INDUSTRY SECTORS

Hit, Boosted, Transformed, and completely New sectors as a result from the C-crisis

Capital (03.04): ‘Companies should anticipate different recovery speeds from different sectors. This is of no surprise hence different approaches are to be applied. In the first 2 weeks counting from the massive epidemics spread in China, share prices of all sectors steeply dropped in all sectors. However, leading industry branches like IT, MedTech and services recovered just within a few days’ time, and their shares are on the go now. The large majority of industry sectors recovered at a slower rate, but reached to their previous levels in a number of weeks. The most affected sectors as Transport, Retail, and Energy exhibit weaker recovery symptoms.’

Capital (16.04): ‘Packaging manufacturers record a considerable increase in the demand for food, medicine, and drug packages. There is a deep drop of demand from sectors such as Automobile, Furniture and Restaurants. The wide range of clients make packaging companies more flexible. However, they too anticipate to experience the negative effects from the crisis. The good news is that the raw materials they use, as well as the markets they serve, are local to a large extent, thus avoiding transport issues.’

‘IMMUNIZED’ SECTORS

‘According to a recently release evaluation by S&P Global, the packaging manufacturers are least sensitive to the coronavirus epidemics when talking about their income and operational profit levels. Such ‘immunized’ sectors are also the Utility sector and Healthcare. On the other extreme, we see the most affected industries such as Automobile manufacturers, Aviation, and Tourism.’

‘We see that the situation in Bulgaria is similar, at least when talking about larger and differentiated package manufacturers. While customers in some sectors have put their orders on halt, others need larger quantities. Major business engines at the moment are Food and Beverages manufacturers, Drug manufacturers and the Pharma industry.’

Property Forum (15.04): [T]the [Logistics] sector is better placed than any other part of real estate to weather the current storm. That is due to rapidly growing online shopping, which is fuelling demand for real estate crucial for e-commerce, such as ‘last mile’ logistics and large regional and international distribution hubs.

McKinsey (04.2020): Assets that have greater human density seem to have been the hardest hit: healthcare facilities, regional malls, lodging, and student housing have sold off considerably. By contrast, self-storage facilities, industrial facilities, and data centers have faced less-significant declines. As of April 3, by one estimate, the unlevered enterprise value of real estate assets had fallen 25 percent or more in most sectors and as much as 37 percent for lodging (the most extreme example).

Unissu (13.04): The luxury segment might be the first to recover.

Mete Varas says, ‘In fact, the luxury segment has always been the first to recover. A report prepared by Italian luxury brand consortium Altagamma, Boston Consulting Group, and Bernstein during the crisis in February quoted a consumer psychologist saying that since luxury purchases are an emotional act. “Once the immediate threat lifts, luxury consumers will come back stronger in a backlash against all the worry and anxiety they came through.” McKinsey also predicts on its “Covid-19 Facts and Insights Report” dated March 25 that apparel/fashion/luxury is the first sector to restart (late Q2/Q3) and the least hit among many others including Defense, Air & Travel, Insurance carriers, Oil & Gas and Automotive. Since there is a direct correlation between luxury shopping and the tourism industry, any delays on travel and international flights specifically will harm recovery.’

TRANSFORMED SECTORS

Capital (16.04.): ‘Different industry players change their qualification in such a way to join the fight against the coronavirus.’

Capital (16.04): ‘In addition to monetary donations, Giorgio Armani was among the first designers who changed their factories’ core activities and started the production of protection masks and protective clothes for medical staff which proved to be so lacking on a global scale. Fashion brands like Prada, Gucci, YSL, and Balenciaga joined this initiative together with two of the major ready-to-wear manufacturers, namely the Spanish giant Zara and the Swedish H&M.’

Capital (16.04): ‘The Automobile companies of Ford and General Motors will produce the emergency respiratory ventilators. According to Washington Post, the production will be ready to start in the beginning of May. The first emergency ventilators produced by Seat are already available and used in a number of Spanish hospitals. The company plans to produce 300 ventilators per day. They have also uploaded hardware information and manufacturing instructions on their website.’

