IN THIS ISSUE:
Providing an indication of individual states of mind, top trending searches on Google relate to the timing around a return to normality, whatever normal means now. Sadly, we at Diamond Willow don’t have a functioning crystal ball that can tell us what the future holds, and our Magic Eight Ball keeps telling us to “concentrate and ask again” meaning we’re out of luck.
While every economic downturn is unique in its own right, recessions tend to accelerate underlying movements in the economy and society. Maybe we are pandering to our biases but it certainly seems like data analytics is going to come out a big winner when we finally break on through to the other side.
Before we nerd out on all the data stuff, it’s worth touching on the post-pandemic economic outlook. It seems optimism is outweighing realism as economic forecasts are pointing to the beloved ”V” shaped recovery. The 2008 Financial Crisis, which arguably left consumers and small business less beaten up than the current recession, showed a more muted recovery, particularly in North America.
Based on the International Monetary Fund (IMF) report out last week, current expectations are calling for a steeper fall but a much more pronounced bounce back (dotted lines in the chart below) versus the 2008 financial crisis. Now there are obviously a lot of balls in the air right now, but it certainly feels like individuals and businesses are going to come limping out of this recession opposed to sprinting. Time will tell.
Change in Real GDP - 2020 Recession vs 2009 Recession
Overly optimistic economic forecasts aside, another consistent takeaway from economic downturns is that underlying consumer and business trends tend to get accelerated. Downturns accompany resource scarcity resulting in individuals and businesses doing more with less, meaning they are focusing on operating as efficiently as possible. Advancements in technology tend to make companies more efficient, and assuming the technology was at least partially adopted prior to the downturn, its use is likely to accelerate.
It’s no surprise that online consumer and business spending has materially outpaced the growth rate of in-person spending in recent years. Canadian growth of e-commerce spending has outstripped retail growth nearly four-fold, and a similar trend can be seen in the United States. Given the stay-at-home nature of our battle against the current health pandemic, the proportion of e-commerce sales versus overall retail sales will materially increase, and while we expect some retrenchment once we are on the other side of this, we do not foresee it going back to pre-pandemic levels as online spending habits are formed and entrenched.
Canadian E-commerce and Total Retail Growth
U.S. E-commerce and Total Retail Growth
Shifting to Online Purchases because of COVID-19 (% responding yes for week ending April 20)
More of the world transacting online ultimately means more data for consumers, businesses and governments to consume, process and analyse. Big data and data analytics has been around for a while but it seems a post-COVID-19 world will drive a further increase in Deep Learning / Machine Learning that will assist with the predictive side of business decision-making. The online world is a competitive space, if businesses want to separate themselves from competitors, they will have to deliver a better consumer experience from start to finish. This is done from knowing what your customers want and delivering it before they ask for it, this will all be done through the magic of data.
Worldwide Revenue from Big Data and Analytics
Key highlights:
To date, large enterprises have dominated the big data analytics market driving 60% of the historical revenues. The COVID-19 pandemic has forced an increasing amount of businesses and transactions online, a trend we do not expect to entirely reverse when this fight is over. Small and Medium Enterprises (SME’s) are expected to be large contributors to the worldwide revenue from big data and analytics Compound Annual Growth Rate (CAGR) of 13% over the next three years as their businesses become increasingly digitized. In order to remain competitive against their larger competitors, SME’s will need to work to create better consumer experiences with increased adoption of big data and machine learning assisting the process along the way.
Sources: IMF, Diamond Willow Advisory, Statistics Canada, United States Census Bureau, Statista Survey, International Data Corporation, Global Market Research.
