After the Shutdown Ends
With Biden and Harris in the White House and the Democrats fast on their way to controlling politics for the foreseeable future, the mainstream media has abandoned its narrative of fear and is pushing hope and prosperity instead. That, and Biden & Company’s willingness to spend trillions of dollars it doesn’t have, spells a new take on COVID-19: It’s time to party again.
The virus will continue to do its thing. This is as obvious today as it was 13 months ago, when I first started writing about it. The difference is that we will be treating it like the common flu. Except for the COVID Cards.
That’s what’s happening now. But what will the future look like? With the shutdowns on their way out, how much and how quickly will the economy recover?
A few of my colleagues are predicting a Financial Armageddon. These unpaid bills will have to be repaid, and it will not come from just the top 1%, as advertised. It will come mostly, as it always does, from the working and middle classes.
But I don’t think it’s going to happen this year. My guess is that we will see a strong stock market for at least the next few years as a result of the multitrillion-dollar government giveaway (checks that will eventually bounce). But the comeback will not be universal. Some business sectors, and even some industries as a whole, will never regain their former share of the country’s GDP. And some are likely to die completely.
THE CASUALTIES
Movie Theaters
In a recent poll by Deloitte, 35% of participants said they prefer seeing movies in theaters and probably would return when the restrictions lift. 52% said they were comfortable watching movies at home or on mobile devices and probably would not patronize theaters.
Prediction: Specialized, hyper-luxurious (and hyper-expensive) theaters will be tested, and might succeed if they can make the experience less about watching a movie and more about something else. But the big theater industry is doomed.
Shopping Malls
Bloomberg reported a 60% drop (about $4 billion) in shopping mall values in 2020.
Prediction: Like movie theaters, there may be a small niche industry of specialized shopping malls in the future. But the large, multi-acre suburban and rural shopping malls of the past will be gone.
Large Bookstores
Print book sales rose 8.2% in 2020 vs. 2019, according to NPD BookScan. But bookstore sales dropped 28.3%, according to preliminary estimates from the US Census Bureau.
Prediction: Large bookstores are going the way of the dinosaurs, but the extinction will take a decade or two to complete. The early casualties will be mainstream bookstores that are selling books and other products one can get more easily and sometimes more cheaply through Amazon. Smaller bookstores that offer comfortable seating, good coffee, and a soothing environment will be around for a while. Specialty bookstores – e.g., those that sell rare and limited-edition books – will survive.
In-person Adult Education
Fall 2020 and Spring 2021 saw a 7% increase in enrollment at primarily online institutions, compared to a 5% increase in Spring 2020, according to EducationData. The online learning industry is projected to exceed $370 billion by 2026.
Prediction: Overall, online college, university, and professional education will continue to rise, even among Ivy League schools. This will happen gradually, as people discover that most traditional educational programs are costly and inefficient.
In-person Business Meetings
Business meetings on Zoom are undeniably much more efficient than in-person meetings. They are more likely to begin with agendas, more likely to stick to those agendas, and highly likely to serve their purpose in half the time. And that’s to say nothing of the very significant savings in terms of time and money that travel used to account for.
Prediction: Many of my colleagues disagree with me on this, but they are wrong. We have seen the end of the in-person business meeting.
In-person Seminars, Conferences
Multiple sources suggest that with smaller budgets, crowd anxiety, and available tech, a full return to the once $235 billion conference industry is unlikely.
Prediction: Information and promotional events – such as book tours, business seminars, and even some celebrity events – will lose their appeal as digital versions become more sophisticated and exciting.
Supermarkets, Grocery Stores
According to Statistica Research, foot traffic fell dramatically during the pandemic. And between August 2019 and June 2020, the number of online grocery shoppers increased from 16 million to 45 million.
Prediction: The supermarket business won’t disappear entirely, but it will be radically transformed. In the next 5 years, expect to see many supermarkets being converted to Amazon distribution centers, with some allowance in some neighborhoods for personal shopping. But it will be considerably less than what exists today.
Big Box Stores
Best Buy’s digital sales made up 43% of all its holiday sales in 2020, according to Bloomberg, a 25% increase over the previous year. Along with several other big box stores, they have announced that they will be converting some retail outlets to e-commerce fulfillment warehouses.
Prediction: Big box stores will do worse than supermarkets. This particular sector of the mega-market economy is in for a total wipeout.
Commercial Office Space
An increasing number of accounting and law firms report that they will be investing in additional technology to make it possible for their employees to work remotely. (37% of accountants, for example, according to Accounting Today, are expected to work remotely in 2021.) Meanwhile, as working remotely increases, businesses are leasing less and less space. According to JLL Research, Q4 2020 saw a loss of 40 million square feet of occupancy.
Prediction: Professional office space use, which dropped by about 70% during the lockdown, will come back, but only to about 50% to 60% of its former size.
THE SURVIVORS
There are many industries and industry sectors that will recover 100%. My guess is that they will be the businesses that sell, among other things, ambiance.
Here is my list:
* Restaurants and coffee shops
* Parks and beaches
* Resorts and cruise ships
* Sports stadiums
* Gyms
* Residential real estate (apartments, condos, single-family homes)
* Construction trades
THE SUPER-SURVIVORS
There are some businesses that will not just come back 100%, but grow much larger because of the shutdown. Pfizer, Moderna, and Johnson & Johnson are obvious. But I’m betting that the biggest corporate beneficiaries will be those that service the digital economy, including business, education, news, and entertainment.
Here are five of them:
* Amazon may benefit the most, as tens of millions of Americans have habituated themselves to shopping digitally.
* Apple, not an obvious choice, has a fast track in the news and information sectors.
* Netflix, like Hulu and other streaming services, will soak up the business that won’t be returning to movie theaters.
* Zoom has become the go-to brand for business conference services, and has good potential servicing the consumer market as well.
* Google and Microsoft benefit from all of the above.
