COVID-19 Impact: Industries Experiencing Growth Due to the Pandemic

The world is in unprecedented territory due to the COVID-19 Crisis in 2020. Asian Development Bank (ADB) estimates that the world can lose 0.089 percent to 0.404 percent of its GDP due to the outbreak, which is between USD 77 Billion and USD 347 Billion in monetary terms. The impact of the outbreak reached Bangladesh late compared to other countries. However, due to the open nature, the developing economy is feeling the impact along with the rest of the world. According to ADB’s estimates in the worst-case scenario- where the outbreak sustains for six months, Bangladesh can lose up to 1.1 percent of its GDP. This can result in the economy losing USD 3.02 Billion.^[1] 

Among the precautionary measures adopted by the countries around the world, social distancing and some form of restricted movement or lockdowns have been common. Such measures are important to “flatten the curve”; as it is the only weapon we currently have at our disposal along with testing. However, they require partial or full closedown of businesses regarded as ‘non-essential businesses’. This is resulting in most industries having negative profits. Which in turn are making them scramble for aid or stimulus from the government to survive. 

On the other hand, some industries have managed to reap benefits from this crisis. This can be primarily attributed to their products or services’ essential nature or necessity to cope with the current situation. Some of them are Online Grocery Shops, Retail Chain Shops, Mobile Financial Services and Information Technology Firms.

Online Grocery Shops: Growing While Other e-Commerce Services Suffer

As countries around the world were announcing lockdowns measures one after another, we saw a frenzy of panic buying and stockpiling of essential products. Now that the lockdown measures are in place and the number of infected cases is growing, people are trying to avoid public places. As a result, they are forced to think of alternatives to grocery shopping from brick and mortar stores and kitchen markets. Many urban habitants hence turned towards online grocery shopping platforms. The current crisis has been regarded as the biggest opening yet for online grocers. Chaldal, an established player in this market, has reported a spike in daily order numbers. They have been attending about 5,000 orders daily and have hired 300 new employees to do so. The average single order basket has also increased from BDT 1,300 to BDT 3,750. Along with online grocers, virtual medicine platforms’ daily order numbers have risen by almost sevenfold. The government has also instructed law enforcement agencies to help the country’s e-commerce providers in delivering medicines and daily essentials.^[2] 

However, the overall e-commerce market has seen a decline of 80 percent of orders in the past month due to the pandemic according to the General Secretary of the e-Commerce Association of Bangladesh (e-CAB). As a result, e-commerce sites focused on other products, are diversifying into the grocery and essentials category. Market giants like Daraz, Bikroy.com, Sheba.xyz have already started delivering fresh groceries. ^[3]

The influx of new consumers in this industry is a great opportunity if they can be turned into loyal consumers. However, that requires proper service and delivery within the specified time. Platforms like Chaldal are failing to achieve those requirements due to obstacles such as reluctance from perceived safety concerns, inability to deliver outside Dhaka, reduced number of deliverymen, lack of safety equipment, shorter time window per day, etc. If the platforms can overcome such obstacles, they will be able to experience significant market growth and redefine online platforms as the norm for grocery shopping. 

Retail Chain Shops: Capitalizing Over Kitchen Markets Due To Better Sanitation Practices

Social distancing and lockdown measures have brought dramatic changes to consumers’ grocery purchasing behaviour. Retail stores saw a spike in bulk buying of essential grocery items, toilet paper, disinfectant, hand sanitizers and many such items. The retail giant Walmart saw a 20 percent upsurge in sales in the US for the month of March. Monthly download of their app also saw a 190 percent increase.^[4] Walmart’s stock price also grew 2 percent from USD 119 at the beginning of this year to USD 122 on April 30^th, compared to the 11 percent decline for the broader S&P.^[5] Such figures point towards the further strengthening of giants like Walmart in the market compared to their smaller counterparts.

