INSIGHTS

COVID-19 is a once in a generation event. Almost overnight, we had to adapt to a new way of living, businesses had the ground move under their feet, and people lost their jobs. However, this is by no means the first pandemic humans have had to overcome. Previous pandemics have resulted in large changes to society and shaped human history.

Fortunately, our ability to manage COVID-19 via physical distancing, superior treatment methods and ultimately a vaccine will spare us a repeat of prior pandemics. COVID-19 will accelerate certain trends already underway, while stunting others, creating both winners and losers.

We’ve seen two years’ worth of digital transformation in two months.

Satya Nadella, Microsoft CEO

COVID-19 will accelerate structural trends

1) Convenience is king

For both consumers and businesses, recent events have highlighted the importance and convenience of e-commerce. People that had not historically bought goods online, but did due to restrictions, will continue to value the ease and convenience of goods being delivered to their door. Businesses, both those selling goods as well as services, have had to adapt, expanding their online presence to improve customer experience.

While this structural trend is not new, e-commerce will continue to rise in importance over the coming years. E-commerce currently comprises 14 per cent of global sales, having more than doubled over five years. Before COVID-19, this was forecast to exceed 22 per cent of total sales in the next five years, which may now be conservative.

2) The end of cash?

Digital payments (primarily via credit and debit cards) facilitate the majority of online purchases. Consequently, as e-commerce grows, so too will digital payments.

However, even in physical transactions, the trend away from cash will only accelerate. Digital payment systems have become increasingly popular due to their convenience, and the pandemic has added another tailwind to this theme. While this will take some time, it may not be too long until digital wallets supersede physical wallets.

Digital payments are nothing new, however the majority of the world’s transactions are still done via cash, and there is plenty of runway ahead. Digital payments are growing fast and the pace of adoption will only grow post-COVID.

3) Is the office dead?

Not exactly. However, there’s no denying that flexible working, which was already gaining momentum, will be more and more popular in the future.

The ability to work remotely helped to keep the wheels of the economy turning even amongst strict lockdowns. Were it not for this, either the economic fallout, or the human toll, of COVID-19 could have been much worse than it will be.

COVID-19 highlighted the need to have resilient technology that enables flexible working. Companies that had flexible, agile, cloud-based technology were much more able to adapt than those that didn’t. We’ve consequently seen a surge in demand for cloud-based technology offerings which should continue.

In a lower-growth world, quality companies will shine

While the actions of governments and central banks have been successful in warding off a worst-case economic scenario, higher debt levels and higher unemployment means economic growth is likely to be subdued in the coming years.

Quality companies with clear growth opportunities or resilient earnings, that are less reliant on general economic conditions, will fare better in the years ahead. In many ways, the strong will get stronger.

Company responses highlight social responsibility mandate

The evaluation of environmental, social and governance factors has gained in prominence in a big way in recent years. Consumers are increasingly concerned about the impact products have on people and the environment.

Meanwhile, investors are demanding improved sustainability disclosures from companies, while business success is being measured more and more in both financial and non-financial terms.

The response to COVID-19 from a variety of companies indicates that companies are taking their social mandate seriously. In recent months we’ve seen the management and boards of numerous companies take pay cuts or suspend bonuses and others extend payment timeframes for customers. Companies from a range of industries have also tried their hand at manufacturing ventilators and sanitiser, and manufacturers of a potential COVID-19 vaccine have announced they will not seek to make a profit from it. Corporate social responsibility is here to stay.

Despite the pressure that COVID-19 has placed on economies around the world, as with anything, there are always winners to be found. Companies that can see opportunities and have the ability to adapt will have the best chance of emerging unscathed.