COVID-19 and Accelerating Trends
We live in an era of unprecedented innovation and growth. From social norms to technologies, our world is developing at an extraordinary rate. Enter COVID-19. This once in a generation event turned every corner of the globe upside down and brought many aspects of our lives to a screeching halt, resulting in a significant economic downturn. However, COVID-19 has accelerated a number of pre-existing social, economic, and geo-political trends. Most notably, the pandemic has accelerated changing workplace practices, shifts in online retail, and US-China trade relations. Changes in each of these areas were well under way in recent years and the global pandemic sped up these trends dramatically.
Remote Work Explodes
Before the debacle of 2020, the movement away from the traditional workplace was already underway. A gradual shift towards more flexible and agile workforces had already started, including increasing reliance on contingent workforces and ability to work remotely. Now, because of the sudden and forced relocation to remote working, many companies can hire talent from across the world and no person is tied down to a particular city. This has a huge impact on office real estate, collaborative technologies, and the way companies are thinking about their workforce and the way work gets done in the future.
Over the last decade, even with widely available video conferencing and collaborative technologies, the vast majority of “office workers” stayed tied to their offices in their respective cities, based on the assumption that work was more effectively done face-to-face with direct management of employees. COVID-19 has overturned these fundamental assumptions about the nature of work. it has radically changed the future of the workplace forever, as the movement away from traditional work practices has exploded. Before the pandemic, 5% of the workforce was working remotely, but now over 60% of workers are operating remotely (Pinchen, 2019), (Boland, 2020). The results of this transformation have been encouraging. Gartner reported that 82% of business leaders plan to continue to allow employees to work from home at least partially, and 47% plan to allow this change to be permanent (Hickman, 2020). The main question for companies now becomes not how to manage a remote workforce, but how to manage a more complex “hybrid” workforce.
The shift to remote working is anticipated to have a potentially significant impact on commercial office real estate and hiring practices for many companies and businesses. As more people work remotely and/or hybrid, requiring more flexible office arrangements, there is a significant opportunity for savings in real estate. Another potential advantage is the expansion of what used to be a regional or even local market for talent toward a national or even global one.
The Retail Apocalypse
There has been a long running shift in consumer spending towards online retail, but the pandemic has heightened this trend and online retail powerhouses are coming out as strong as ever. Now more than ever consumers rely on e-commerce for not only luxury goods, but also essential products. For the last decade, traditional “brick and mortar” retail has been steadily declining; in 2019 alone, 8,000 stores closed in the US. However, 2020 has accelerated this “retail apocalypse” (Peterson, 2020). In 2020 so far, an alarming number of major operations have already declared bankruptcy, such as JCPenney, Modell’s, Lord & Taylor, and GNC. These companies, lacking strong business models and efficient e-commerce platforms, have become victims of the healthcare crisis and economic crash.
As the lockdown took hold this year, social distancing drove an immense increase in online sales: from May to July, consumer sales at Amazon.com increased 60% over the 2019 levels and their total e-commerce sales nearly doubled in May (Semuels, 2020). Major e-commerce companies were further advantaged as many were classified as essential businesses and not required to shut down during the pandemic. Though these online retail giants are thriving, traditional and small businesses are taking tremendous hits because as major players, most notably Amazon, they exercise the power of what one small business owner called a “dictatorship”.
This forced change in consumer behavior may actually have shifted consumers’ buying patterns permanently. In the US, almost 30% of consumers surveyed by Competera said that they will never go back to in-person shopping, and in the UK, respondents said that they will continue their current shopping habits even when the world returns to the “new normal” (Kuhuk, 2020). In terms of online retail, the long anticipated future seems to suddenly be right in front of us, thanks to the COVID-19 virus.
China Turns for the Worse
Long before the pandemic occurred, the relationship between the US and China, both economically and politically, had been disintegrating. Starting in 2016, the new Trump administration took a hard line economically towards China, most prominently by instituting tariffs and painting China as a manipulative and untrustworthy economic partner. With a $90 billion drop in imports from China last year, the Trump administration sought to create an advantage in negotiations for a trade deal with China (Tucker, 2020). But as 2020 started with COVID-19’s origination in China and the US mishandling of the virus, the troubles in this complicated relationship expanded.
When the COVID crisis emerged in China and the Trump administration mishandled their own federal response, China became an easy and useful scapegoat. This has accelerated the downward spiral politically and economically, driving the relationship to its lowest point in decades (Usher, 2020). In August, Trump even went as far as to abruptly cancel trade talks with China, saying “With what they did to this country and to the world, I don’t want to talk to China right now” (Moore, 2020). At the same time, the administration took direct action against Chinese individuals and businesses, most notably by issuing more tariffs and signing an executive order banning US companies from working with TikTok and We Chat, both Chinese-owned companies. Another important factor in the acceleration of these tensions is the fact that this year is election year in the US. This means that the Trump administration will further defend its questionable record on COVID-19 and paint China a scapegoat for the many issues at hand. With the 2020 election at hand and the virus still uncontrolled in the US, it’s difficult to predict if the recent instability will be resolved any time soon, but it has certainly escalated.
Sources
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