Today’s article comes from long-time contributor, Kosmo. I added some of my own thoughts near the end.
The COVID-19 vaccine is nearly ready for prime time. By the end of the year, the highest risk patients will be getting vaccinated. It will probably be at least a couple of months before my wife and I will be eligible for shots, and even longer for the kids. But at some point, things will begin to get back to normal – or as near to normal as possible. Some industries are going to see longer-term effects and will be transformed – either positively or negatively – by COVID experience.
Delivery services have seen a huge surge during the pandemic. Employees of these businesses have performed a valuable service by limiting the number of people who need to be inside stores and restaurants.
My family has made heavy use of delivery services. We haven’t been inside a restaurant since March – but we’ve had many meals delivered since then. In fact, we’re getting fried chicken delivered in about fifteen minutes. For us, it’s basically cost neutral when compared to dining out. The tip for delivery is roughly the same as an in-restaurant tip. There’s a delivery charge, but that’s offset by not paying for four drinks. I’ll drink 50 cents worth of generic cola instead of paying $2.19 in a restaurant. The guy who runs the dominant local delivery service is an acquaintance from our neighborhood, so it’s nice to be able to help out his business at the same time. I’m sure we’ll continue to use delivery more – and dine in restaurants less – even after COVID passes. The food is always hot and tasty, and it’s faster than eating in a restaurant. Also, a restaurant is no longer blacklisted simply because one of us doesn’t like the food. My wife and kids can get Mexican food delivered, and I can throw a Totino’s pizza in the microwave. (Totino’s says not to microwave them, but just nuke them for 4:30, rotating once. Almost as good as using the oven.)
The cousin of delivery is pickup. Not every restaurant in the area has delivery services, but many of them have pickup. Order online and have them bring the food our to you. Personal interaction – 15 seconds. Even less exposure if you have them just put the back seat.
I’ve only been inside a grocery store a half dozen times since March. Twice were because the drive-through prescription window wasn’t functioning. If we spend $35, we can get free pickup. Submit the order online and have a store employee figure out where everything is and get it ready for you. Although there have been some occasions where this has ended up taking way too long (hours, in a couple of cases), it’s been a very positive experience overall. I’m going to avoid the inside of grocery stores even after this is over – I’ll happily let someone else do the work. This means that we’ll be doing the bulk of our grocery shopping at that store. Prior to the pandemic, we’d mostly shopped at their competitor. The competitor – a somewhat smaller chain – simply doesn’t have the space to allow for pickup.
We’ve also used pickup from other stores, ranging from Target to Hallmark. Instead of dragging all four of us for a marathon Target trip, we just enter the order over the course of several days, then I run down and pick it up with it’s ready.
My daughter takes private art classes. The art studio was shuttered by the pandemic, but the business didn’t die. The owner pivoted to Zoom classes, and also recorded a series of lessons that could be purchased individually. The great things about the recorded lessons are that the bulk of the effort is upfront. Her cost – in terms of labor and dollars – is nearly the same whether she sells a particular lesson to one customer or a thousand. It also expands her audience. You might not be free every Thursday from 7-8 PM, but you can consume a canned lesson at your leisure. Obviously, it’s not exactly the same as a live class, and her pricing does reflect this.
It’s important for these “winning” companies to realize that although their business will remain strong in the future, it will likely slide from the current peak. Those companies should position themselves to shrink their footprints a bit in the future so that they’re not trying to support their current overhead with fewer orders.
Corporate-owned chain restaurants can come out of this in okay condition. On the one hand, business is suffering. On the other hand, many of their Mom & Pop competitors have been wiped out by the pandemic. Even smaller chains have shuttered some of their locations. The larger chains may have suffered losses in the short term, but when they return to full capacity, the landscape will have changed. Not only will there be fewer Mom & Pop’s and fewer locations for smaller chains, but there will also be a reluctance for entrepreneurs to launch restaurants for a few years. After all, there’s no guarantee that we won’t see another pandemic like this next year – or even five years into the future. This will allow the larger chains to grow their market share.
Mom and Pop Restaurants
A lot of Mom & Pop’s have been completely wiped out by the pandemic. Even chains with multiple locations have been affected. A local sandwich place that served premium hot sandwiches closed. The quasi-Italian place near my office also closed. My office complex has a few thousand people. It’s on the outer edge of the metro areas, without much of a residential population. The Italian place was probably drawing about 90% of its business from my office. My office has been shut down since March. We’ll be working from home through at least the end of June. Even after we do return, we’ll probably only be in the office a fraction of the time. The restaurant’s clientele vanished overnight.
Commercial real estate
I’ve been reading the tea leaves to see what my employer will do in the future. My best guess is that the company will strongly pivot to work from home. Perhaps 10-20% of the time in the office. They’ll probably use a “hotel” cube format, reduce the overall footprint, and sell off excess real estate. I think a lot of companies will do this, particularly in areas with high real estate costs. Why pay for a Manhattan cubicle for an employee if they can be just as productive in their hometown of Manhattan, Kansas? In my option, demand for commercial real estate is going to plummet.
Corporate cafeteria, cleaning, custodial
My office complex has two cafeterias. My employer contracted with a third party to provide cafeteria services. Those people haven’t been working since March. My guess is that we’ll only have one cafeteria in the future.
Likewise, my employer contracts with third parties for cleaning, custodial, security, and a variety of other services. As commercial real estate goes from occupied to vacant, these industries will also take a hit.
Kosmo has an interesting perspective that I never thought about with delivery services and dining. One of the main reasons I go to restaurants is to get out of the house and be part of the community. I’ve been working from home for 13 years now, and I think most people can now relate that you sometimes have to get out. My tastebuds are more of the Tortino’s and generic soda variety that Kosmo mentions in the article, so I don’t mind a difference in the food itself much of the time.
I completely understand the draw of not having to do grocery shopping. For many people, it must be great to reclaim that time. Personally, I enjoy grocery shopping. I love looking for bargains. I love doing mental calculations and comparisons. I love having “me” time away from the kids outside of the house.
I don’t know how I feel about digital delivery. It seems saturated. I’ve got an endless number of FinCon (personal finance group) talks from 10 years that I know I will never watch. I got a deal on Masterclass and I’ve only watched a little of it. My wife is very much against paying for Zoom karate classes for the kids.
My kids’ school recorded a lot of videos last year for distance learning that they can reuse again, but I don’t think they do. Khan Academy and numerous other places have online lessons. If there was a universal search engine and these got combined under one umbrella for a low price (or free like Khan Academy) it could be really useful. I believe that digital delivery is the key to providing free college in a way that doesn’t get caught up for decades of politics.
What are your thoughts? Which segments of the economy have been decimated by COVID-19, and which segments will emerge is a reasonably good position?