the most engaging social media, having an average session length of over 10 minutes.
Another sector that benefited from the Covid-19 crisis is food delivery. The lack of in-house dining helped digital restaurant deliveries to increase by 67% globally, with the United States increasing the most at 123%. At the same time, such a growth rate was caused by unprecedented business closures, so the industry is projected to return to a more modest development as restaurants and cafes are open most of the time. Nevertheless, some of the newly-formed habits are going to linger. Today, 68% of customers say they are more likely to purchase takeout or delivery food than they were before the pandemic. 92% of fully-vaccinated restaurant customers plan to continue ordering online at least as often as they do now, while just 8% plan to return to dine-in as they did prior to the pandemic.
The producers of remote working tools and software are among the pandemic winners too. In China, Alibaba-owned DingTalk and Tencent’s WeChat Work — two of the most widely used workplace collaboration software platforms — temporarily crashed on the first day Chinese office workers began working from home. The video conferencing company Zoom ended 2020 with a net profit of $671 million, up from just $22 million the year before. As of September 1, 2021, Zoom had a market capitalisation of $88 billion, compared to roughly $30 billion at the onset of the pandemic. Microsoft Teams had enormous growth in daily active users – from 75 million in April 2020 to 145 million in April 2021.
Finally, contactless payments and electronic transfers prevailed as people were afraid of germs carried by physical banknotes. Even after the cash fears abated, consumer preference for contactless payments stayed. “Even if there’s no fear factor anymore, which will take a while,” said Jamie Topolski, a Fiserv director of product strategy, “people won’t go back.” People eventually will adjust the way they interact with businesses as circumstances change. But payment methods rarely shift backwards.
Pandemic bubbles to burst soon
Although many new trends are going to linger, some businesses that have flourished due to the pandemic limitations are expected to fail soon. In addition, many governments have provided continuous financial support to businesses during the pandemic. Most national support programs are ending this year. Without the monetary boost, some businesses won’t be able to survive.
Some companies saw the Covid-19 crisis as the right time to innovate, automate internal processes and adapt to the changing customer behaviour. Yet others were too busy surviving to invest money in new operating models. As usual, those businesses that cannot keep up with the times and introduce new solutions aren’t competitive and will ultimately fail. According to a recent study published by the management consultancy Ayming, the industrial, automotive, energy and biotech sectors are the most affected by the absence of necessary innovations.
The smaller the enterprise, the fewer chances it has to survive after governments stop their generous pandemic relief funding and reverse the rates back to normal. In a 2021 report by LSE’s Centre for Economic Performance (CEP) and the Alliance for Full Employment (AFFE), almost 15% of UK businesses were defined as being on the brink of imminent closure. “Micro” businesses – those with fewer than 10 employees – are seen as particularly vulnerable. In particular, they are more likely to be greatly impacted by supply chain disruptions and inflation. Generating enough revenue is the biggest post-pandemic challenge facing owners of small businesses. As inflation rises, SME business owners will be forced to increase prices, which will make them less competitive.
As for temporary trends, online mental therapy sessions that briefly surged while the lockdowns were in place, didn’t prove sustainable. Virtual appointments were more attractive to those already receiving psychiatric treatment before the pandemic, but only 5% of newly diagnosed patients chose to receive mental health care via virtual appointments. Lack of access or tech literacy also contributed to the trend quickly vanishing away.
The popularity of online fitness, which was the only gym-resembling option for some time, is also fading away. The routine of going to the gym in person provides more accountability, access to higher-level equipment, personalised instruction, and greater levels of personal achievement which are additional incentives to return to the gym. At the same time, fitness club owners who began to offer on-demand or live-streamed workouts may keep the service as an additional revenue source.
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