Pandemic Impact Factor Screening research is based on the thesis that consumer and business behaviour and practices will be changed significantly as a result of the pandemic and its aftermath. We have developed a group of seven major factors and over 30 related qualifying screening questions that we believe indicate whether a company has an increased risk or reward profile.
We believe that the Covid-19 pandemic has fundamentally changed the world as we knew it. Many of these changes are likely to be permanent. The pandemic has altered the way people work, relax, live and think. The perception of what is risky and what is safe has been turned on its head.
To summarize, our thesis is:
- Availability of a vaccine is still some time away. Once available, swift and widespread distribution will be difficult to achieve
- Consumers will live with the fear of contracting and spreading Covid-19 until widespread vaccination has been achieved
- Travel, large crowds, physical socializing will be avoided over the longer-term
- A general trend towards moving out of larger cities will continue
- Digital transformation trends will continue to accelerate and businesses will adjust to WFH
- Businesses will be saddled with compliance costs of new health and safety regulations
- Governments will face changes in consumer expectations and attitudes towards healthcare
- Geopolitical risks will increase
- The U.S. will witness continued turmoil while adjusting to shifts in consumer behaviour
Due to social distancing and lockdowns and Work From Home, businesses that operate online, or produce the tools for companies to adapt to more demand for online services will continue to experience a surge in demand due to the coronavirus, Covid-19 outbreak. Consumers will more rapidly move online across many categories. Trends already in place will accelerate. Companies whose businesses are online or are rapidly moving online are better prepared to serve the market while those based on bricks and mortar are more likely to be challenged.
Restrictions on travel and trade as a result of the pandemic are likely to remain in place for years, and public health regulations will become stricter and more widespread. It’s highly probable that enhanced screening, permit and visa requirements, reductions in ease of travel and transport of goods will be impacted or implemented long term. Governments, in an effort to restore consumer confidence, will enforce new regulations designed to protect consumers and will likely overshoot, and result in impairing businesses who rely on international supply chains, movement of large numbers of people, or are otherwise perceived as presenting a high risk of infection to consumers.
The most obviously impacted sectors are businesses on the front line of day to day consumer interaction. Restaurants, coffee shops, event venues, bars, pubs, hotels, resorts, etc are experiencing a prolonged and possibly permanent change in consumer demand. Many businesses will be required to spend significantly on technologies and services designed to mitigate consumer concerns over health risks. Consumers will likely continue to avoid contact with crowds or reduce visits to brick and mortar hospitality and entertainment focused businesses even after widespread vaccination has taken place. Companies in these sectors will need to change business practices and deploy technologies and systems designed to protect customers – many of these do not exist yet or are expensive.
Companies focused on the health and safety of consumers and crowds are positioned to assist businesses who will require new and robust health security solutions in order to attract customers. Heightened focus on health and virus risks will spur expenditures on antiviral medications and treatments, vaccines, screening systems and devices, rapid testing, containment and quarantine solutions and services, and telemedicine. Demand for antimicrobial or antiviral materials or other “bio tech materials” and products will likely be strong in a post pandemic world.
Businesses that deal with large numbers of people in close proximity to each other will continue to be negatively affected long term. Regardless of how long the pandemic will continue, its psychological, economic and financial effects, have inevitably altered the perception of risk from exposure to large group settings. Consumers are going to avoid gathering in large groups – particularly individuals over 60 even with improvements in testing and the introduction of vaccines. We believe consumers will be fearful of the virus and we assume that even when the rate of infection has slowed the virus will be seen as a threat. Even after vaccination efforts minimize the immediate threat, consumer behavior will be changed long term and concern over future pandemics will be heightened for many years.
The fact the virus can remain alive for many days on inanimate objects and surfaces will impair cross boarder importation. Perishable product supply chains designed to move items from producer to consumer in days could be significantly impacted. Overall we believe that businesses that ship goods internationally or rely on global supply chains are at risk of ongoing business interruption. Further, companies with long international supply chains in countries with poor healthcare systems will likely be pressured to replace suppliers and build new supply chains closer to home markets in order to avoid new border restrictions and the potential of localized lockdowns put in place to handle future outbreaks.
The most obvious winners are companies who enable consumer cocooning or Work From Home (WFH) and Stay at Home (SAH) behaviour. As these social and business trends become entrenched, demand for a range of new solutions for managing a distributed workforce will provide existing platform companies and new entrants with opportunities to grow market share and fill demand. Companies not offering WFH opportunities will suffer, compromising their ability to attract the best employees. The delivery economy, pioneered by the likes of Amazon.com and any company that focuses on in home exercise, consumer electronics, home entertainment and ecommerce will continue to be positioned to profit from a long term trend towards SAH behaviour. The trend towards non-brick and mortar retail, will accelerate.