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COVID-19 Crisis: The Challenges Continue to Mount

8 MINUTE READ | April 3, 2020

COVID-19 Crisis: The Challenges Continue to Mount

We made it to another Friday. I hope you have a quiet weekend ahead — just a few more hours between you and season three of ‘Ozark’ on Netflix. See you back on Monday with a round-up of what you might have missed from the weekend. 

This week was another seven days of chaos on the world stage, though it’s becoming a bit more orchestrated with governments and the private sector working closer than ever to combat a common enemy. In the headlines most notably was the Administration extending social distancing measures nationwide until the end of April and unemployment claims in the U.S. topping ten million on Thursday, hours before the number of confirmed cases of coronavirus hit one million worldwide. The EU announced a funding plan to help subsidize wages, Q1 was the worst financial quarter for markets since 2008, and Italy saw its caseload begin to plateau, an early signal that national lockdowns are working. 

In advertising, the Edelman Trust Barometer 2020 Special Report confirmed our gut instinct since the outbreak began: consumers are keeping a close eye on how brands handle the coronavirus crisis. Most interestingly is that technology platforms are changing their product roadmaps as consumers around the world are homebound for the foreseeable future. 

Podcasting and radio listening behavior are two lukewarm entertainment mediums that have experienced really surprising consumption shifts since this all began, which are worth taking note of. And once a shining star amid the turmoil, video app Zoom had a rough week with ‘Zoom Bombing’ hacks and privacy concerns masking the connective good the platform was enabling. Zoom soon came forward with a new plan for keeping users safe and shared that the app has been serving over 200M daily meeting participants users in recent days, “ballooning” up from the app’s 10M peak in 2019. 

At PMG, we published a variety of POVs and press bylines:

We’d love it if you’d check them out and let us know your thoughts at insights@pmg.com. Along with these perspectives, here’s what we know.

This week, more beauty and retail brands pledged substantial financial support and generous product donations, including SheaMoisture, Reformation, Capri Holdings, and Mayhoola, to name a few. Paris Fashion Week canceled the Men’s and Couture Shows for the summer, solidifying a bleak outlook for many luxury retailers.

The challenges continue to mount for retailers big and small. For some, retrieving the raw materials from overseas manufacturers is priority number one. For others, it’s managing fulfillment and distribution challenges, especially with merchandise locked up in closed stores that could be liquidated quickly via ecommerce to generate much-needed cash flow. Some estimates predict the fashion and luxury space will face up to $600B in declining sales, as the effects of the outbreak and subsequent economic shutdown ripple across the supply chain.

It was a busy week in the entertainment industry. Across entertainment and media companies, including Disney, Comcast, NBCUniversal, and iHeartMedia, executives took pay cuts or donated their entire salaries to workers as tough decisions were made to furlough or layoff personnel

With President Trump announcing that social distancing measures would be extended until the end of April, the industry took that news as an opportunity to shift schedules and adjust forecasts. The 2020 Tokyo Olympics were officially rescheduled to 2021 and Amazon is teaming up with SXSW to launch a virtual festival. News Fronts 2020 is rescheduled to livestreaming sessions, film releases are being delayed, and Wimbledon was canceled for the first time since World War II. The foreseeable future of entertainment via films, concerts, and festivals doesn’t look too bright. As such, AMC Entertainment, Fox, and Disney were given downgrades in the latest coronavirus impact report by analysts

One the other hand, virtual entertainment is soaring. Producers are doubling down on docuseries production after the phenomenal success of ‘Tiger King’ and late-night TV continues to experiment with new segments during at-home broadcasts. Plenty of celebrities are taking to livestreaming platforms to host virtual concerts, charitable giving, and similar forms of entertainment for fans. As a result, Twitch experienced record-breaking numbers last month, and that trend is likely to continue around the world. As to be expected, gaming is seeing a resurgence as well. 

