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Opinion

The Lockdown Effect

As some countries around the world lift restrictions following COVID-19 lockdowns, we can start to see the effects the lockdown will have on different companies and industries. From the data I have seen so far, the lockdown effect seems to divide organisations into three broad categories: winners, losers, and recoverees. Let’s look at what this means.

Winners

There are some different kinds of winners. In some cases, businesses that were ready to handle online orders will have gained sales that might otherwise have been made in bricks-and-mortar stores. Other winners will be companies that will have benefitted from a short period of increased demand. So, for example, Amazon are likely to be a big winner due to their dominance online. They will have gained sales that would have happened on the high street if it were open. This is a transfer of sales from the losers to the winners. Ikea will have seen a surge in demand from people kitting out their home office, which are sales that would not have happened at all. There will have been knock-on winners in the packaging industry and for courier companies.

Some of the winners can expect to go back to normal when restrictions are eased. Some will find they retain a proportion of the win over a longer term.

Losers

Most of the losers will have lost sales to winners during the lockdown, or will be in an industry where the sales simply stopped (such as restaurants). They will have a bit of a fight on their hands to bring customers back from the competition if people started to shop elsewhere. Unfortunately, some of the losers won’t be able to recover, either because the runway has already ended, the cost of getting back in the game is prohibitive, or the customers are now shopping elsewhere.

Recoverees

The recoverees find themselves in industries that provide a necessary product or service that people have had to wait for. If you needed a vehicle service in May, you still need it now. Much of the “lost” business in these industries is actually “delayed” business and a rush to catch up will bring in much of the lost revenue. That double-glazing repair you needed will still happen and if the businesses can handle the capacity there is an opportunity to recover “lost” sales.

Watch Out in 2021

The following insight is not mine, so all credit to Rebecca who noticed this. For businesses with short-term memories, 2021 is going to be a mess. If you work in a business where targets are set based on “last year’s sales”, you’ll be fighting the effects of your lockdown effect category. For example, a courier company that tries to hit similar sales volumes in April 2021 is going to struggle as they won’t have millions of people stuck at home with delivery being the only shopping option. Equally, recoverees will have a bumper June / July / August in 2020 and might struggle to hit those volumes in a year’s time.

Summary

A global pandemic is certainly an accelerator, both good and bad. Many organisations will realise that working from home can be productive and increase workplace joy. Many businesses that were already struggling may find the end comes much sooner. Things that were likely to happen eventually will be happening much sooner.