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Many people are happy to see the end of 2020. With a contentious election concluded, the Dow reaching 30,000, and the news of a least two vaccines with over 90% effectiveness against the COVID-19 virus, these bits of news are a shimmer of hope to bring an end to a less than stellar year for most. Several companies have done well, even with these negative influences causing economic and political uncertainty. Most notably, teleconferencing software, like Zoom, supermarkets and food delivery, such as DoorDash, GrubHub and Uber Eats, as well as the big players of FAANG (Facebook, Amazon, Apple, Netflix, Google (now Alphabet)) have all performed exceedingly well throughout the year. We will delve into why and what will be their future post covid.
With the advent of the COVID’s “new normal,” Zoom (up 703% YTD), the popular teleconferencing software, has been the bell of the ball and continues to do well, while the office solutions Citrix (up 10% YTD but trailing behind the market down from a YTD high of up 50%) has faltered in comparison. The major difference is that Zoom offered the best option for teleconferencing before the pandemic hit. Their closest rival is Skype. Both Zoom and Skype include screen and file sharing, recording of meetings, cloud storage, telephone access, and a whiteboard. However, Zoom’s business client user experience wins overall with their integrated feature set, including hand-raising, individual meeting URLs, ability to divide into breakout sessions, etc.
“Let’s have a Zoom meeting” is now the standard reference to any virtual meeting.
Citrix did well initially and has signed several deals that keep it moving forward, but it has not kept up with the initial summer hype. There are other players in the game, and 99% of Fortune 500 companies were already using Citrix’s virtual desktop software, so the amount of further growth is limited, and Citrix even saw the 3rd quarter bottom line declined 9.2% on a year-over-year basis.
Similarly, the dining and drinking out industry has been hard hit; 100,000 restaurant closures are expected for 2020, and the National Restaurant Association says that 40 percent of operators aren’t sure if they’ll make it for six more months.
Establishments that were already best suited for alternative food distribution, such as DoorDash, have really done well, and DoorDash is planning an IPO at just the right time with the potential to have a company valued at $32 billion. Grubhub is up 48%YTD, and Uber/Uber Eats is up 58%YTD. Kroger, Walmart, and Costco have all done well with their grocery pick up and online delivery all in place before, but expanded service during COVID.
All five of the technology giants in FAANG have also done well during the COVID crisis. As our lives switched to a more online world, the FAANG companies were there to supply us with the products and services that were required. They have cemented their place in the minds of buyers for any products or services so that if you wanted social media connection, you went to Facebook. If you wanted to buy something, you bought it on Amazon directly or through their marketplace, shopping on your I-phone was how you did it, inbetween facetime calls or watching Apple TV, Zoom was the place of a Netflix movie watch party, and Google/Alphabet filled in the rest of the spaces. Google search was used if you could not find it on Amazon, or were looking for news outside of Facebook. Google cloud services were used to complete work, entertainment was found on YouTube, and Android was right behind Apple for their own apps, phones, and entertainment.
The Secret of Success
There really is no secret to the success of all of the pandemic successful companies. These companies all had their services in place before the COVID pandemic took hold, were top of mind for their industry, and were undoubtedly nationwide, and in some cases, global companies.
Some of these companies have expanded their offerings, such as adding contactless delivery, but they all had the general offerings before the pandemic took hold. The other thing that they had was the ability to change rapidly when it was needed.
The distribution of goods could be re-routed if the Amazon distribution center was closed due to an infection outbreak. A company’s capacity could be altered quickly to match changes in demand, Zoom had the needed hardware and bandwidth to conduct a high-quality meeting with many participants, and Grubhub could take on new delivery drivers who were laid off, and restaurants that were only allowed to sell take out, immediately. A company’s dexterity meant that additional services could be provided when necessary or advantageous.
The question now becomes, with an inevitable COVID vaccine, will the companies that have been successful during the COVID pandemic stay that way?
Many white-collar employees have taken to the at-home flexible working lifestyle. A PWC survey found that more than half of executives see a post COVID workforce working remotely.
This will undoubtedly require the use of services that have become popular during COVID to still be utilized.
Additionally, this will also push companies to think about their workforce in a different way. Can this job be filled by someone working remotely, and do they even have to be living nearby, or even in the same country? The companies that can change to fit these new needs will have continued success, and our successful companies have already shown they can do so.
With the reopening of restaurants, theaters, gyms, bars, sports arenas, and concerts, how food and entertainment are obtained and consumed may be altered post COVID. It is still not certain if the new dinner and a movie date, is going to be ordering from Grubhub and watching Netflix. The likely result will be similar to the above working at home survey, a portion of the total will change compared to pre-COVID; however, we will undoubtedly want to again go out for a nice dinner and some other entertainment.