NEW SECTORS

McKinsey (04.2020): From the global financial crisis, for example, assumptions about the use of assets and nature of ownership were radically overturned. Businesses became comfortable sharing assets and cocreating with customers and even competitors, and the sharing economy was born. From this archetype of “asset sharer” came some of the world’s most successful businesses, all launched in 2008–09, including Airbnb and Uber. A similar archetype emerged around the “gig economy,” which Uber also represented, along with Instacart, TaskRabbit, and others. Both these archetypes have persisted long after the financial crisis was resolved.

Unissu (13.04): Re-commerce will be the digital twin of (e)commerce.

Mete Varas: ‘Wikipedia defines re-commerce as “a process of selling previously owned, new or used products, mainly electronic devices or media such as books, through physical or online distribution channels to companies or consumers willing to repair, if necessary, and reuse, recycle or resell them afterwards.” Since the term was first used in 2005, it continues to evolve covering consumer electronics, such as smartphones, tablets, and computers to furniture, apparel, and accessories. Before, sustainability was the main reason for companies considering re-commerce. Optimizing inventory, new revenue streams as well as being proactive to new consumer behaviours might push more retailers investing in that business line in the future.

Ghost supermarkets will grow fast.

If there is one vertical this pandemic and lockdown help the most are ghost supermarkets. All preconditions are now in place for them to take off. In the short to mid-term, they will enjoy the ever-growing client base, more affordable city-center stores -warehouses-, and a readily available delivery workforce. Since most of them are in Emerging Markets, we could also expect to see them in Europe and some of the densely populated cosmopolitan cities in the US too.’

The gig economy will have a new expansion area: retail sales associates.

Customer Service has always been a critical component of all businesses. Technology helps retailers to keep their customers engaged, boost their productivity (whether it’s scheduling or communication) and make more sales. A large selection of in-store technologies enables sales associates to provide personalized service too. This crisis will put even more pressure on the retailer’s operating expenses. I expect sales associates will eventually be part of the gig economy.’

Automated Cleaning | Air-quality solutions | UV-light emitting robots

Propmodo (09.04): ‘Automation allows traditional steps required to be skipped, typically saving people time, and therefore money. But now, we need to look at automation through the lens of eliminating as many steps as possible that require human to human contact… Cleaning automation, particularly in large commercial spaces, will now be a priority. People who inhabit these spaces, and who will be inhabiting them (once the time comes to reopen offices and non-essential businesses), will want to know these places are clean and safe. Whether as workers, patrons, managers, tenants, or owners, people will be much more inquisitive about how the spaces they occupy are cleaned, not just one time to disinfect, but on a regular basis going forward.

Given the tremendous square footage of commercial spaces, cleaning automation isn’t a new concept. In fact, “cleaning is the fifth largest industry in the world,” according to Kass Dawson, the Head of Strategy and Marketing Communications at Softbank Robotics.

Cleaning automation doesn’t always require robots, either. Another company Microshare deploys sensors for all kinds of uses within healthcare facilities to help automate a number of things, one of which can be to alert the facility when more than just a routine cleaning might be needed. Push button sensors can be used in operating rooms as a way for staff to signal when a deep clean might be needed after a person with an infectious disease was treated in the space. Other sensors are able to read and transmit air temperature and water quality data, which can be used to determine predictive cleaning patterns as well as set optimal conditions for disease transmission reduction.’

HIT SECTORS

Capital (12.04): ‘In accordance with the report data the four most affected sectors on a global scale are accommodation and food facilities, manufacturing, retail, and business and administrative services.’

Travel & Tourism

Dragontrail (01.04): ‘The China Tourism Academy’s “Chinese Post-Virus Sentiment Report: 15 Observations and Discoveries About Travel” addresses Chinese tourism after the COVID-19 crisis, including consumers’ worries and plans, and when and where they want to travel.

