It’s no secret that the U.S. is currently in crisis mode. By the end of March job losses in the United States had exceeded 700,000. More than 6.64 million Americans applied for unemployment benefits during the week ending March 28 – this is the highest number for a single month in history and every week in March saw the record being broken again and again. The trajectory for unemployment claims is edging ever upward.
The unprecedented regulations governing shutdowns, self-isolation and lockdown have led to bars, restaurants and other service providers to shutting their doors. As the lockdown continues in cities such as New York the pace of layoffs accelerates. There are businesses that simply will not be around when people finally emerge from their homes.
International service providers have been in the headlines as well with a large amount of focus on airlines, auto manufacturers, cruise companies and other leisure orientated businesses under immense pressure. The stimulus package unveiled by the United States government will undoubtably help – but there are grave doubts whether these industries will emerge unscathed. And the ripple effects may reach further than many people think.
The grounding of airliners means that car hire companies are effectively dead in the water. Car hire companies need to dispose of aging assets on the used car market – and that market is suffering. Inevitably this is going to lead to used car prices plummeting. Due to a glut of new stock.
The problem is not only that auto usage is effectively banned in many countries due to the lockdown, even once the Coronavirus is brought under control (and there are doubts that this will become a reality in the medium and even long term) it is unlikely that crowds will gather in showrooms and used car lots. Steel manufacturers will be affected due to decreased demand for product used by the auto industry in the manufacture of new vehicles. The human psychology of fear is powerful.
Ironically the plummeting sales of used cars come at a time when the price of fuel is heading towards record lows.
But the ripple effects do not stop at the lot. In house finance providers will be feeling the pinch as well – as will other loan providers. Fear of fiscal strain due to ongoing business failures and the attendant job losses is making consumers think twice about the purchase of big-ticket items.
The ripple effects continue – manufacturers of smart televisions will be feeling the effects of the Coronavirus for years due to closely monitored household expenditure – although they many be spared the worse due to the fact that home entertainment may be a growing sector.
So, what is the way forward?
Taking the auto industry as an example there can be no doubt that survival will depend on a pivot towards online business models. The lockdown has forced many consumers online in order to access services and products – and many have discovered that online purchasing offers better value and a more convenient experience.
It is unlikely that the traditional auto showrooms and expansive used car lots will remain in a post-Coronavirus world.
The move towards online business models will reward those businesses that are able to pivot to this sort of strategy. Those that do not will find themselves at a competitive disadvantage.
The Coronavirus has changed the world. It has changed the way we communicate and it has changed how business will be conducted in the future.
For many businesses it may be too late, for others the pivot towards online business models may present an opportunity. However, it is very much a case of Carpe diem, seize the day. Those businesses who are hoping to ride out the storm without immediately beginning to formulate an online strategy will have their lunch eaten by those who will hit the ground running when the pandemic begins to be brought under control and lockdown is lifted.