COVID has changed the world drastically; we are living in a new normal.
Now that we have been doing so for several months it is going to be a reverse culture shock going back to the old ways. Companies that have adapted have found success, and this ability to adjust is what made them successful during the COVID pandemic and will make them successful in the post-COVID years to come.
This post was initially published by Andrey Loginskiy on Medium.com
As we enter our second wave of the COVID-19 pandemic, a few questions are raised. First is, when this pandemic will finally be over, and second, what will be the ultimate result on markets and the economy? The first of these is more difficult to answer as each nation’s government and its peoples are reacting differently to the widespread outbreaks, and will there be a reliable and trusted immunization in short enough time to be of use? We will leave this first question to the scientists and doctors to answer, but take both a short and long-term recovery into the answering of the second question.
The Beginning of COVID-19
Let’s start with what we know first. With the social distancing and lockdowns that started the pandemic from March through the summer, online shopping has come out the king. At the lockdown’s height, the research firm Technomic found that over half of consumers avoided crowds, and a third were leaving their house less often. Another firm, First Insight found that 30% of already tech savvy millennials were more frequently shopping online in their market study. Adobe Analytics also reported that consumers were shopping for non-perishable food items with an increase in demand of close to 69%.
Online’s Continued Surge and Tactics
The most recent data released by Adobe Analytics showed that September’s online sales in the U.S. increased 43% year over year, topping $60.4 billion, above August’s 42% year over year record. This trend will likely continue with the normally July Amazon Prime day 48-hour event, being held in October this year.
Resulting in over $10 billion in purchases recorded, which is an increase of 45.2% above the prior year’s same event sales, and with Amazon statingthat $3.5 billion of which was made by their Amazon Market Place third-party sellers, this would be a near 60% year-over-year increase.
At a McKensey Roundtable, European fashion execs agreed with the Adobe findings, that the crisis has accelerated digital use, and the crisis paradigm shifts seen will continue post-crisis. The majority of the leaders agreed that rather than take a defensive position during COVID-19, it was time to invest in both brand and e-commerce marketing while measuring the right KPIs and making use of automation. By having this balanced approach, retailers can take advantage of opportunities and be sure that they are setting the correct campaign targets. This way, companies will create new ways to engage, communicate, and interact with their customers while acknowledging a change in consumption, where buyers now look for purpose and sustainability. Marketplaces, including that for fashion, must accept a “next normal” is here to stay and they must embrace innovation.
With the approaching holidays, retailers are expecting strong online sales and continued trouble with instore pandemic sales. The longer the COVID pandemic continues, the more likely brick and mortar will suffer.
The Digital Commerce 360’s retailer holiday survey of 118 retailers found that 1/3 of retailers expect holiday web sales to increase up to 24%, and another 1/3 project more than 25% gains. With the final 1/3 expecting flat or downward trends.
As the Fall/Winter COVID second wave is hits, all sellers should plan for the same issue that plagued the marketplaces over the spring and summer, Inventory shortages due to supply chain issues. Michael Krakaris, multi-channel e-commerce fulfiller Deliverr’s Co-Founder, spoke at the Payoneer BEYOND conference about how this issue has been best addressed — stating that Walmart stayed successful throughout the pandemic through its previous years of planning. Walmart was able to drive its own online grocery sales and sales of their third party marketplace, allowing for multiple channels to provide consistent products to shoppers. They found massive spikes in specific product categories, and thus, by thinking in a “category way” rather than in a “per product way,” Walmart was better able to deal with demand. Expecting warehouse closures was required, and developing workarounds through redundancies made fulfillment possible.
Smart and experienced online third-party sellers did a similar tactic; they were diversifying sales through different channels, selling on Etsy, Walmart, Wish, Amazon, Google, and Shopify to get their products out. The reason being that multi-channel eCommerce remains more defensible, and a typical online buyer pattern was first to conduct a search for the desired product at Amazon, then if unsuccessful go to Google, where the retailers who were best at marketing their products on Google, such as Walmart and eBay, gained the buyers business. The smaller players are doing a similar tactic, building their own Shopify, Amazon, and Walmart marketplace stores and running their own Google Ads to get multiple indexing for all buying pathways.
Winners and Losers
In a recent article Ovidiu Solomonov, Adevinta’s (a marketplace specialist) SVP for global markets, said that COVID-19 had been the perfect work at home experiment showing that employees can still be productive working remotely.
