Are we moving towards another recession? Economic impact of Corona Virus (COVID-19) on Business in 2020.

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I am doing research through this article on the economic impact of Corona Virus on obvious industries and trying to figure out the industries where Corona has an invisible hand over a shift in their operations. I will be adding new industries as I continue working.

Background

Novel Coronavirus that was first detected in China and which has now been detected in more than 100 locations internationally, including in the United States is not a new virus. Coronaviruses (CoV) are a large family of viruses that cause illness ranging from the common cold to more severe diseases. However Coronavirus disease (COVID-19) is a new strain that was discovered in 2019 and has not been previously identified in humans. That is why the word "Novel", meaning "new", is added before its generic name. The virus has been named “SARS-CoV-2” and the disease it causes has been named “coronavirus disease 2019” (abbreviated “COVID-19”). 

Status

As of March 2020, there are 1,67,511 cases of confirmed infection have been reported and 6606 individuals have died. You can check the latest status from WHO here. This is far worse than what appears to our eyes. Business have been stumbling over scarcity in human resources and money inflow in society.

Situation

On March 13, President Trump announced a national emergency in response to the coronavirus outbreak. Schools, colleges, malls, and offices are going on compete shutdown and work have to be done remotely. There is panic among people and they are stocking up their reserves. In the wake of this, I should be talking about specific industries to analyze the situation more appropriately.

1. Transportation and Tourism industry: I have first-hand experience of this as I am working in the airline industry. The airline industry is the first one to take the hit and moving towards losses in billions. While Lufthansa is planning to slash its flights to half in April, American, Alaska, Delta, and United are waiving some change and cancellation ticket fees for both domestic and international flights. Due to the social-distancing of customers among fear of infection spread, the customer is not planning to book new flights for travel in the near future. Adding to the agony, they are canceling there existing bookings. So at one hand airlines are not generating revenue from new bookings, while at the other they have to empty their existing reserves to pay the refund, a sore hit from both sides. 

Some other industries who are affected as a side-effect of impact on this industry are:

  1. Tourism Industry. This itself is a category dependent on a plethora of other smaller industries.
    1. Hospitality industry: Hospitality Industry is facing a potentially devastating coronavirus impact. It is notoriously precarious in the best of times. With the coronavirus pandemic now spreading widely across the United States and the world, the situation for restaurants, bars, and other businesses in the hospitality may soon become dire. People already are refraining to go to such public places. With the ban on the dine-in facilities in the USA, restaurants are closing. Along with the business, daily wage workers are the most impacted ones. Most of the waiter’s income is earned from tips. In few cases, they are employed on $ 0 salary and all their income from tips. With the ban on dine-in, they are at verge of losing their “jobs and sustaining power”.
    2. Local cab industry: Uber and Lyft shares have dropped by 10.22% and 20.89% in the midweek of March which is a strong indication that they are getting low business from people traveling from airports and that has been confirmed by CEO Dara Khosrowshahi. As a result one of the key drivers of this business, ride providers would be going out of this business to reduce their operational costs. Even if on a temporary basis, but Local cab industry is going to take a greater hit in terms of revenue and workforce loss.
  1. Retail Industry: let's talk about the situation of big players in the retail industry. We can broadly divide this industry in brick and mortar retail industry (Walmart, Costco) and the online retail industry (Amazon, Alibaba, eBay).
    1. Brick and Mortar retail industry: I needless say anything about the situation in this industry. These pictures say it all.
      Empty shelves are seen at Walmart in Salt Lake City during the Covid-19 outbreak, Utah
      Empty shelves are seen at Walmart in Salt Lake City during the Covid-19 outbreak, Utah

      Chaos at Costco as shoppers desperately try to stockpile toilet roll as coronavirus fears drive panic-buying
      Chaos at Costco as shoppers desperately try to stockpile toilet roll as coronavirus fears drive panic-buying
    2. Online retail industry: There could not be a better candidate to research for the impact of Corona Virus on the Online retail industry than Amazon. Amazon, one of the companies at the forefront of digital innovation is being watched now by the world as a solution provider for the situation we have in the pictures above. But since Amazone provides a platform to other retailers to communicate smoothly with the end-customers, they have lesser control over supply. We have seen a tremendous fall in the supply of most demanded products on Amazon, face masks and sanitizers. For the first time in history, these products are not available in ample supply on Amazon and other online retailers. However, there has been a radical shift in the rise in sales of other products too. Indirect impact on other industries has a direct impact on the sales of products on Amazon.

      a. Fitness Industry: Either people have stopped going to fitness centres or Gym have closed by itself due to lower foot-fall, fitness products sales are on rise on Amazon. I myself have bought some equipments which i never had thought of purchasing earlier. However the pricess of such items have increased by alteast one-third of their previous market price.

      b.  Grocery Shopping: People have started ordering their groceries on Amazon as they don't want to get infection from local grocery stores.

      Howsoever, coronavirus affects the Amazon inventory supply chain. Both UPS and FedEx has warned of shipment disruption and delays in countries most affected by the COVID-19 outbreak, according to Reuters. This might strike Amazon negatively and it's both retail and end customers. 

      This is an unprecedented time where both local and bigger businesses in the travel / retail / hospitality sector are getting hit the hardest. Some of these companies have already begun to lay-off employees with many laid off asking “what’s next?”. In a time where others have frozen hiring, Amazon is infact looking for 100,000 new workers to join its ranks. In addition to these new jobs, Amazon is also investing $350 million into raising the hourly salaries these jobs have. It seems that Amazon is keeping up with its own 14 principles (Earn Trust here of stakeholders specifically). 
      Source: https://www.businessinsider.com/amazon-100000-new-hires-and-pay-raise-amid-coronavirus-2020-3
        

Conclusion

The list is ongoing and several more industries are going to be impacted. Hundreds have lost their jobs already and thousands are going to be if the situation continues. We need to have a clear vision to improve these conditions by following the guidelines by WHO to contain this spread. Or else we are on the verge of another recession.

A word of advise from my side to curb this recession?

Do not hoard stuff, do not stop buying. In today's online era, you'll not run out of food and stuff unless you start hoarding.

You hoard stuff ⇾ You stop spending money later ⇾ Companies experience slowdown ⇾ They start laying off Panic ⇾ You get no money ⇾ Markets crash ⇾ Recession ⇾ Companies shut down production ⇾ Things get worse.

So do not hoard stuff! 

What are your thoughts about the impact on those industries our eyes don't see? So you think there is an incoming recession or we are going through one? What can we do as individuals and as a community to blunt its impact?

Comments
Pradeep Manda 7 months ago

Only solution is breakdown the chain of spreading virus