In a high school science class, I remember learning that energy is never created or destroyed. Instead, it changes from one form to another–this is the First Law of Thermodynamics.
In some respects, the same law can be applied to our economy. While many individuals and businesses are suffering financially, many individuals and businesses also are flourishing financially. It’s not like money disappeared; rather, it moved from one segment to another.
Here are some examples of the transference of money during the COVID-19 Pandemic. If your business has been negatively affected by the pandemic, is it possible to pivot, diversify or shift directions?
DINING
Safer-at-home orders, capacity restrictions and general fear about eating in an enclosed space have negatively affected the restaurant industry. In June, the National Restaurant Association said the industry had lost $120 billion from March through May and was projected to lose $240 billion this year.
But consumers still have to eat, and much of the money that would have gone to restaurants went instead to grocery stores. For example, Kroger, the biggest U.S. supermarket operator, reported increased sales of 30 percent in March, 20 percent in April and 20 percent in May, with quarterly profit increasing 57 percent to $1.21 billion.
Let’s not forget about drinking: off-premise alcohol sales grew 27 percent from March through June, according to Nielsen.
ENTERTAINMENT
No sports, no (indoor) movies and no concerts led to many consumers seeking to be entertained at home. In the second quarter, the video game industry gained $11.6 billion in revenue, a 30 percent year-over-year jump. During that time, Nintendo sold a whopping 22.4 million copies of “Animal Crossing: New Horizons.” More Americans are playing video games compared to two years ago and for more hours per week, the Wall Street Journal reported.
Meanwhile, streaming services such as Hulu and Netflix made out like bandits. The former saw a 27 percent year-over-year increase in subscribers, while the latter gained 10.2 million subscribers in Q2. Those numbers will likely continue to increase as many movie theaters remain closed. (It should be noted that drive-in movie theaters, such as the Ford-Wyoming near Detroit, experienced a resurgence this summer.)
TRAVEL/OUTDOOR RECREATION
With consumers traveling less, hotels took a major hit. Stats released in the early part of summer from the American Hotel & Lodging Association show a $112 billion loss. AirBNB also has been affected, with the company realizing a 67 percent decrease in revenue in the second quarter.
So how did consumers spend their money instead? Data show that they went camping (some camping and glamping booking services were up 400 percent), rode bikes (sales up 65 percent) and visited national parks (many saw a record number of visitors). They also purchased pools, boats and RVs.