Speaking of celebrities, plenty of familiar faces have stepped in with generous donations towards coronavirus relief efforts, including Leonardo DiCaprio, Dolly Parton, Oprah Winfrey, Rihanna, and Jay-Z, to name a few. Media companies are following suit with creative ways to help people. Sony launched a $100M relief fund and HBO is releasing TV shows, movies, and more for free starting today.

While only a part of the outbreak’s economic impact, global layoffs were the leading story this week, hitting record highs with 6.6M more Americans filing for unemployment last week — bringing the total number to ~10M unemployed — and hundreds of thousands are facing the same circumstances in Europe. Of course, the timing couldn’t be worse as April bills loom over both companies and consumers

The U.S. stimulus checks may be delayed for some individuals, but the Administration assured the public that the small business lending program via the stimulus package would be ready by Friday, April 4th, 2020. Big banks and loan advisory firms, on the other hand, are shaking their heads in disagreement, citing a lack of federal guidance. The real estate market has taken a hit as well with potential home buyers reserving funds for the essentials and delaying any big purchases.

The travel industry remains heavily impacted by the outbreak and subsequent economic shutdown. In this week’s top story, it came to light that roughly 8,000 passengers are aboard nine cruise ships scattered across the sea that left before the lockdown. Those with sick passengers were denied entry by many countries but have most recently docked along the East Coast with medical personnel standing by. 

With the Tokyo Olympics postponed, and now the Cannes Lions International Festival of Creativity getting canceled as well, the outbreak will continue to disrupt events planned or pushed into Q3 or Q4 of 2020. The hotel and hospitality industry downstream are suffering from near-nonexistent demand as well, according to Skift’s latest research

American Airlines recently announced a 60% cut to summer international flights as demand suffers, and more reductions are likely on the way. Similarly, United Airlines said a quick “snap back” is off the table. Like other airlines, United Airlines is losing more than $100M in revenue a day. Fortunately, the airline is expecting a $5B grant via the CARES Act, which will be used to pay staff through September 2020

T-Mobile completed its merger with Sprint, the FCC enacted a $200M telehealth initiative, and the COVID Global Hackathon is underway. Facebook and Google will be providing grant money and funding to small businesses, big companies began rescinding commerce marketing deals, and supercomputers are being put to the test via coronavirus research and outbreak mapping. Digital UX, infrastructure, and DevOps remain crucial as WFH results in increased traffic surges, with countless technology firms rolling out critical updates to address changing work behavior

As more companies search for cost containment strategies, rent and bill payments are being deferred, and budgets slashed. For many, this will result in delayed projects and hiring freezes, even across priority teams such as IT and network security. Weeks ago, the economic slowdown was believed to only be temporary, but with the Administration extending social distancing guidance until April, a lasting recession is all but imminent, leading to more canceled investments, originally set aside for new projects

The list of companies attempting to mitigate costs by furloughing or laying off employees during this time is only growing longer. Macy’s furloughed 125,000 employees and shortly after, was removed from the S&P 500 with its credit rating downgraded; a dangerous blow to one of the biggest retailers.

Lululemon, on the other hand, announced it would be paying April rent and all of its workers through June 1st, whether or not the stores reopen before then. (The apparel brand ended 2019 with $1.1B in cash on hand.) Of note, Lululemon’s CEO Calvin McDonald spoke with CNBC at length this week about the retail sector, in which he shared what we already knew:

“More people are shopping only because of COVID-19, and those habits are going to stick,” calling this the “new reality of retail.” 

For many, the fallout of labor cutbacks is dampened by the realities of our current circumstances, but others became the week’s top headline. Of course, a new challenge for businesses that remain open is determining the safety measures for workers, any store associates, and customers amid a patchwork of legislation and little federal guidance. Early this week, the top business stories centered on labor concerns across several global brands. In one instance, Amazon employees in fulfillment facilities planned to strike over safety concerns after an employee tested positive, and Amazon reportedly did not shut down the facility to properly sanitize. 

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Regardless of the sector, brands are hunkering down, facing new pressures from seemingly all sides of the business, and will need to remain agile to weather the storm.


Posted by Abby Long

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