For many of those who have bridged the digital divide this year, there is no turning back.
The Covid 19 pandemic forced Americans to collectively switch from physical to digital media within a few months. As retailers learn to work without stores, as business travelers learn to work without planes, and as employees learn to work without offices, much of what began as a temporary benefit may become permanent.
Covid acted like a time machine: He took the period 2030 to 2020, he said.
Lauren Padelford,
Vice-Chairman
Shopify Inc.
All these trends, which companies thought they had more time for, quickly gained momentum. The number of traders using the company’s e-commerce platform increased by more than 20% to 1.4 million between January and June, according to broker Robert W. Baird & Co.
The impact is already being felt in all areas, from the stock market to operating expenses and reduced liquidity. Investors have rewarded companies with digital business models that have more assets in 2020, such as an online used car retailer.
Karvana Co.
CVNA -8.45
Airbnb Inc. and
Amazon.com Inc.
Or companies that provide the infrastructure that makes these models possible, such as Shopify,
Zoom Video Communications Inc.
and Microsoft Corp. companies now spend less on office space and travel and more on cloud computing, collaboration software and logistics.
In many ways, digitization is simply the next chapter in a centuries-long process: the dematerialization of the economy. When agriculture gave way to production and then to services, the share of the economic value of raw materials and muscles decreased, while the share of information and the brain increased. The former chairman of the Federal Reserve
Alan Greenspan
it is gratifying to see that economic performance has gradually declined.
The parking lot ofHilltop Mall in Richmond, California was vacant on March 17 after a local shelter delayed the spread of Covid-19.
Photo:
Justin Sullivan/Getty Images
Major error
The pandemic isn’t the only force at work here. The same applies to the climate requirement to replace renewable energies with fossil fuels. Solar and wind energy does not require fuel, storage tanks, pipelines, railway wagons or tankers. The pandemic has accelerated this development, leading to lower prices and investments in fossil fuels.
However, the dominant driver is information technology. Joel Mokyr, an economic historian at Northwestern University, said that one of his most important and least appreciated roles is that of the great forger: It enables increasingly accurate and realistic representations of a kind of reality by means of analogue or digital imitation, which we could call virtualisation.
In 1850 he declared that the only way to hear music was to be physically present at a concert or to play it himself. Then came piano rolls, vinyl records, CDs and now streaming, innovations that have reduced the material contribution to the music to almost nothing.
At least one third of the value of a record, cassette or CD is paid up in real capital: Manufacturers and distributors, but also retailers. Today almost all the value of a streamed or downloaded song goes to intangible capital: the artist, the composer, the label, the publisher or the platform (like
Apple Inc.
iTunes or
Spotify Technology SA
who’s spreading it.
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In the field of film entertainment, the pandemic created a similar dynamic. Warner Bros. has decided to release all his films simultaneously in 2021 on the HBO Max streaming service (owned by AT&T Inc., just like Warner) and in the cinema. Many boardrooms have switched to working remotely with virtual tools such as Zoom, a development that Mokir called the biggest misstep technology because it tries to reproduce the physical relationship between bosses, employees and customers in virtual form.
One of the historical barriers to the introduction of e-commerce was that some of the benefits of face-to-face shopping could not be replicated. Amazon started with books because, unlike clothing or devices, you don’t have to touch James Patterson’s latest bestseller to decide if you want to buy it.
Since then, consumer resistance to online shopping has steadily decreased, and the pandemic has further weakened it, partly because retailers have learned to better mimic the personal experience.
Carvana allows customers to view 360-degree images of the exterior and interior of the used car, request and receive a loan online, and then send the car home or to a nearby ATM (essentially a cramped, multi-storey garage with glass walls). Sales figures rose sharply during the pandemic, proving that many customers buy a used car without driving it first. Those who hesitate to buy Warby Parker glasses online can try a three-dimensional image of themselves with a few Apple iPhones.
Platoon Interactive Inc..,
Many fitness enthusiasts will not return to the gym after the pandemic.
The shift from physical to virtual trading goes hand in hand with the growth of remote and contactless payments and the decline of cash. The virus has prompted some cash bastions, such as casinos, to bring the technology closer to the booking money. The viral shift to the Internet has of course led to an increase in remote payments. For example, according to data from JPMorgan Chase & Co., the number of missing cards as a percentage of total credit card spend increased from around 40% in February to over 50% in early December.
For many retailers, the pandemic has made this transition a matter of survival. Prior to Covid-19, the website of the Mr. Flynn Jewelry store in South Boston was usually used to help people determine whether the store was worth visiting, said Megan Flynn, co-owner of the store. Now we see how important this is because people don’t want to come for various reasons.
Since June, around 30% of store sales have been initiated directly through the website or by phone calls and text messages, compared to 3% last year. Visitors to the site can ask a shop assistant to try on the jewelry. In the past, Mrs. Flynn’s customers are almost exclusively local. About 20% is from outside Boston. They can look for a creator [online], they find him through us, and then they start shopping with us.
The number of traders using the Shopify e-commerce platform increased by more than 20% between January and June to 1.4 million, according to broker Robert W. Baird & Co. Covid acted as time machine: It has brought 2030 to 2020, according to Loren Padelford, Vice President of Shopify.
