Global supply chain disruptions, widespread call for industrial self-sufficiency, and growing distrust in government are merely a few of the myriad consequences posed by the Covid-19 pandemic on global economies. Industry-specific impacts have proven relatively predictable. It comes as no surprise that airlines, for instance, facing an instantaneous demand-side shock, sought assistance from the federal government in the form of bailout funding. Moreover, with consumers facing legal, political, and social pressures to stay home, it follows that movie theaters, live entertainment venues, and restaurants alike would struggle to stay afloat.
Insofar as the economy has struggled to confront an ongoing demand-side shock, tech has proven resilient, serving as a driving force behind S&P 500’s strong performance, an indicator whose value is 40% attributable to information technology and communications firms. E-commerce and tech-based consumers industries have done exceptionally well during the pandemic. Between March 16 and July 1, HBO Max observed a 300% increase in new customers relative to the 12-week period prior, coinciding with the initial issuance of stay-at-home orders. Amazon gained $570bn in market cap as of late July, and winners in the home fitness space such as Peloton have seen surging sales, up 172% as of early September. This grouping, the purely- or quasi-technological firms were on the rise prior to the pandemic, and it follows that goods and services which can be consumed from home have been favored by a crisis that keeps people home.
Yet the heart of tech resilience amidst the covid crisis lies in adaptation. The pandemic has necessitated efforts to pioneer technological distribution of fundamental services, evidenced by the emergence of TeleHealth and EdTech, with investor optimism fueling a substantial uptick in M&A transactions involving these tech subgroups. Covid-19 has demonstrated a remarkable capacity to disrupt organizational inertia, the fundamental force incentivizing “business as usual” over risky alterations to the status quo. The infrastructure necessary to support TeleHealth and EdTech have long existed, yet it was the pandemic that forced firms and industries unable, or perhaps unwilling to identify creative deployment solutions to do so.
When the pandemic first hit in early Spring, universities found themselves woefully unprepared to support a shift online. Students and teachers struggled to adapt, and online-courses were plagued by technical and practical difficulties. Following a Summer of intense preparation, it seems that major institutions have adapted. According to a 223 page report published by MarketsandMarkets, the global EdTech and smart classroom market is expected to grow from $85.5B as of 2020 to 181.3B by 2025, boasting a CAGR of 16.1%. According to Holon IQ, this massive expansion is, “driven by Higher Education tuition deflation, combined with faster/cheaper credible alternatives and digitization driving a lower administrative cost base across all sectors.”
Apart from education, the pandemic has catalyzed the use of telecommunications infrastructure to administer healthcare services, supported by incentives to promote accessibility, save time, and limit unnecessary contamination of hospitals and patients whose conditions necessitate physical presence. April alone saw numerous M&A transactions pertaining to TeleHealth, with the acquisition of Tyto Care, 98point6, LifeStance Health, and SilverCloud Health -among others- highlighting optimistic expectations in the industry. According to Acumen Research & Consulting, the Global TeleHealth Market is expected to grow to roughly $20B by 2026, bolstered by a CAGR of 13%,just below that of the EdTech market. Bullish projections are supported by an increasing persistence of chronic disease, an increasing geriatric population, as well as encouraging reimbursement policies.
If tech is the biggest winner of the pandemic, retail is surely its biggest loser. The pandemic severely accelerated the ongoing retail apocalypse; between 20,000 and 25,000 stores are projected to close in 2020, according to Coresight Research, easily eclipsing the once record-setting sums of 8,000 and 9,300 in 2018 and 2019, respectively.
The pandemic has accelerated the transition from a traditional to digital economy, a paradigm shift which could prove deleterious for local economies and civil society at such an accelerated pace. Among the earlier manifestations of this transition, the shift from traditional to e-commerce represented a choice for consumers: convenience or connection. The implementation of tech-based adaptations during the pandemic, though, have left consumers with little choice in the matter. With physical store locations dwindling and an increasing volume of incentives to stay home, consumers are compelled to sacrifice the vitality of the horizontal networks that once characterized American society; what Alexis de Tocqueville exalted as the foundation of civil society, and American exceptionalism.
While sanguine outlooks regarding EdTech and TeleHealth have quickly gained traction, their success is necessarily a consequence of the Covid-19 pandemic, raising several pertinent considerations. Is the shift toward remote administration of complex services temporary, or is it here to stay? It is far too early to say, but it depends entirely upon the willingness of consumers to adopt these systems when circumstance once again permits a choice. Can services that fundamentally limit interaction provide consumers a net-benefit? This is a difficult one – only time will tell, but the response hinges on the capacity of a digital economy to permit the formation and retention of the horizontal bonds that de Tocqueville described, what political scientist Robert Putnam referred to as ‘social capital.’ In light of overwhelming partisan tension and a notably contentious election cycle, the preservation of civil society and democracy at large emerge as compelling interests. Can we afford less connection right now? In other words, can one really make friends on zoom?