Carlos Castellanos

24 September 2020

6 min read

We are living during a period of unprecedented disruption that is underscoring the importance of Future Consumers who are more diverse, empowered, and expressive than ever before.

The underpinnings of this disruption, however, seem different from anything we’ve faced before. For the first time in modern history, the world is experiencing a pause in economic activity that resulted in a 32 percent contraction in U.S. GDP in the second quarter.

With much of the global population in lockdown at some point during the COVID-19 pandemic, consumer spending in many categories has been decimated as stores, restaurants, hotels, movie theaters, concert venues, gyms, financial institutions, and theme parks closed in response to the virus.

At a macro level, the Federal Reserve has thus far been able to prevent the contagion of the public health crisis from creating a full-fledged financial crisis by increasing the monetary supply, injecting liquidity into the market through accelerated asset purchases, and decreasing interest rates.

Taken together with historically high unemployment rates, bailouts for industries on the verge of collapse, and broad-based social unrest, it may be difficult to see the light at the end of the tunnel. That said, when we look back at the pandemic with the benefit of hindsight, we’ll see how the new coronavirus accelerated the digital transformation of companies across industries and societies.

Future of Work
work-from-home-with-kids

One great example of the impact these collective trends have had is the adoption of Zoom - a digital, video communications platform that has seen a surge in demand as consumers adapt to the new normal of working from home and relying on video conferencing for meetings, interviews, and social connection.

On the other hand, commercial real estate companies and co-working spaces are likely to continue struggling as the Future of Work shifts away from an office setting toward a decentralized, distributed environment. As with most companies currently facing disruption, the main risk today is that we have reached an inflection point and life after COVID-19 will involve a “new normal.”

Education
remote-learning-with-kids

We are also seeing similar levels of accelerated digital disruption and changing consumer behavior in Education, where a centuries-old system of learning and teaching is being upended. K-12 students are using video communication tools to learn from home, college students are taking digitally proctored exams, and adults in lockdown are rediscovering what it means to learn through services like Masterclass and Duolingo, which have seen a surge in usage.

Schools and universities are unlikely to fully reopen in the near future, and it’s been reported that roughly 20 percent of Harvard’s incoming freshman class has chosen to defer admissions. If these trends are not transitory, we could find ourselves in a paradox where the “future” of education has already arrived.

These are not isolated incidents of accelerated disruption

In Healthcare, the use of telemedicine has exploded and served as a catalyst for the $18.5 billion merger between Teladoc and Livongo.

Smart Fitness companies like Peloton are seeing record rates of adoption and retention while physical gyms like 24 Hour Fitness and Gold’s Gym have closed locations and/or filed for bankruptcy protection.

The Retail landscape has been upended as many stores remain closed and e-commerce adoption surges. Household names like J. Crew, Brooks Brothers, Neiman Marcus, GNC, Men's Wearhouse, and Jos. A. Bank have filed for bankruptcy and many more retailers are on financial life support. Further, the pandemic has accelerated e-commerce penetration rates in formerly laggard categories like grocery and furniture and with key demographics such as the elderly.

Financial Services firms have seen the pandemic’s volatility turning many retail investors towards the stock market, and emerging brand Robinhood has 13M users, more than Charles Schwab or E-Trade.

In Media and Entertainment, the push toward on-demand and streaming video services is accelerating as cable companies continue to lose subscribers and the theater window narrows. For example, AMC recently announced its exclusive distributorship of Comcast/Universal films would drop from 75 days to 17 days. This means its films will become available at home via premium video-on-demand streaming platforms nearly two months ahead of its traditional schedule. This shift comes at a critical time during which Comcast released its Peacock streaming service, Disney acquired Fox, and Disney+ reached 60 million subscribers in just eight months despite management expectations that it would take ~5 years to reach 60-90 million users.

Post-COVID trends

Even though we are still in the early innings of the pandemic, there are three common trends materializing in these industries that have the potential to reshape society:

  • Accelerated disruption

Much has been written about the pandemic’s role as an accelerant for innovation. Specifically, early signs point to COVID-19 being a catalyst for digital disruption across industries and geographies that could condense a decade’s worth of progress into just 18-24 months.

  • A bifurcating landscape

Over the last decade, entire industries have bifurcated into two buckets: the structural winners and losers. Within consumer-facing industries, the winners have been consumer-centric companies that embrace and service consumers through innovative technologies, business models and monetization. Likewise, many of the losers have been product-centric and focus on selling products the same way they have since the 1950s. For many years the distinction between the two was very nuanced, but going forward we think the bifurcation will accelerate. The consequences will take the form of market share losses, restructuring, and bankruptcies for many companies that fail to align their entire business around the consumer..

  • Changing consumer behavior

With consumers worldwide being forced to adopt new technologies that digitize the delivery of physical goods and services, it’s likely many will not revert to previous behavior after having been introduced to alternatives offering better, cheaper, or more frictionless experiences.

When we take these trends together, it’s clear COVID-19 is a catalyst for the consumer adoption of software-enabled experiences and that the impact of the pandemic on consumer behaviour could be long-lasting. As NYU Professor Scott Galloway observed, “Things won’t change as much as they will accelerate. While other crises reshaped the future, COVID-19 is making the future happen faster.”

With this in mind, the bifurcation of winners and losers across industries makes the intersection of digital transformation and consumer-centricity more important than ever. The Samsung NEXT Innovation blogs will explore these ideas through the lens of the often overlooked reality that consumers are more diverse, empowered and expressive than ever. These changes, along with the resulting evolution of Loyalty and Business Models form the basis for our Future Consumer Thesis.