Similar trends can also be noticed in the local market as well. In 2019, the annual turnover in the organized grocery retail sector rose 19 percent year-on-year to BDT 23 Billion with a CAGR of 24 percent. Super shops in urban areas such as Shwapno, Meena Bazar, Agora, Unimart saw a 50 percent spike in sales since March after the first confirmed case. People turned towards the super shops in search of more hygienic and safer options compared to kitchen markets.^[6] 

Now that the limitation on movement has been imposed, access to the brick-and-mortar stores has been limited. The government has also curtailed the operating time for small retail and grocery shops. This has provided an opportunity for the super shops to capture more market by moving into virtual platforms. Shwapno has launched their own delivery service both online and by phone calls in the adjacent areas of the stores. They have also collaborated with food delivery platform FoodPanda since mid-April. This collaboration is part of FoodPanda’s on-demand groceries and medicine delivery service PandaMart.^[7] Another key player in the industry, Meena Bazar, launched mobile shops selling basic grocery items and fresh produce. It already has its own online platform, ‘Meena Click’.^[8] The current circumstances and such initiatives are helping large retail chain shops gain more market share over small grocery shops and kitchen markets.

Mobile Financial Services: Providing Better Alternatives To Traditional Banks

COVID-19’s primary infection vendor has been identified as water droplets expelled from an infected person. On the other hand, banknotes and coins exchange numerous hands on a daily basis. As a result, previous studies have claimed that paper money can carry more germs than a household toilet.^[9] This directly points towards the risk of being infected by using banknotes and coins in financial transactions.

Such circumstances have created a need for a cashless society and serve as a perfect growth opportunity for FinTech services such as Mobile Financial Services (MFS). The world’s fourth-largest economy, China, already has 600 million users, moving it very close to a cashless economy.^[10] The COVID-19 outbreak is urging the world to follow suit with China and reduce the usage of cash.

To aid the lockdown and social distancing measures taken by the government, bank-working hours have been reduced significantly. The banks also have less reach in rural backwaters in our country. This has created a unique opportunity for the growing MFS sector to lead the way for a financially inclusive future. Recently, the Prime Minister announced BDT 2,500 cash incentive to 5 million poor families as part of measures taken to keep the economy stable. All of these will be paid out using MFS services directly to the families to ensure transparency.  Top players such as bKash and Nagad have also been helping private firms and NGOs such as BRAC and Grameenphone in the distribution of financial aids to marginalized communities.^[11]

Since April 4, around 1.92 million MFS accounts have been created to provide the workers of Ready Made Garments sectors using the stimulus package announced by the government.^[20]

Such initiatives have increased the number of accounts created adding to the pre-existing 81.8 Million MFS accounts handled by 15 banks.^[12]

Other than delivering financial aids, MFS has also been crucial in the “touch-free” delivery services offered by e-Commerce firms, food delivery services and online grocery delivery services. Payment through MFS services reduces contact with the delivery personnel through cash. MFS has also helped in payment of utility bills such as electricity, telephone and such. Electricity bills paid through digital platforms has increased from 5 percent to 60 percent after the pandemic.^[13]

However, the sector still has some obstacles to overcome. The local agents cannot open their shops and collect/deposit cash in the banks due to lockdowns and reduced banking hours. This has increased the importance of integration with online banking for MFS; however, for the marginalized population, local agents are the only solution. There has also been some scepticism and criticism when it comes to the listing phase of receivers of financial aid from the government. The MFS can help ensure transparency using their verification methods and past transaction history. The transaction fees have also been regarded as too high, for relatively small amounts such as salaries of workers in the RMG sector. MFS and Bangladesh Bank have worked on this issue by removing transaction charges on purchase of essential goods such as groceries and medicine through MFS, increasing P2P transaction ceiling from BDT 75,000 to BDT 200,000 per month and cutting cash-out charges for export-oriented industries’ worker salaries from BDT 14.5-18 to BDT 4 per thousand takas.^[14]

