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Over the last 2 weeks, my colleagues and I have been receiving multiple questions and taking part in numerous conversations regarding the Corona Virus COVID-19, specifically how it will affect everything from day to day living (Toilet Paper Apocalypse), to the economy and industry markets.
“What's your view on the markets in the region? Do you expect a major downturn due to the coronavirus or do you think it will rather result in an accelerated drive towards eCommerce? We would be very interested in your perspective.”
Macro View of Market Impact
International equity markets have been undeniably toppy for quite some time now. Price -to-earnings ratios clearly show this and until about a month ago markets have been at record highs almost the world over. The greatest investor of all time, Warren Buffet, has been building cash positions and hasn’t made a major acquisition since 2015. With a penchant for investing when markets are in downturn, large stockpiles of cash and little investing could signify that the market is overpriced and is ready for a correction.
The markets have been waiting for a reason to correct and, in such a low interest rate environment, coronavirus (CoV) is just the catalyst. It took several weeks and the Italy outbreak to really set-off the current official technical correction.
Then the US Federal reserve this week cut rates by half a percentage point as a strong pre-emptive measure in an attempt to stimulate markets. So strong in fact, that it has spooked the markets and stock market carnage ensues again; demand for 10 year $US crashed yields below 1% and the flight to safety assets like precious metals continued.
Markets are headed for (if not already in) a somewhat overdue downturn/correction. CoV is the catalyst that sparked the sell-off across the board. Now that the sell-off has commenced, and with CoV still a major concern and spreading at an ever-increasing rate, the ‘pack mentality’ of the markets will set in and it will likely affect markets for some time to come.
Fortunately, the fundamentals of many businesses are, and will remain, strong - but they were already over-valued. CoV will certainly have an impact on companies travel plans and ability to trade. Large tech companies are closing offices, stores, and factories in China as well as restricting employees from nonessential travels to the country.
How Global Organisations are Proactively Responding
Conferences around the world, in a variety of industries, have been cancelled as international travel grinds to a halt, with organisations unwilling to send staff to potential virus outbreak hot-beds. With the halt on travel and conferencing, tech companies may come to the rescue where face-to-face interaction is not 100% critical. Software like GoToMeeting or Zoom could see a rise in use to get a level of human interaction that doesn’t involve health risks.
Last month many major tech companies announced they would temporarily shut down all corporate offices, manufacturing factories, and retail stores across China - this includes Apple, Samsung, Microsoft, Tesla, and Google (Google has also closed offices in nearby Hong Kong and Taiwan.)
These established players are already well engrained with eCommerce but smaller and mid-sized players may be forced to re-evaluate their go-to-market channels due to CoV. Ecommerce enabled businesses in some sectors are experiencing huge increases in demand. Online food retailers are booming as consumers are ordering in what they cannot collect in person.
Smaller players who don’t already have an end-to-end eCommerce presence (i.e. take orders, receive payments, automate their fulfilment channels with technology and then provide customer service and post-sale support) will certainly be looking more closely at eCommerce to reach customers who are afraid to go to stores. But I think where there is fear and uncertainty there is opportunity.
There is certainly an opportunity to use digital technologies to enable staff to keep working, keep selling and as an opportunity to talk and interact with customers differently. Remote working, already on the rise in the modern world can be enabled even further, with relatively simple changes to policies.
Engage Across Channels
There are also opportunities to engage home bound workers and consumers across channels. With consumers staying home, their in-store touch points will be reduced so knowing how to use other digital channels to communicate and capitalise on this behaviour is key to surviving and thriving in a market that looks to be adjusting downwards.
Brands can work with their digital agencies to develop strategies around communicating with your customers on purely online channels, enabling great customer experiences and sales opportunities. Using social media to communicate your brands status in terms of opening hours and supply, investing in pay-per-click advertising or SEO to attract users stuck at home searching for products and services that they can still access when physical stores are closed will be even more vital.
Adapting to Consumer Market Shifts
CoV is creating a shift in the markets and consumer experiences (at the very least temporarily) that smart brands will be able to utilise technology to adapt to. Quickly responding to these changes and developing strategies to enable remote work, remote meeting and using digital to drive online purchases and interactions using integrated omni-channel experiences will help business cope with this threat. Now is the time to keep talking to customers and develop your online experience, showcasing you can handle any hurdle and still deliver great experiences to them.
Overall, how we manage the impact will be the difference between businesses that are left behind and those that adapt based on how consumer behaviour is changing. Let’s stay positive at this difficult time, and as I like to say let’s focus on “what’s the opportunity in this?”
That's all, Andrew Ellett
Managing Partner, Revium
This article was also posted on LinkedIn here.