COVID-19 pandemic is a unique situation that affects both sides of the economy: supply and demand. What is more worrying that it takes time for business and consumers to adapt into “a new normal” following a large-scale economic disruption.
One cannot argue the fact that COVID-19 is a relentless destroyer of brick-and-mortar businesses as we have seen in the news and reports from retail associations around the world.
On the bright side, the global pandemic is boosting almost anything that can be done online or with minimal human contact — grocery deliveries, online learning, takeout food, streaming video, even real estate closings done with online notaries.
Unlike the Great Depression which was caused by policy error and host of structural issues, most economists will categorically place COVID-19 as a “real recession” – a classic shock to the demand and supply akin to a natural disaster, pandemic or even war.
Economists have thus forecasted an economic recovery following a V-shaped curve and some with a conservative U-shaped curve. Regardless of multiple views on economic recovery theories, the supply of goods and services remain impacted at this stage because factories and offices are shut and output falls dramatically.
Can the digital economy accelerate the global economic recovery?
On the other side of the equation, demand falls flat due to economic anxieties and fear – forcing consumers to stay home within 3 to 6 months. With unemployment potentially increasing in selected sectors, this will curtail consumer spending even more.
In this article, we provide a fresh perspective from multiple data sources that can potentially provide a leading indicator in the economic recovery due to the global pandemic.
They say data tells a story.
Here are some insights from what we have gathered.
Online demand from consumers remains strong
Search engine results and trends are becoming a leading indicator to gauge demand from consumers. A search input indicates a strong interest from a consumer looking to purchase a specific product or service.
COVID-19 contributes fear and anxiety to most of us. Stress-coping mechanisms such as online-shopping may contribute to the drastic shift in consumer behaviour during lockdown.
According to the latest Google trends, consumers are shopping for essentials, with 1.8X growth in delivery searches worldwide1, and a 41% increase of in-app purchases within F&B delivery mobile apps.
Consumers are also shopping for essentials, with 1.8X growth in delivery searches worldwide.
In Indonesia, Google search queries for recipes in 2020 have exceeded 2019 peaks. And in Malaysia, volume of conversation related to food & groceries recorded the second-highest amongst 9 other topics recorded during the Movement Control Order (MCO) based on 3.9 million social media data.
Revenue from eCommerce market in Malaysia. Source: Statista
Malaysia is also blessed with one of the highest internet users in the region with 16.53 million online shoppers. It was estimated that revenue from eCommerce in 2019 was USD 3.6billion (RM 12 billion) and this could reach USD 4.3 billion in 2020 according to Statista.
If the trend continues it means good business for logistic companies and other parts of the value chain.
However, how about other businesses that are not using online platforms to transact or sell their products?
Business recovery can be as fast as 50 days after the first shock
Similar to the global pandemic, the magnitude of impact from natural disasters can cause massive economic impact and loss of business.
Researchers Robert Eyre and Flavia published their recent study in April 2020 that showed an efficient approach of using Facebook data to measure “business recovery” after a major natural disaster hit.
Business recovery in this study can be defined as the time taken for a company to resume its business operations which include but not limited to engaging customers through marketing activities, information flow and other online activities displayed on a Facebook Business Page.
Business locations on Facebook with aggregate posting activity. Source: Robert Eyre & Flavia.
Three countries were investigated in this study Mexico’s Chiapas Earthquake in 2017, Nepal’s Gorkha Earthquake in 2015 and Puerto Rico’s Hurricane Maria in 2017.
Using Facebook Graphi API, posts for each Facebook Business Page were analyzed before and after the natural disaster. The business recovery times were found as follow:
- 51 days for Nepal
- 71 days for Puerto Rico
- 55 days for Mexico.
The business downtime was analyzed by observing the number of posts from each of the Facebook Business Pages during that period. Here is a snapshot from the research study.
Detected downtime events from Facebook Business Pages data. Source: Robert Eyre & Flavia.
Business recovery trend was identified when Facebook Business Pages are actively promoting items, products, goods, services – it means the business community is reacting. There were innovations and discounts to stimulate consumer demand within the constraints.
And from a supply side, adjustments will be made by supplier and service providers to ensure demands are fulfilled according to the new norm – mainly through digitalization and online sales platforms.
However, what are the results from an increase of online posts from Facebook Business Pages? Does it translate to strong online sales?
Consumer online spending is surprisingly strong
Unlike the Great Depression (where technology was non-existent), the reality today is, businesses respond more rapidly by leveraging on technology and social media platforms even during hard times as witnessed during SARS.
