Gallantway Analysis into COVID-19. The Impact on Digital and Online Commerce

March 13, 2020

What is Happening?


There is little doubt that the COVID-19 virus will impact purchasing, media consumption, advertising and consumer behaviour in 2020.

While the health of the population is rightly the primary concern for government, the behaviour of both people and businesses is creating economic uncertainty.

The effects will be longer reaching for some brands and have been immediate for others, with major Asian airline brands such as Cathay Pacific and Singapore Airlines already announcing the potential need for staff to take unpaid leave.


Overview


We have provided two hypothetical scenarios on the impact of COVID-19 on digital and online commerce in general. The severity, slow down and change in media investment and user behaviour will become clearer as new market data are released in the coming weeks.

However, there are some leading indicators and data from China, global media platforms, and publishers that have led us to present two scenarios for the impact of the virus.

Impact Scenarios



Scenario 1:

Advertising investment is reallocated as brands focus on realising short-term ROI

Looking at CSM data, since the Chinese Spring Festival, a users home has become the main scene for people's entertainment, work and life.

As a consequence, a users time and attention is being redistributed and is likely to shift further to digital and to screens in the home.

For advertisers, uncertainty creates difficulty in planning for the long term and increases the likelihood that brands will focus on realising what is in front of them instead of planning for what is down the road. This includes planning and implementing new technology that may not drive an immediate ROI.

Should ecommerce and online sales volumes continue to rise (as we predict), it is conceivable that investment becomes even further focused on digital channels, particularly across the channels that are closest to consumer decision-making.




Scenario 2:

Major economies fall into recession, advertising is significantly impacted for a prolonged period

Another possibility is that the outbreak removes one percentage point from global GDP as per Nomura projections.

Large urban areas become locked-down for prolonged periods and major sporting events are either postponed or cancelled - Like the NBA who suspended their season on March 11th. Any cancellation of events such as the Olympic and Paralympic Games will also have an adverse effect on traditional media and will impact online publishers and VOD (Video on Demand) platforms.

Alphabet, Facebook and Amazon may stand to benefit as advertisers scale up short-term marketing, sales, promotions and discounting online in order to stimulate more measurable demand in a crisis period.

Firms impacted by a recession generally spend less money on advertising and marketing, big advertising agencies that bill millions of dollars per year will likely feel the impact and project-based engagements will increase in frequency. In turn, the decline in advertising expenditures will affect media companies in every sector, be it print, broadcast, or online.



Consumer Impact on Digital Services


We are seeing the increasing consumer anxiety around the unpredictable spread of coronavirus driving a surge in demand for delivery and digital services, with Deliveroo and Netflix both seeing a surge in demand as more people's distribution of time shifts towards the home.

Food delivery and digital subscription services are benefiting the most from the outbreak according to a survey by payment provider Barclaycard, which recorded growth of 12.4% among subscription entertainment services such as Netflix and Now TV of 12.4%, while takeaways took off with sales growth of 8.7%.

Companies are also already mitigating potential business risks, with Deliveroo having already announced that they plan to provide Non-Contract Delivery services.

Brands should be considering opportunities that arise through the emergence of new normals (working from home - we are looking at you 🙂) that become further entrenched in consumers behaviour as time goes on.