Winter is coming: How brands should prepare for the coming COVID-19 recession
The biggest health crisis in living memory will lead to economic hardship
Heading into 2020, a global pandemic was deemed to be a low likelihood, moderate-high impact event. Just six months later, the world has been thrown into unprecedented crisis, with over 24 million cases and 800,00+ fatalities, and still rising.
At time of writing, developed economies seem to be getting to grips with COVID-19 (at least the first wave of infections) and the epicentre of disease seems to have shifted into Latin America and Africa, though there are worry signs of increasing infections as societies loosen and the weather shifts.
With countries emerging from lockdown, attention is shifting to the aftermath, which it is becoming clear, will offer its own profound challenges. With economic activity being more or less halted for three to four months, we are already seeing a major impact on both global and local economies. It is also clear that there is a direct link between the degree to which a country’s economy is and will continue to be affected, and the level of infection that country suffered.
How bad will it be?
As economies gear up to reset, the degree and duration of the covid-19 impact remains unclear. The global economy will take a severe hit from COVID-19, with a possible 6% contraction in 2020. However, it is possible that the hit may be rather short-term with up to 5.2% of that 6% contraction being regained in 2021 [Source: OECD Global Economic Outlook June 2020].
Of course, this is just an estimate. Much will depend on whether countries can avoid a second spike in infections, in particular whether such a reoccurrence will necessitate a repeat of the lockdowns that so paralysed economic activity. If a second spike is widespread, the economic impacts will be greater and last longer: a 7.6% contraction in 2020 with only 2.8% of that regained in 2021.
Whether we endure one or two spikes, there is also considerable debate about how quickly the global and local economies will rebound: various scenarios have the rebound point varying between the most optimistic (end 2020) and most pessimistic (end 2023) [Source: Moody’s COVID-19 Economic Forecast Scenarios – The Shape of the Coming Recovery].
Moreover, the effects will vary hugely from one country to another. Most forecasters expect the effects to be most keenly felt in Western European markets that suffered high infection rates (UK, France, Italy, and Spain), with the UK arguably hardest hit of all.
The economic turmoil will clearly impact on consumer spending, with both short-term discretionary spending and longer-term, bigger ticket items being affected. Businesses already reeling from the effects of months of lockdown might have been hoping for a quick and major return to normal – the so-called U-shaped or V-shaped recessions. But, while there is likely to be a rebound in spending as consumers hit the shops again, take advantage of government initiatives to stimulate the economy (like Eat Out to Help Out) and try to make up for months of enforced frugality, it may well be short-term, for many at least, once the economic impact starts to fuel further cutbacks and job losses.
It is only natural for businesses to look to counter such consequences with tactics aimed at maintaining spending, avoiding deferral and creating positivity.
Lessons from the past
In doing so, it is only natural to look to past crises for inspiration and there have been many pieces (such as this one from the Centre for Economic Performance) doing just that.
Of course, the truth is that every crisis is different. While it is tempting to try to learn lessons from recessions past, the COVID-19 recession will be unlike any other. Some of the consumer responses to COVID-19 have resembled those seen during previous recessions but, to these, we must add the unique characteristics of life during a protracted period of health-driven isolation.
Having said, that here are strategies that we saw in the 2009 recession that we are also seeing used today, albeit with COVID-tweaks. I’ve dredged the archives, looking back at work I did back in 2009, when I was part of the team working on a global consumer trends monitor called Roper Reports Worldwide (now called GfK Consumer Life). The team have been kind enough to let me use some of the trend data, so thanks to them for that. I also uncovered a number of marketing and product strategies that were being used back then and seem to be perfectly serviceable again now, although they will need to be updated to take account of the very different social and technological character of life in 2020. [Our full Winter is Coming presentation showcases real-life examples of each of these, from both 2009 and 2020]:
- Encourage thrift and re-evaluation of life priorities
- Enable money-saving strategies
- Try to keep momentum in the market
- Encourage and enable calm
- Stress the feelgood factor
- Lift the mood
- Put consumers in touch with the comfort of the past
- Discourage a fearful view of the future
- Encourage positivity for the (long-term) future
- Tackle uncertainty head on
- Create solidarity with causes
- Recovery is up to all of us
- Adapt your business model(s), either short-term or long-term, or both
- Offer support: to those who have lost their jobs
- Continue to innovate and launch
- Recognise that “back to normal” isn’t what everyone wants
As the mantra goes, “every crisis is an opportunity”. Such positivity is laudable and there is certainly some truth to it – Apple launched its first Powerbook laptop into the crisis of 1991 and the iPod into the difficult days of October 2001. However, it is just as accurate to emphasise that “every crisis is a crisis” and not everyone is able to innovate their way out of it.
At such a time, it can never hurt to go back to basics, reminding yourself about and refocusing your efforts on fundamental human needs, such as the following:
- Trust, Safety and Security
- Maximisation and value
- Efficiency and convenience
- Belonging, Connection and Fellowship
Provided you can be sure that your product addresses one or more such fundamental needs you will have given yourself at least a chance of survival. Other tactics we’d recommend exploring are:
- Blending business as usual with the new realities
- Maintain some of the positives of lockdown: community spirit, appreciation of key workers, kindness
- Encourage people to look forward not backwards
- Help consumers to fight the paralysing effects of fear and uncertainty
- Ensure that the recovery is built as sustainably as it possibly can be
- Participate in reuniting the country, moving away from the divisions of Brexit.
Keeping to our metaphor of the coming recession as a “winter”, we can take inspiration from an undeniable expert in how to cope with, survive and even thrive under inclement conditions, noted explorer Sir Ranulph Fiennes, who has said that:
“There is no such thingSir Ranulph Fiennes
as bad weather, just inappropriate clothing”
If winter is indeed coming, then it is all about the preparation. Businesses must spend the days of autumn making sure that they have the right “clothing” for the coming weather, in the form of the right products, the right staffing, the right systems, the right communications strategy, the right digital platforms, and so on.
Winter is just another season, to be ridden out before the warmer days of spring and summer. This too shall pass:
“As sure as the spring will follow the winter, prosperity and economic growth will follow recession.”Bo Bennett, Businessman, author and motivational speaker speaking in 2009
This article was written by Nick Chiarelli, Head of Trends at UNLIMITED. It is a summary of a full presentation deck that we are delighted to make available. Download the deck here, and fill in the form if you would like to request a presentation of the materials to you and your team.