People are stocking up but staying at home more, and the coronavirus is gearing up to be bad for business.
Reports about the consumerist boom brought on by the novel coronavirus are everywhere. Yes, people are stocking up on things like hand sanitizers, face masks, and household disinfectants, in addition to washing their hands more often (which could lead them to buy more soap), but Covid-19 — which has infected more than 100,000 people worldwide and poses a threat to human lives, especially in cities where outbreaks are rampant — could, despite appearances, be really bad for business.
Empty store shelves and TikToks of frantic stockpiling aside, most businesses and brands are primed to lose revenue. On top of that, this will undoubtedly affect workers, especially those in the service industry who are less likely to have paid time off if they’re sick.
As Vox’s Matthew Yglesias wrote of the stock market’s recent meltdown, “Markets [were] down because events abroad imply bad business conditions are coming in the near future.” Covid-19 doesn’t have to get significantly worse in the US to impede the economy (although health officials say it’s likely that more cases will emerge). If people start going out less or if the government encourages “social distancing” to reduce the likelihood of an outbreak, that’s going to hurt companies across many sectors — from mom-and-pop restaurants and film distributors to major airlines and the alcohol industry. (Corona beer might have a marketing dilemma on its hands, but the spirits business is more worried about how coronavirus will stall imports and alcohol production.)
Then there’s the issue of the global supply chain. Financial analysts have predicted a “ripple effect” from supply chain disruption, which would slow down the production of familiar American goods, from Diet Coke to iPhones to Baby Yoda toys. The scope of a supply chain disruption has yet to be determined because, as Elisabeth Braw pointed out in Foreign Policy, “no CEO actually knows his or her companies’ complete supply chain,” adding that “the suppliers have suppliers of their own, who may, in turn, even have a third layer of suppliers.” To put it simply, if a business relies on a coronavirus-impacted country for production or has a significant overseas customer base, the outbreak could have a substantial negative impact on its sales and manufacturing.
For years, experts have said that modern life has put us more at risk of a global outbreak, due to increased urbanization and population growth. The outlook isn’t great for most companies at this point — in the short or long run. Sequoia Capital, Silicon Valley’s biggest venture capital firm, has declared the disease the “black swan of 2020” (In business-speak, black swan refers to a rare, unforeseen event that carries potentially severe consequences).
As the global spread of coronavirus continues, a handful of brands appear to be, at least in the short term, uniquely profiting from Americans’ disease and quarantine preparation, such as antiseptic labels, medical suppliers, canned food brands, and at-home entertainment companies. Meanwhile, conventions, sporting events, concerts, movie theaters, and basically any place where people congregate are taking hits — and that’s just the beginning of the fallout.
People are worried about germs. They’re turning to Purell, Lysol, Clorox, and other disinfectant products.
In the midst of the growing coronavirus threat, American has quickly focused on a new enemy: germs. Hand sanitizer, cleaning wipes, and other disinfectant products are “flying off shelves,” according to several news reports. The Environmental Protection Agency released a list of antimicrobial products in early March that are effective against Covid-19, which includes Lysol, Clorox, and Purell branded items, but for weeks, people have been scrambling to stockpile household goods. Shares for Clorox were also on the rise in late February alongside two drugmakers developing potential treatments for the disease, Bloomberg reported.
A Clorox spokesperson told Vox in an email that the company has increased production of disinfecting products based on increased customer interest in its wipes. Purell is also seeing a spike in demand, a spokesperson confirmed, adding that it has experienced “several demand surges in the past during other outbreaks, and this is on the higher end of the spectrum but not unprecedented.”
Hand sanitizer, in all its antiseptic glory, has turned into something of a holy grail product, as Sabrina Maddeaux wrote for The Goods. Here are some eye-opening stats she pointed out: Consumer demand for hand sanitizer has grown by 1,400 percent from December to January; local Walmarts, pharmacies, and Bath & Body Works are sold out; and packs of Purell bottles on Amazon are either unavailable or marked for hundreds of dollars. (Gojo, Purell’s parent company, said that it “does not set retail prices to consumers” but “feels strongly that there is no place for price gouging.”)
As demand for these products soar, household cleaning brands are either vaguely referring to coronavirus or steering clear of mentioning it at all. Companies are aware they should be cautious, Adweek reported, as the Food and Drug Administration is hyper-aware of any product advertising that isn’t backed by a clinical study. These brands “don’t need more demand creation,” Allen Adamson, founder of the marketing firm Metaforce, told Adweek. “They’re already having to run factories 24/7 to keep up with demand.”
Coronavirus is changing how and what people eat
The restaurant industry at large is bracing for declining sales and a pivot to delivery options in the coming weeks, as more people are choosing, or being forced, to eat at home. “It is going to fundamentally shift the attitudes that the majority of Americans have toward that convenience,” Alex Garden, CEO of the food technology company Zume Inc., said at a restaurant conference in early March. Even Starbucks has predicted a sales drop from its China-based franchises, and has stopped allowing customers to use personal cups.
Chinese food businesses — especially restaurants in Chinatowns across the country — have been on the frontlines of a sales decline, as tourism from China has slowed significantly. Xenophobia, racism, and general concerns about the coronavirus have also hurt Chinese restaurants, and as Eater reported, owners say misinformation and baseless fears circulating on social media have contributed to the drop in customers. The New York Times reported in February that New York City’s three main Chinatowns have experienced a 50 to 70 percent drop in business, according to local workers and owners.
From San Francisco to Philadelphia, foot traffic has also declined in these cultural hubs, leading some restaurants to start offering delivery options, in the hopes of appealing to stay-at-home customers.