Information Technology Firms: Reinforcement Of The Growing Trend Of Digitalization

The pandemic sent stock markets around the world crashing as many countries around the world are already experiencing recessions. Since the 2008 recession to early 2020, there has been a bounce-back led by the so-called Fang stocks (Initially Facebook, Amazon, Netflix and Google, now including Microsoft and Apple). They helped drag the S&P 500 up by nearly 400 percent from its 2009 low to the beginning of 2020, while the tech-heavy NASDAQ 100 index increased 700 percent.^[15] Even after the COVID-19 outbreak, the stocks of Big Tech companies like Amazon kept soaring. The stock valuation rose from USD 1,838 back in the first week of January to USD 2,400 in the first week of May. The market cap currently for Microsoft is USD 1.32 trillion, Apple is USD 1.26 trillion, Alphabet is USD 900 billion and Facebook is USD 577 billion, which makes up over 20 percent of the S&P index.^[16] This shows how the post-COVID future will be dominated by big tech companies.

Social distancing and lockdown measures have pushed most white-collar workers around the world to ‘Work-from-home’. This has presented the Video Conferencing Market with a unique opportunity to grow. The industry is forecasted to grow at a CAGR of 9.2 percent during the forecast period of 2020 to 2026. The month of March witnessed a spike in downloads of video conferencing apps by 62 million.^[17] Among them, Zoom has become a household name in the first quarter of 2020. Its daily user count has gone up to 300 Million in April 2020 from only 10 Million in December 2019. Its market cap has also grown to a whopping USD 48.78 Billion which is said to be higher than the combined value of top 7 Airlines’.^[18] Like the rest of the world, Bangladeshi white-collar workers were also forced to adopt ‘Work From Home’ measures due to the lockdown. As a result, Zoom and other video conferencing tools became essential for Bangladeshi professionals. This can also expedite the process of digitization of many work processes required for ‘Digital Bangladesh.’

With half the world’s population put under lockdown, it is no surprise that home entertainment providers are witnessing growth. With sports events cancelled/postponed around the world, people are turning to video streaming and gaming platforms. Streaming has surged dramatically around the world with most of the western countries under lockdown. Streaming in the USA, Spain and Germany surged by 201 percent, 200 percent and 130 percent. The end of 2019 marked the beginning of streaming wars as Disney and Apple launched their own streaming services respectively. Regardless of that, Netflix has shown itself to be untouchable so far. Almost 16 million people created accounts in the first three months of the year, which is nearly double the number of new sign-ups it saw in the final months of 2019. Its stocks also went up by 32 percent while the broader market saw a decline of 13 percent. However, Netflix and other such platforms are still affected negatively by the pandemic. The lockdown and social distancing measure have forced them to close down any production works, which stopped the creation of new content to cater to the growing consumer base. ^[19] Bangladeshi tech firms have been trying to capitalize on this opportunity as well. Recently, Red Dot Digital, a subsidiary of Robi Axiata Limited, launched ‘Binge’. ‘Binge’ is being promoted as a mix of Internet Protocol TV and online streaming platform.^[21] However, ‘Binge’ is not the first Bangladeshi streaming platform. It is joining Hoichoi, iflix, Bioscope, ZEE5 and others in the growing streaming platform market of Bangladesh.

Sustaining The Growth In A Post-COVID World

Risk is a fundamental element of any business. A global event as prominent as the COVID-19 outbreak is likely to have an impact on any business. The aforementioned businesses are experiencing some sort of benefit from the situation created by this outbreak. However, they must consider, as we slowly ease out of the lockdown measures, this growth is not permanent. They must capitalize on this opening at once and focus on practices like consumer retention, that’ll make this growth more sustainable. As we move towards an uncertain post-COVID world, perhaps these industries can provide the vital support and growth required for our economy.

Rashik Alam, Content Writer at LightCastle Partners, has prepared the write-up. For further clarifications, contact here: [email protected]