“COVID-19 unexpectedly shook the world and changed everyone’s lives.”
Indiana University East economics expert Litao (Lee) Zhong’s words succinctly summarize what’s happened in recent weeks.
The deadly results of the COVID-19 pandemic grow more obvious every day, as are the severe financial complications.
Everything has changed. There are loads of unknowns.
“The impact of the COVID-19 could be more extensive and damaging than what the subprime mortgage crisis did in 2008 to the nation and to the world,” warns Zhong, associate professor of economics. “In our region, the most hurt businesses/industries could be restaurants, hotels and retail stores due to the shutdown.”
Most small businesses have already closed temporarily and layoffs are mounting at a staggering pace. “There is a lot of uncertainty,” said Oi Lin (Irene) Cheung, associate professor of finance and director of the Center for Business and Economic Research. “Every day we are receiving new information.”
Some small businesses will struggle just to re-open unless they find alternative ways of making money. The same goes for furloughed workers that still face the same bills they had before the shutdown.
The new reality, Cheung said, might be “the way they do business may have to change.”
Despite the problems, Zhong expects the region that IU East serves won’t be hurt more than others “since we don’t have as many infected cases (as many urban areas); and our region’s economy relies more on manufacturing.”
Cheung and Zhong joined Tim Scales, senior lecturer of finance and director of the Center for Entrepreneurship and director of the Center for Economic Education, in offering insights into what can be done to minimize the unique economic and financial problems created by COVID-19.
“Almost all successful businesses are a success because they solve a problem,” Scales said. “We have a problem and within the problem there are, and will be, additional problems. The solutions from previous generations can serve as a foundation and working knowledge but we must seek new problem solutions now.”
Stay-in-your-home orders mean more employees are working remotely now and small businesses are being forced to find new ways to reach customers with their products and services.
Most eyes are turning toward the web, where many services — such as ordering for food deliveries — are already exploding. Some businesses may have needed to build a web site or increase social media and “this speeds up what they might want to do anyway,” Cheung said.
People have to help each other, Scales said.
“Many small business owners do not know or understand web-based or app-based marketing. If an individual can design and work with social media, apps and e-commerce, start a business helping small business owners, this is the time,” Scales said.
Some small businesses will have to branch out with new products and services just to survive — and might find that they complement the old methods. For example, Scales said the curbside pickup of groceries and restaurant food “was in early development. Now it has meaning and purpose – it has solved a problem and should become successful.”
Cheung believes business owners face a paradox in responding to something that has never happened before.
“For the very short term, it’s difficult to make a good decision,” she said. “Actions too quick in one direction might hurt more than not doing anything.”
She added that some small-business owners “might have difficulties” if they can’t generate income for two weeks or beyond. “What I am worrying about is the duration of this crisis. If they can’t conduct business, can’t sustain their existence, they can’t be this way for a long time.”
She suggests that business owners within the area should consider starting some form of side business, if possible; and employees consider developing some new skills.
“That might also help them after this crisis. It depends on the nature of the business,” Cheung said.
There already is a surge in online shopping by consumers, Zhong said. “Amazon just announced plans to hire 100,000 drivers and warehouse workers to fulfill its sprawling operations. The shutdown and social distancing foster the strong growth of online business and shopping. Certainly, this business model will become more popular in some industries after the crisis.”
Reach out to get help
The Stimulus Bill, just passed in late March, will certainly help in the short term. It promises to deliver $1,200 to most adults and offers the hope of loans and grants that could help businesses pay employees and stay open.
Zhong: “(It) throws a lifeline to small businesses and low-income and middle-class households. It provides a hope to the economy,” he said. “However, the impact … may fade away if the pandemic prevails over a long period. Then, the federal government may have to offer more stimulus plans to revive the economy and confidence.”
Cheung: Putting money “in their hands will help with living expenses and also will help with business activities. … I am sure if this doesn’t work, they will have some other things to help the whole country. We cannot tell yet how effective that will be.”
Scales: “Our country is built on entrepreneurship and this is a time to witness true entrepreneurs getting creative to make a difference in our country. People should seek assistance as they look to become creative and expand their ideas.
The assistance is beyond financial, it includes product or service design/development (manufacturing), execution (bringing it to the market), pricing, advertising and promotion and many others. If a person has the ability to deliver a product or service, it’s a time to help others, help our communities, our country and our world.”
More staying home — for work
Cheung: Employees will work more from home and that could even extend past the pandemic stage. But she offers the caveat that at-home work often takes more than a computer. “If they don’t have the right set-up, some might not have a place to work comfortably (in the beginning).” Besides the set-up required for a home workstation, there are supplies and compatible Wi-Fi and computer programs. “Of course, if we are required to work at home, we have to try to do it.”
Zhong: “Many businesses and companies allow employees to work remotely and meet virtually. The demand for online meeting/conferencing apps surged up in the past month.” He notes that the stock price for Zoom jumped by 50 percent.
There are opportunities
Zhong: “This crisis also reveals some opportunities which may reshape the future business model. Businesses/industries had to find alternative methods to keep business running during the shutdown time. Many of them explored and/or expanded the online business model. Many restaurants and grocery stores take orders online and deliver food to your door.”
He points to data reported by Google that shows “U.S. searches for four leading meal-delivery services — UberEats, DoorDash, Postmates, and Grubhub — jumped 53 percent within the past month. Individually, UberEats led with a 70-percent increase in searches.”
Scales: “I can see great amounts of opportunities. Creative thinkers are what we need during challenging times. We need individuals within their households, in their communities and their organizations thinking of how to do things that can have a positive impact. Times like we are experiencing are often times that we reflect and discover what is most important to us. We need to simplify and make certain our actions are in line with our goals.”
The long-term impact
Zhong: “It’s still hard to conclude how much of an impact the crisis will bring to us at this point. It all depends on how long the coronavirus outbreak lasts. Just like Dr. Anthony Fauci said in an interview on CNN, ‘You don’t make the timeline, the virus makes the timeline.’”
Cheung: “To be honest, I don’t know how long it will last. This is also a wake-up call. They might think about: If this happens again, what am I going to do with my businesses?”
Scales: “People need to be safe and well. They need to understand the facts (and) try their best to live within their means and realize good times will return. Delayed experiences such as sporting events, graduation celebrations, travel, entertainment and many other special occasions will return and they will hold even more meaningful times for us. This is a time for us to realize knowledge is power. The power to understand, to share, to assist in solutions and to grow our futures.”