MarketWatch, and certainly the restaurant industry, is predicting that demand for food and grocery delivery will grow if the outbreak takes a turn for the worse. That’s good news for the likes of GrubHub, InstaCart, and UberEats — but not necessarily for service workers, the people who cook, serve, and deliver food, who often work without paid sick leave. Drivers for Uber and Lyft, who are independent contractors, have reportedly been scrubbing down their cars “inch by inch,” the Washington Post reported. American delivery companies, including Instacart and Postmates, have introduced a program of “contactless delivery,” which was first implemented in Wuhan to reduce risks. Food couriers will drop off orders at a person’s front door or a location they requested in advance to minimize human contact.
Meanwhile, grocery stores across the country are seeing a spike in sales, and nonperishable food brands like Campbell are benefiting from the bump, as shoppers stock up on their “pandemic pantries.” Campbell is treating the growth in demand as it would a storm or a natural disaster, the Wall Street Journal reported, in case of any port or factory closures. As the coronavirus case count in the US grows, people are increasingly worried they’ll have to self-quarantine for a brief period, and have been buying up staple foods and cases of water. (If a person in your household is sick, drinking water from a bottle is more sanitary than from a cup or a reusable water bottle that’s less frequently washed.)
The homebody economy is booming (or its stocks are, at least)
The term “homebody economy” was invoked by The Goods’ reporter Kaitlyn Tiffany in 2018 to describe the phenomenon of (generally) young women who like to stay at home, lounge in bed, and do what society likes to call “Netflix and chill.” That demographic of the stay-at-homers, at least in 2020, has changed, as people of all ages and genders are encouraged to rest up if they feel ill. While the broader market is tumbling, stocks for the homebody economy, which include the video-conferencing service Zoom, the fitness equipment maker Peloton, and technology companies like Netflix, are rising, Yahoo Finance reported.
The stock market is forward-looking, Yglesias wrote. “In other words, stocks fall not because bad things have happened to companies but because there is good reason to believe that bad things will happen in the future.” Rising stocks might not be an accurate indicator of how these companies will perform in the long run (or if people are buying more Netflix subscriptions), but it does reveal that investors think Zoom’s, Netflix’s, or Peloton’s short-term outlook is bright and profitable.
Then, of course, there are the e-commerce sites and delivery providers. Amazon, the largest virtual marketplace in the US, is a company that’s arguably poised to benefit the most from the pandemic. Its workers aren’t. According to data Vox received from Helium 10, a software suite for Amazon sellers, nine of the top 10 keywords being searched on Amazon.com are coronavirus-related. Shoppers are mostly searching for N95 respirators, medical face masks, and hand sanitizer. Recode’s Jason Del Rey also found that in Amazon’s health and household category as of March 5, top items included a three-pack of “anti-dust” masks, Clorox and Lysol Wipes, and “immune support” gummies.
As more and more people stay home, they’re likely turning to Amazon to order whatever they need because, well, the e-commerce giant can get it to their front door in a day (if they have Prime), although the service appears to be overwhelmed with orders and is experiencing delivery delays. Speedy delivery is terrible for the environment and burdens warehouse and delivery workers, but when the world is on the verge of a pandemic, the cost of one-day shipping seems to be a problem most shoppers wouldn’t prioritize. Amazon is also actively working to stop scams and prevent merchants from price-gouging, but the cost of high-demand items is still increasing marginally.
The coronavirus has disrupted social gatherings, conferences, and major cultural events
People are clearly hesitant to leave their house — not to mention their city — as the outbreak threatens to disrupt everything from conferences to major sporting events. Faced with the spread of a contagious disease, people are grappling with the safety of crowded events, and it’s increasingly looking like few people want to take the risk.
Since January, airlines have been suspending routes left and right, offering fee waivers for trip changes and cancellations. The International Air Transport Association said airlines are set to lose anywhere from $63 billion to $113 billion in revenue if Covid-19 continues, a prediction that suggests the outbreak could disrupt the industry as significantly as the 9/11 terror attacks or the Great Recession.
Film releases have been pushed back, musicians and performers are scrapping concerts and tours, and major cultural events, like the Cannes Film Festival, are at risk of being canceled. A series of high-profile companies, including Facebook, Twitter, Netflix, and Apple, have cancelled or withdrew from major tech conferences, signaling how high-profile companies are not willing to risk employees’ well-being. On Friday afternoon, Austin’s mayor, Steve Adler, announced the SXSW festival had been canceled by executive order, bringing the direct economic loss of major tech events to over $1 billion.
The 2020 Tokyo Olympic Games are months away, but the International Olympic Committee is preparing for the possibility of a fan-free Olympics. Within recent months, sporting events without fans have grown increasingly common. The New York Times reported that the World Health Organization has begun discussing screening measures for the Olympics, in addition to a worst-case scenario without any fans present — just athletes, sports officials, and broadcasters. In addition, qualifying events for the Games have already been postponed or canceled, which further complicates the process of selecting athletes who will get to compete.
At this rate, the coronavirus outbreak looks like it could upend the most basic aspects of our daily lives. Americans are commuting, eating, and interacting with one another differently. Still, the disease won’t affect everyone equally, although our futures are intertwined. As Elizabeth Spiers wrote at the Daily Beast, “For those with means, the virus is primarily a market disruption, and a threat to the economy — and by extension, their wealth. For those without, the crisis is existential and immediate.”
The wealthy are preparing differently, moving to safe homes abroad and flying private jets, while lower-income people — dependent on the nature of their jobs, health care plans (if they have one), and living situations — are more constrained to their day-to-day realities.
Already, public health, business, travel, and even the entertainment industry have felt the outbreak’s ripple effects. A handful of brands and products might briefly benefit from Americans’ new purchasing habits as they buckle down for the worst, but there’s so much we still don’t know about the coronavirus and its potential economic fallout, for China and the rest of the world.
All Rights Reserved for Terry Nguyen