J. Walker Smith on the nuances of the coronavirus outbreak, and how the vulnerabilities it exposes could portend a positive rebound
Panic over COVID-19—aka the coronavirus—has headlines shrieking and markets tumbling. Stores have been emptied of face masks and hand sanitizer. A handful of cities have been quarantined. Some cruise ships have been denied entry to port. Public health authorities are warning of a global pandemic. A recession is said to be all but certain.
It’s tempting to conclude the worst, but the vulnerabilities exposed by COVID-19 actually portend a positive rebound.
George Mason University economist Tyler Cowen argues that the February market retreat reflects the usual process of investors using selling signals to learn what other investors think about risks and the “robustness of the global economy.” As steep as it was, the selloff was ordinary stuff for stock markets. It’s just that in this case, what investors learned from other investors is that there is less faith in the economy than reflected in previous stock prices. The tight knit of globalization appears to be a liability.
In a rebuttal Twitter riff prompted by Cowen’s column, Luis Pedro Coelho, the principal investigator for the Big Data Biology Lab at Fudan University in Shanghai and a former computational biologist at the European Molecular Biology Laboratory in Germany, argued that because of globalization, the disease is less severe as it spreads to other countries and the response of medical researchers is faster and more effective. The venerable journal Science reported that platforms such as Twitter and Slack, which know no boundaries, have opened the floodgates for a torrent of data and information unlike anything seen before. The speed of research into past disease outbreaks was hampered by “sluggish scientific communication.” This time around, “[t]he COVID-19 outbreak has broken that mold.”
Similarly, the impact on commercial markets is a mixed bag. Kantar research shows that the immediate effect on certain industries such as travel, retail, pharmaceuticals and some personal services has been severe—demand is down and access is constricted. But online shopping and other digital solutions will enjoy a long-lasting boost, and some businesses such as bookstores in China—which are experimenting with book delivery services and live-streaming literary readings—are pioneering innovative ways of operating that will not only endure, but will influence other categories as well.
None of this is to suggest that there is no cause for concern, but instead to acknowledge that the situation is nuanced.
Certainly, global economic growth has been stunted for this year. Additionally, the resilience of consumer confidence is an unanswered question, with many worrying that the wind in the sails of consumer spending has been lost for the medium-term. Based on past infectious disease outbreaks, economic losses are known to be significant.
Though sizable, economic dips due to pandemics snap back quickly. And not all consumers are equally vulnerable to economic slumps, as shown in a detailed Kantar analysis of household financial situations. If the worst economic effects of COVID-19 remain concentrated in the equity markets, then the consumers affected will be those best able to afford it.
What will persevere are the lessons consumers take away from COVID-19. Vulnerability is one of many lessons. Consumers have also learned that they must demand more from brands than quality, experiences, performance and price. Brands must give back to the public as well, stepping in and addressing societal problems. At the very least, brands must not operate in ways that injure social welfare.
Consumers are looking to do business with brands that can be trusted to deliver health, safety and responsible engagement in the marketplace. At Kantar, we describe this emerging shift in marketing as “The Era of the Public.” By serendipity, the coronavirus will usher in this new era even more quickly. (The coming public era will the subject of my next column.) In the 2019 Kantar Global MONITOR, 66% of consumers worldwide agreed it is important for brands to be “committed to making our society better.” This is a substantial increase in just a few years. Only 51% agreed with a similar question in the 2017 Edelman Trust Survey.
Consumers recognize that the coronavirus outbreak will have to be fought as a defensive battle, stringing things out while the virus runs its course and exhausts itself. The takeaway will be more frustration than fright, which will translate into a legacy of elevated expectations about what brands must do to ensure a healthy future for consumers, the marketplace and society at large.
Photoillustration by Bill Murphy.