Self-driving, no flights
Travel has never been out of heart
Traveling mainly on relaxing vacation and sightseeing tours
Domestic destinations, close to home, among nature, with their elderly relatives
When involving in group tourism, there is a ‘new-style’ group tourism like private family groups (37 %). Additionally, there is an increase of up to 18 % in Chinese who opted for personalized, customized travel.
An enormous rise in travel insurance purchase (74 % of all respondents)

1) Travel was one of the leading topics that people cared about during the virus, and demand is still high – 40% of survey respondents said they were still reading information about travel and travel discounts often during the crisis period; 40% read it sometimes; 10% actually paid for a travel deal during the crisis period; and only 10% didn’t follow any information about travel.
3) When asked about their goals for post-virus travel, 30% chose relaxing vacation, 24% chose sightseeing and tours, and 9% chose culture and education.

4) Most respondents said that their first form of travel after the virus would be domestic, with most sticking close to home.

12) 45% of respondents said they would opt for FIT, 37% for group tourism (including “new-style” group tourism like private family groups), and 18% opted for personalized, customized travel – a notable increase.

13) In the past, most people did not buy travel insurance, but this has changed dramatically. 74% of survey respondents said they would buy travel insurance in the future, only 17% said they did not plan to buy it, and 9% said they weren’t sure.

McKinsey (04.2020): Even a short moratorium on business travel could have lasting impact when alternatives such as video conferences prove sufficient or even preferrable. Near-shoring of supply chains may further reduce demand for cross-border business travel, and consumers who are afraid of traveling overseas may shift leisure travel to local destinations.

Capital (13.04.2020): Light in the tunnel for some sectors only.

According to a McKinsey report the sector of consumer electronics has the potential to recover quickly in Q2 2020. Challenges in the Asian part of the supply chain of electronics may force the sector to rearrange its vendors, thus diversifying suppliers and subcontractors. However, the forecast supports a quick sales levels recovery.

‘Forecasts for Aviation, Tourism and related sectors are dark. McKinsey experts anticipate that internal flights will recover within 2 moths’ time, and the rest within a year’s period.

‘Summer tourism most probably will record a zero-level year. The sector and all related branches may anticipate some improvement only in Q4… The Tourism recovery will be most possibly delayed for the winter season. However, there is a risk of a new contamination wave anticipated for the same period of time.’

Unissu (13.04): It will take a long time for people to go back to Malls.

Mete Varas says that ‘In some countries, shopping centers have more meaning and function than shopping. They also function as a societal meeting and interaction points. The magnitude of this outbreak is a traumatic event that is almost beyond comprehension. When self-isolation ends soon, we should not expect people to rush into concerts, stadiums and shopping centers right away. Shortly, shopping centers will invest/promote more on traditional or even advanced technologies offering good hygiene practices. Just like the security checks at the airports, visitors might be required to measure their temperatures or ask for permission to access the app monitoring their vital data history. (Note that it’s already been a standard procedure to pass through X-ray checks entering malls, stadiums, commercial buildings for many years in many countries.)

‘One can argue that people’s immediate reaction to the over month-long lockdown is to go out, do at least window shopping or do what it’s called “shopping therapy”. Yes, that’s true but there is a high probability that high-streets, open-air shopping centers will be preferred more -along with parks, forests, and beaches. Initial post-pandemic customer habits from Beijing show us that people are reluctant to go out. Those who visit bars are less but they drink more.

Repurposing the abandoned malls will continue to evolve.

‘Dead malls, retail apocalypse, store closures… Those were the headlines we kept reading for years much before the outbreak starts. Shopping centers have been taking steps to overcome this downward trend by repositioning, changing brand mix (less food court more fine dining, more co-working areas, larger gyms) or repurposing (turning into residential units, hotels or schools). Since food sustainability, health, last-mile logistics are some of the hottest topics in the coming mid-term, we might see complete or partial repurposing projects including vertical farms, clinics, cloud kitchens, and cloud supermarkets.’

McKinsey (04.2020): The shift to e-commerce may also further boost already high demands for industrial space. Relatively niche asset classes (such as self-storage and cloud kitchens) could see an improvement in their unit economics, as demand density goes up when more people work from home, while other asset classes (such as co-living) may suffer.