Photo:
Andrew Harrer/Bloomberg News
Before the pandemic, many traders resisted the idea of going online because they thought it would take a lot of time, money and technical skills, Padelford or Shopify said. Actually, it’s not. The average company can be online in a day and pay only $29 a month.
With Shopify, companies can quickly set up a website with many of the same features as Amazon, without having to sell through Amazon. The reseller class has almost doubled in less than two years, according to
Colin Sebastian,
an analyst for realtor Robert W. Baird. They range from well-known brands such as Beyond Meat Inc. and Nestle to laid-off employees looking for extra income.
Network effect
The proliferation of consumers, retailers and brands on the internet leads to what Mr. Sebastian calls a network effect. The more users there are, the stronger the desire to see others follow. It would be surprising if we didn’t see most of these changes after the pandemic, he says.
This is not the only network effect. The other initiative came from innovation and technology providers who implemented it quickly; thanks to them, the online experience has improved almost daily since the beginning of the pandemic. At the beginning of the pandemic, for example, Mrs Flynn’s jewellery shop added a Podium Corp. application to its website that allows customers to place orders and receive invoices via SMS.
Digitization does not make physical resources superfluous. According to the Progressive Policy Institute, a centre-left think tank, Amazon’s American investment in 2019 was higher than that of any other company. It’s more about changing the right look. Online retailers invest mainly in technology and logistics, for example in order processing centres and delivery vehicles, not in shops, offices or equipment. While the stores are designed for customers to browse multiple aisles looking for different items, the order processing centers are designed for employees to process items without interruption. In this way they use work and space more efficiently. Amazon’s turnover per employee is 50% higher than Amazon’s turnover per employee.
Walmart Inc.
.
This year, companies spent more on almost everything related to logistics and technology and less on everything else. According to CBRE, the net storage space absorbed by the tenants in the first nine months was similar to the previous year, while more office and retail space was vacated than rented. Air traffic is increasing this year despite a sharp drop in the number of passengers. In the third quarter, spending on software and information technology increased year on year, while almost all other types of investment declined.
Once the vaccine is widely available and the fear of the virus is gone, things will change. The rapid return to the restaurants when restrictions are lifted is indicative of the desire for physical presence, as is the desire of many employees to brainstorm and gossip around the office coffee machine.
Mr. Moker warned that dematerialization cannot continue indefinitely: Reducing the number of returns also works here. We can mimic reality, but we’re not digital creatures ourselves, and…. our evolutionary past will continue to require physical experience.
This situation was common in the United States when the pandemic forced the closure of offices and schools. Here Angela Atkins works outside her home in Oxford, Miss. in December, while her two sons, Jess and Billy, concentrate on their schoolwork.
Photo:
Leah Willingham/Associated Press
But maybe not as much as before. Following the terrorist attacks of 11 September 2001, the planned shift to videoconferencing and teleworking did not take place because the technology required was cumbersome and expensive. On the other hand, the pandemic came at a time when many employees already had a fast internet connection and a device with a camera and videoconferencing software.
Before the pandemic, about 5 percent of the working day was spent on domestic work, according to a study of 15,000 Americans by researchers Jose Maria Barrero, Nicholas Bloom and Steven D. Davis. That figure rose to 50 percent in November, according to an article by the Becker Friedman Institute, an economic research organization at the University of Chicago. Once the pandemic is over, respondents still expect to spend 22% of their working days at home.
The authors attribute the continued existence of teleworking partly to employees and employers who are willing to invest in the necessary equipment, but also to the remaining fear of physical proximity as a result of the pandemic. Then there’s the network effect: When several companies work partly from home, this reduces the costs for other companies and employees who do the same. They also praise innovations such as collaboration software that improve the experience. In another article, co-written by Mr Bloom, Mr Davis and Mr Julia Zhestkova, it was revealed that 1% of the patents filed at the beginning of the pandemic included domestic professions, almost double the percentage of patents filed before the pandemic.
Accelerator
The Nationwide Mutual Insurance Co. in Columbus, Ohio, illustrates this change. Shortly after the national pandemic, 98% of the 28,000 workers worked at home. The initial impetus was security, but CEO Kirt Walker said this accelerated existing plans to move to virtual operations. Before the pandemic, about 15% of the employees worked at home. Today, the company plans to have half of its employees working from home, which will make the situation permanent in the long term.
Mr Walker used to hold Town Hall meetings with staff in the auditorium of Columbus Headquarters, which can seat up to 350 people. It now has regular company-wide broadcasts involving thousands of employees. They ask questions and voices, which Mr. Walker has to answer using Slido, a live version of the application he just bought.
Cisco Systems Inc.
We looked at the most important developments in the United States: The Great Depression, recessions, world wars, and we have seen that Americans have reacted in two different ways, Walker said. First they were forced to try new things and in different ways. These new things have become a habit. Second: People have become more valuable.
The company closes 17 offices across the country, retains four major locations, reduces real estate requirements by about 1.1 million square feet and saves about $100 million, which it estimates will be used to reduce policyholder premiums.
Some companies have seen 2020 as a lost year, Walker said. This has been an accelerator for us, and it has brought us closer to some long-term goals.
Covid has plagued the normally busy streets of Manhattan and countless other urban business centers in the United States.
Photo:
Yen Moon/Reuters
Email Greg Yip at [email protected].
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