| The Unique Challenges of the Businesses Seeing Increased Demand During COVID-19

The Unique Challenges of the Businesses Seeing Increased Demand During COVID-19

Since the start of the pandemic, we’ve been focused — and rightly so — on helping organizations that have been hurt by shutdowns and other disruption.  Our COVID-19 Resource Center is filled with information on topics such as crisis management and government relief.  However, we also think it’s important to examine the areas where the crisis has led to a sudden spike in demand.

The businesses responsible for supplying coveted items like all-purpose flour and exercise dumbbells are surging right now. But while they may be faring much better than the businesses forced to shut their doors, that doesn’t mean these companies haven’t experienced their own COVID-19 rollercoaster and challenges. We looked at 10 industries that are booming and some of the ways business owners are adapting to keep up with demand.

Home Repair and Improvement

Most people have never spent this much time inside their homes. They are looking at their surroundings and realizing it’s a good time for updating and renovating. Concerns that were previously lingering on a weekend to-do list are suddenly front-and-center, and DIY home improvements seem more valuable (and time-sensitive) than ever. Chains like Home Depot and Lowe’s have seen an increase in sales of almost 11% since the crisis began.

That doesn’t mean sales have been simple though. Home retailers have had to ramp up their tech teams to keep their websites running and scale up supply availability for in-demand products. Labor costs also increased as stores hired thousands of seasonal employees to handle the spring bump.

Streaming Services

With live sporting events canceled, movie theaters closed, and regular programming limited, streaming television platforms like Netflix, Hulu, Disney +, Apple TV Plus, HBO Go/HBO Now, Amazon Prime Video, Sling TV and Fubo are reaping the benefits. A large catalog of TV shows, movies and original programming are hugely desirable. Captive audiences are binging on hours of television they normally never would have consumed.

Netflix is surging in subscription sales, reporting that 15.8 million people signed up for the service in the first quarter of this year, more than double its projections. But with so many people tuning in, the company is having to downgrade bandwidth in some areas, frustrating customers. It’s also feasible that the spike may lead to a future major decline, as people start to come to terms about the paychecks lost and must make tough decisions about where to cut expenses.

Communications and Collaboration Technology

It has been well-reported that companies like Zoom, Microsoft and Facebook are seeing unprecedented growth of their private messaging and video products. With the sudden shift to work-from-home environments, these technology tools quickly became essential for productivity. People are completely dependent on these platforms to remotely connect to colleagues, clients and even school classrooms.

Facebook reported that messaging usage increased by 50% in countries hit hard by COVID-19. But at the same time, it is seeing a decline in its core advertising business as its biggest spenders (travel and dining-related companies) have slashed marketing spend. Zoom reported that users increased from 10 million per day to 200 million per day in the three months since the pandemic. Yet the company’s challenges in maintaining security have been well publicized. Microsoft Teams reported that it has more than 75 million active users daily, an increase of 70% in just six weeks. But the company wasn’t so clear on how many of those users were leveraging the free version of the platform.

Online Retailers

With brick-and-mortar stores still closed or modified openings in various ways in most states, e-commerce retailers have become the more stable option for purchasing products and supplies. From office necessities to home goods, items are flying off the virtual shelves. Amazon may have topped $75 billion in sales in the first quarter, but it has also predicted that it will spend $4 billion or more in Q2 (its entire predicted operating profit) on COVID-19-related expenses to keep employees safe.

Home furnishing companies, which were losing market share prior to the crisis, have been split when it comes to how well they’ve adapted. Wayfair’s revenue increased by nearly 20% in the first quarter, potentially due to having a vastly larger and more diverse selection of items than competitors. Meanwhile Pier 1 filed for bankruptcy and plans to liquidate all its stores after failing to find a buyer to continue operations.

Cleaning and Custodial Services

Essential businesses, hotels, factories and hospitals could remain open, provided they adhered to strict cleaning and safety practices. This created an increased demand for commercial cleaning and custodial services. ZipRecruiter reported a 75% increase in job listings for janitors, opening a revolving door as those same people helping to keep us safe are fighting to gain access to personal protective equipment, and many are stepping down due to lack of supply.

Food Distributors

Grocery stores, farmers markets and food suppliers are in demand more than ever, given that restaurants are still closed for dine-in services throughout most of the country, and people are being forced to cook and eat at home. Limited options, as well as consumer fear and panic purchasing, are creating a run on goods. Grocery stores across the country are reporting increased revenue while struggling to maintain their supply chain.

California stores are reporting year-over-year gains of as much as 26%. Arizona, New Mexico and Illinois are looking at numbers in the 60% range, and stores in Utah and Wyoming have seen revenue increase more than 100%. Currently, stores like Kroger, Costco, Safeway and Albertsons are all hiring additional workers.

Delivery and Concierge Shopping Services

Companies like DoorDash, Postmates, GrubHub, Uber Eats, Instacart and Shipt are booming in the work-from-home economy. These services offer no-contact delivery and provide the customer peace of mind. Third-party delivery app usage increased as much as 79% since the COVID-19 pandemic started. Yet these platforms are challenged to keep up with the rapidly changing list of which restaurants are open versus closed, so they’ve found themselves paying some drivers just to drive around while navigating struggling tech support systems.

Wine and Spirits

Alcoholic beverage sales rose by 55% in late March, compared to the same time period in the previous year. Direct-to-consumer wine club Winc saw a 578% increase in new member sign-ups, and on-demand alcohol delivery app Drizly experienced an estimated 300% spike in sales. Across all brands, wine sales are up almost 28% since the pandemic began — a rise partly attributed to increased stress levels and social isolation. Beer and hard cider sales have increased by 20%.

Larger brands are doing much better than craft breweries and local distilleries, as retailers tend to pick the former to stock their shelves since they’re easier to get. Those brands that have not been so lucky are turning to alternative product lines, such as producing hand sanitizers instead, to keep demand high.

Bicycles and Cycling Equipment

In most places, cycling shops have been considered essential businesses from the start. And while stores have been subjected to limited operating hours or strict social distancing requirements, many are still seeing lines of people waiting to purchase equipment, straining supplies. Some bike shops (often smaller and locally owned) are reporting increases of 25% or more, while overall sales of adult bicycles were up 121% in March according to sports-industry analysts.

BioTech

Laboratories are racing to find a cure to this global crisis, receiving both government grants and loans and private donations. Many biotech and pharmaceutical companies that are working on developing a treatment or vaccine have seen their stock prices soar in recent months. Regeneron Pharmaceuticals, Gilead Sciences, Inovio Pharmaceuticals, Moderna and Novavax are all included in this segment. But many challenges lie ahead, from navigating clinical trials to manufacturing vaccines fast enough to meet demand.

Shared Struggles

While these industries are experiencing welcomed growth and increased revenue, the unplanned demand for products and services is also causing never-before-seen struggles. Many manufacturers are working with limited staffing and under heightened regulations. Couple that with shipping challenges, and many industries are facing significant supply chain issues.

Companies now have an opportunity to analyze their unique situations and see what long-term learnings they can garner. Organizations that embrace change and respond with innovation and agility will ultimately come out of this pandemic stronger and better positioned for long-term profitability. If your business never had a culture set up to do that, now is the time to look internally or externally to identify the technology, processes and resources needed to move quickly.

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