Brief - The Hustle

What does the coronavirus mean for business?

Written by Conor Grant | Jun 30, 2020 10:59:42 AM

By Conor Grant

Whether you’ve been told to work from home indefinitely, leave your college campus mid-semester, or cancel plans to catch a Broadway show or an NBA game, you’ve probably seen the coronavirus affect your life by now.

And if you’ve been watching the markets — which have been tumultuous, to say the least — you’ve probably realized the coronavirus is having a big impact on the business world, too.

Over the coming weeks and months, few aspects of business won’t be affected to some degree by the coronavirus. 

But how deep will its impact go?

To answer that question, we’ve canvased the country, talking to business owners, workers, and consumers, and evaluating the effect on major institutions, events and markets.

Below, we break down how all those groups have been impacted, how they’re responding, and what to look out for in the coming weeks:

1. Business owners

Impact: The coronavirus is scattering workforces, straining supply chains, and diminishing demand, making it more expensive for businesses to operate and harder to sell their products.

Response: Businesses are telling their employees to work from home (if they can), adjusting their forecasts downward, and developing contingency plans to continue operating.

Some examples:

More than 150 publicly traded businesses have issued warnings to their investors, detailing temporary store closings, lost sales, and other missed revenue.

Boeing halted hiring and eliminated overtime to conserve cash as its stock has dropped.

Companies — like Hilton, eBay, Disney, United Airlines, and Royal Caribbean Cruises — are opening credit lines to make sure they have enough cash to finance their operations.

What to watch:

Workforces will continue to evolve. New positions will emerge (experts recommend that businesses appoint “coronavirus coordinators,” for example), and after the pandemic ends some of these roles — particularly ones that cater to remote workers — may continue. Other companies may realize some positions should remain remote.

Businesses will develop new ways to sell… or fail. The success of these strategies — revamped online sales funnels, virtual experiences — will determine which companies survive and which don’t. Airlines, for example, are particularly vulnerable: A British airline called Flybe has already gone out of business.

Contingency plans will crop up everywhere. As businesses learn where their single points of failure were, companies that survive will take steps to reduce future risk. Many employers — including the federal government — are scrambling to develop work-from-home policies.

2. Workers

Impact: The coronavirus is making it more dangerous to commute to work on public transportation and more dangerous to work in crowded places.

Response: Employees with flexible employers are working from home and trying their best to stay productive. Employees with less flexible employers — or jobs that can’t be done remotely — are attempting to stay healthy at work and demanding protections from their employers.

Some examples:

Employees at Facebook. Google, Amazon, and other large tech companies were asked to work from home. 

Amazon offered employees unlimited sick days — but only people infected with the coronavirus are entitled to pay.

Meanwhile, employees at restaurants and other service industry businesses that require in-person work are protesting their lack of access to paid sick leave.

On the other hand, Trader Joe’s employees — who also can’t work remotely — gained access to a new paid sick leave program. 

And some employees working in jobs that could expose them to the virus — like baristas at Starbucks — even became eligible to earn “catastrophe pay.”

What to watch:

Unprotected workers are going to get loud. Criticisms about the lack of paid sick leave and benefits for gig workers were already common, and now the pandemic has thrown those issues into the limelight.

Employers will get serious about remote work. Companies that had only dipped their toes into developing remote work policies will now be forced to develop them to attract — and support — remote workers.

3. Consumers

Impact: The coronavirus is discouraging consumers — including normal folks like this elderly couple — from going out to buy non-essential items. 

Response: A slowdown in non-essential spending has already begun, and economists estimate spending on food services, arts and accommodations will drop 80% and spending on public transportation will drop 67% if the pandemic continues. At the same time, however, consumers have increased spending on certain products (like surgical masks and other hygiene products) which has led to price gouging.

Some examples:

Aerial photos show that some of the world’s most popular travel destinations are nearly empty of tourists.

Desperate cruise companies and airlines are waiving change fees and offering steep discounts to attract customers.

Amtrak cancellations are up 300%.

Some movie theaters are promising to put empty seats in between viewers to get moviegoers through their doors.

People have been panic-buying toilet paper across the US even though there’s no sign of a shortage.

Small bottles of hand sanitizer have been re-sold for $138.

Packages of Lysol wipes that normally retail for less than $14 have been spotted on resale for $220.

What to watch:

There will be lots of steep sales. Consumers in general — and travelers in particular — who are willing to keep spending will find “bargains for the brave” (trips from New York to Miami for $51?!).

Price gouging will continue. Since ecommerce companies like Amazon and eBay aren’t equipped to fully police their platforms, price gougers will continue jacking up prices of essential items — and panicked shoppers will continue buying them (in some markets, security guards have been assigned to protect the TP).

4. Markets

Impact: The coronavirus has disrupted the global economy by causing producers to reduce output, distributors to interrupt shipping, and consumers to limit spending.

Response: Investor uncertainty led to a mass selloff of stocks that sent global indexes tumbling, ending an historic 11-year bull market. 

Some examples:

America’s 3 major stock indexes had their worst day since 1987 yesterday.

Oil prices had their worst day since 1991 earlier this week.

Trading halted in the US this week when the New York Stock Exchange tripped a so-called “circuit breaker” to slow the sell-off. 

What to watch:

‘Safe’ assets will surge in popularity. Already, purchases of gold have increased dramatically. And, given the volatility of traditional stable assets like government bonds, investors might opt instead for other options like cryptocurrency.

National governments will step in. Japan’s government quickly approved a $4B stimulus package, and the US Federal Reserve plans to inject $1.5T into the economy to prevent further “disruption.”

5. Major Institutions and Events

Impact: The coronavirus made it difficult for large groups of people to gather safely in the same place, challenging the institutions of government, education, healthcare, and mass entertainment.

Response: Colleges and universities, local governments, and major entertainment providers all began developing new ways to serve large audiences without requiring in-person attendance. Solutions range from full-blown suspensions of operations (pro sports leagues) to complex contingency plans (voting systems).

Some examples:

Healthcare systems and hospitals across the country have been treating patients via telemedicine to limit contagion. Resources at American hospitals are already strained — the number of beds available fell 16% between 1975 and 2018.

Colleges and universities cancelled in-person classes and moved them online, which could pose huge problems for students without backup plans: ½ of students at community college and about ⅓ of students at 4-year colleges suffer from food or housing insecurity.

Major events across the world — St. Patrick’s Day parades across the US, Tokyo’s famous Cherry Blossom Festival, and Texas’ SXSW — have been cancelled.

Local governments are debating whether to transition to “remote vote” systems for upcoming elections.

Disneyland is closing for the rest of the month, and all of New York’s Broadway theaters are shutting their doors (until at least April 13th).

The NBA, NHL, and Major League Soccer suspended their seasons, and MLB postponed the start of its season.

What to watch:

Online conferencing is set to boom. As doctors turn to telemedicine and schools turn to tele-education, the value of good online conferencing tools is clearer than ever.

Virtual reality is about to surge. Businesses that normally require in-person visits — museums, conferences, concerts, sports games — are losing revenue, which will likely inspire investment in virtual alternatives. Some museums in both America and China have already begun using live streaming platforms like Taobao Live to take “visitors” on virtual tours.

Data privacy will become even more important. As businesses ask students, patients, and customers to share private information across digital platforms, they’ll face even more pressure to keep that data secure.