In contrast to the depressing situation which traditional retail is facing, e-commerce has benefited from this episode of the virus outbreak as people are now turning to online grocery platforms to purchase their daily necessities.
Latest data from Criteo from multiple markets in South East Asia showed that furniture online sales saw an uplift by 54% compared to 2019 – this is signaling robust demand potentially due to the festive-buying frenzy season as some countries such as Malaysia and Indonesia will be celebrating Eid in May 2020.
Overall higher sales were observed from February until end of March 2020 despite COVID-19 hitting hard in countries such as Indonesia, Malaysia, Thailand and Singapore – with peak towards the end of March 2020.
The data from Criteo showed that the consumer electronics segment is seeing a significant growth in online sales globally and expects this trend to continue through Ramadan.
Meanwhile, we saw similar behaviour in China – Carrefour reported vegetable deliveries growing 600 per cent year-over-year during the Lunar New Year period and JD.com saw an increase of 215 per cent in online shopping grocery sales to 15,000 tons in just the first 10 days of February 2020.
In Malaysia, some suppliers are already embracing Facebook to sell fresh goods directly to consumers – from fresh vegetables, fresh fish, and chicken. This trend was unheard of until the global pandemic occurred.
If businesses can reach out to consumers more rapidly by simple clicks of Likes on Facebook – that is akin to have hundreds if not thousands of visitors to your physical store.
This leads to another conundrum post COVID-19: With the acceleration of online marketplace and sellers, do suppliers need to rent a space at a wet market or bazaar in future if you can cut down the middle-men and sell directly to consumers online?
Demand for super luxury items remain robust
Yes, COVID-19 affects most of us but few are lucky to be at the top of the chain. If you are selling super luxury items – chances are demand will continue to be robust due to pent up demand in the top segment.
If you are an individual seller selling luxury items online, perhaps there are still demand globally if you look really hard. Don’t let the offline brick-and-mortar retail sales put your off.
On the reopening day of Hermes’ flagship boutique in Quangzhou (two months after it’s closure), Hermès recorded a whopping US$2.7 million in sales in one day. Yes, in one day!
Xiaohongshu user Atomniu claimed to have spent a mind-boggling US$142,00 on clothing, shoes, as well as a black crocodile Birkin 30 handbag.
Whether this is a one-off trend or a prolonged one remains to be seen, but spending power of the middle class in Asia has shown to be the engine of growth in recent years.
It's believed that this staggering single-day tally is the highest for any single boutique in the whole of China, which signals immense hope for other luxury brands looking to make an economic recovery after the coronavirus outbreak
Closing Thoughts
The global pandemic crisis brings new opportunities to large and small companies. For the traditional retailers, the brick-and-mortar businesses can build more resiliency through digitalization and automation.
The digital economy showed signs of rapid recovery and potential for further acceleration post COVID-19 as businesses continue to innovate amidst challenging times.
The shifts in consumer behaviour and demand will cause an expansion in some industries and contraction in others.
However how we feel about the situation, the world will continue to be filled with economic anxieties as reported in the latest research by Fetzer et al, .
More negative beliefs about the coronavirus are crucially shaping economic worries during this crisis.
For business owners, there is no reason to panic. Lessons from past pandemics and systemic recessions have equipped businesses with innovative strategies to navigate and cushion the impact of reduced losses.
The number of winners and losers during this crisis is dictated by the speed of technology adoption in new business models – by diversifying new income streams, increasing efficiency or optimizing costs.
How rapidly these strategies can be executed by large companies during this crisis remain to be seen. As far as the data suggests, smaller and more agile companies are beginning to adapt to the new landscape.
It is time to act.
References
Fetzer, T, L Hensel, J Hermle and C Roth (2020), “Coronavirus Perceptions and Economic Anxiety”, arXiv preprint arXiv:2003.03848.
Stefan Stieglitz and Linh Dang-Xua (2013), Emotions and Information Diffusion in Social Media — Sentiment of Microblogs and Sharing Behaviour – Journal Of Management Information Systems
Robert Eyre, Flavia De Luca & Filippo Simini (2020), Social media usage reveals recovery of small businesses after natural hazard events – Nature Communications, Article 1629(2020).
Johannes Haushofer and Jeremy Shapiro. The short-term impact of unconditional cash transfers to the poor: experimental evidence from Kenya. The Quarterly Journal of Economics, 131(4):1973–2042, 2016.
Cornelius Christian, Lukas Hensel, and Christopher Roth. Income shocks and suicides: causal evidence from Indonesia. Review of Economics and Statistics,101(5):905– 920, 2019.