This result, tied with the fact that housing, healthcare, and education, which are some of the U.S.’s largest economic sectors, but only bring in less than 10% of their revenue from online sources, means that these sectors’ potential to drastically change their service delivery channels, give them the biggest opportunity for online growth, and will likely lead to the most significant successes.
Solomonov said that marketplaces having end-to-end capabilities internally or through strategic partnerships would have the best margins and, in turn, tremendous success.
Adventia’s Marketplaces Report, compiled by Dealroom.co, gives a numerical clarification to these successes, saying that 60% of startups are in an excellent position to navigate the crisis. And specifically, startups in online learning, recruitment, health tech (both care and pharmacies), all forms of food delivery, and the newly named “passion economy”(doing what you love to make money) are seeing the most growth, while expectedly travel, real estate tech, and mobility services being part of the 1/5 of the vulnerable marketplace startups are troubled.
The digital marketplace adoption that was already happening over the past two decades has just accelerated with the COVID-19 pandemic. The forced changes due to COVID restrictions have resulted in short-term winners and losers. COVID has shown that for online businesses, there isn’t necessarily a considerable challenge adopting for most sectors, but brick and mortar outlets will have the most significant struggle returning to normality.
They can either embrace the convenience and new health considerations solved by online buying or selling and the opportunities it affords, adding additional geographic sales and payment options, or ignoring these changes, likely fail.
There has been a more defined structural impact on marketplaces and shopping through the COVID-19 changes. Globally online marketplaces see a combined value of $814 billion and will only continue to grow as we get out of this dark time. As the recent results have shown, they will undoubtedly remain the leaders in our post COVID recovery.
This post was initially published by Andrey Loginskiy on Medium.com
The WSJ reported on October 1st that the Russia-eCommerce company Ozon, often considered Russia’s own Amazon.com, is preparing its filing for a U.S. initial public offering (IPO). This IPO would be planned for either later in 2020 or the first quarter of 2021. This IPO filing move is seen as a very positive one for the Russian online retailer who’s benefitted from the COVID 19 pandemic and their buyers’ needs for delivery to home services.
Analysts predict that the company could be valued at between $3 billion and $5 billion USD. The result of the pandemic’s shift to increased online shopping saw Ozon’s second-quarter sales increase nearly two times as fearful Russian’s chose Ozon for almost all types of purchases, including food and other staples.
Though well behind the U.S.’s $519Billion in eCommerce figure in 2018 and Amazon Prime’s member reach of 95 million, Russian eCommerce has been steadily growing even pre Covid-19 pandemic. Russia now claims to have over 62 million eCommerce market users, making the Russian Bear Europe’s largest eCommerce market. . Russia’s three largest online retailers are Ulmart, Citilink, and Ozon, and according to Reuter’s, Ozon’s sales rose by 93% in 2019, reaching $1.1 billion. and in 2019 the entire Russian market grew nearly 25% having a valuation of over $31 billion. This valuation data from the Russian research firm Data Insight would put the Russian market size on par with that of India and slightly larger than that of Canada’s expected 2020 $28.4Billion. However, Russia’s $31 Billion figure does differ from other data (from April 2020) found that claims the Russian market is only $20B, and the Indian market sits at US$ 120 billion in 2020. These extreme variations could be different methods of measurement (one may only be looking at retail while the other looking at all e commerce) but also lead to a bit of concern when trying to evaluate a companies viability and opportunity.
If Ozon passes the SEC scrutiny and is allowed to conduct its IPO, it would be Russia’s first IPO in the U.S. for 2020 (or 2021). The last Russian based company IPO in the U.S. was for the country’s job search portal “HeadHunter” which had it’s Nasdaq IPO on May 9th 2019, where it placed 16.3 million American Depositary Receipts (ADRs) or 32% of capital, at $13.5/ADR, which was the upper range of the price guidance, and in fact closed the IPO on the 13th with 18,750,000 ADRs because underwriters exercised their full option to purchase 2,445,652 additional ADRs from the selling shareholders.
HeadHunter’s ADR holders have seen a wild ride since the IPO, but currently, the price is up 75% over the IPO price.
With Ozon’s sales increase of 93% to $1.1 billion in 2019, and the further 200% sales growth during the COVD-19 pandemic, a potential IPO for the online retailer is a natural way to keep up with a quickly growing demand. Though there may be some concern with the financial results recording Russian data practices in the past, companies currently listed as U.S. ADRs have had few if any problems with SEC compliance. A post-IPO Ozon may have a wild ride, but likely less of one than was seen by HeadHunter as Ozon is far more diversified. If the ADRs become available, assuming a reasonable valuation, they will likely be a good investment for anyone wishing to dip their feet into Russian investment waters.