What does the new economy look like as countries and states restart after the massive coronavirus pandemic shutdown?
It’s a new world
Six months ago, probably none of us would have imagined that here in the US, we would be required to stay home and limit our activity for the health and safety of our communities, the stability of our healthcare system, and to protect the most vulnerable among us – from what’s been called an “invisible killer”.
Almost every industry has been impacted by the pandemic – restaurants, retailers, gyms and spas have been shut down. But even companies which have done a lot of business during quarantine like Amazon (link opens in new tab) and major grocery store chains, have been impacted by paying higher wages to workers, spending more money on protective equipment, and dealing with supply chain disruptions.
The majority of people I interact with regularly, from clients to neighbors to family members, understand the importance of quarantining and are doing their best to keep themselves and their families safe by following the protocols in their states. But even the most compliant of them are starting to wonder, when will we be able to go back to some semblance of normal activity again? And even more concerning, what will “normal” actually look like in a post-pandemic environment?
It’s becoming more clear as time goes on that we will have to start re-opening the economy even in absence of any clear health-related breakthroughs in treatment, vaccines, or antibody tests available widely.
The consumer will have a major role in the success of reopening
I think the consumer will ultimately drive the success or failure of any individual state’s reopening plans. If the consumer isn’t comfortable going out, they won’t go out. If the consumer doesn’t feel safe going into one store and sees another store practicing measures that feel safer, the consumer is going to choose the store that’s perceived as safer. No one can force us to venture out before we are ready. And what ready means for each person will be different too.
According to this chart (link opens in new tab) from the St Louis Federal Reserve, in Q1 2020, personal consumption expenditures make up 68% of the US gross domestic product. So if the US consumer doesn’t feel comfortable spending money again, it’s going to be very tricky to get the US economy restarted.
And obviously, consumers aren’t currently spending the way they were prior to the pandemic. A 5/1/20 Barron’s article (link opens in new tab) said, “Consumers surveyed in France, Germany, Italy, Spain, the U.K., and the U.S. were spending 25% to 30% less than before the virus as of April 21, according to Deutsche Bank.”
How can companies prepare for their own reopening?
So what are some steps companies can take to get started on a successful reopening? This McKinsey article (link opens in new tab) details critical factors that should be considered as businesses plan for a successful reopening. Several of these recommendations could be helpful for both large and small companies. Here are a few recommendations from the article:
“Providing customers with safety guarantees that restore trust.” My friend Francine Brown from Bless This Body Massage Therapy (link opens in new tab) has been working hard on plans that will help her customers feel safe coming back when her business is allowed to reopen by the state. Some of her plans could include wiping down common areas and cleaning surfaces between clients, wearing a mask and requiring clients to wear masks, and more. She’s also been cultivating a connection to her customers through regular email updates with a variety of wellness-related resources.
“Safeguarding the health of employees.” A friend of mine works as a grocery store shopper. Several weeks ago, before masks were a requirement here in Illinois, she was provided with a mask hand-made by her boss’ wife. She appreciated the personal effort to help her stay healthy. At this point, employees will probably expect more safety protocols than a hand-made mask, but the important point is that my friend felt that her boss cared about her and wanted to keep her safe.
“Reviving demand.” Interestingly, this is going to be critical because many consumers and businesses may have gotten used to doing without many things they used to spend money on. So purchasers will have to be reminded of the benefits of the services or products they once used. To revive demand, businesses may need to rely on “tactical pricing” like deals, but they may also need to do a deep dive into market segmentation to understand which customers are worthwhile to woo back.