Out with the Old, In with the New: The Stay-at-Home Economy Might be here...
Posted by Steve Bokor & Ian Clark
The Internet has long empowered consumers with a more efficient path to the products and services they need to consume in their everyday lives. Noticeably, the disruption of the traditional shopping model reduced the time consumers spend travelling to and from traditional “brick-and-mortar” stores. Of course, now the pandemic has forced them to do even more shopping online.
The transformation to the stay-at-home economy is on full display right before our very eyes, thanks to internet technologies fuelling online shopping behaviour like never before. Even if you hadn’t ventured into the world of buying online pre-COVID, the pandemic was probably the right catalyst to propel you to do so.
E-commerce and grocery delivery services, for example, have developed new and existing technologies to meet consumer needs for convenience health and well-being. Walmart and Loblaw’s have provided curb-side pickup allowing consumers to order online. Not only do they offer convenient delivery, but their online shopping platforms provide abundant information to allow consumers to compare brands and products to make favourable choices.
THE NECESSARY TOOLS
The Internet has enabled some businesses and governments to do well in the new “working at home” environment. Companies like DocuSign (a digital signature platform) are a good example of companies making it possible to work at a distance in our day to day roles. Work communication tools like Slack Technologies can connect employers and employees through the cloud.
The adoption of video streaming services such as Zoom Technologies has helped the stay at home worker to carry on with business activities and communications. Further to this, Zoom provides a portal for online education allowing both university and high school students to take advantage of continuing education studies. The demand for home entertainment, such as video games, live broadcasting, and online movies, has increased the need for online entertainment through the likes of YouTube (Alphabet), Disney Plus, and Netflix.
Our lives are now taking place off Main Street and onto the server farms and the cloud, thanks in large part to Google and Microsoft. Online activity is grabbing the lion’s share of all commerce and human activity at the moment. Whether it is binge-watching Netflix or advertising through Facebook it’s no coincidence the companies benefitting most from the increased online activity are seeing their stocks rally in response. Those stocks are already the largest and most important components of the stock market’s indices. The MAGA stocks (Microsoft, Amazon, Google, and Apple) make up 40% of the market weight of the NASDAQ and their surging stock prices are driving the rally.
Yet, Wall Street is not reflecting what is happening on Main Street with nearly 40 plus million Americans and over 3 million Canadians unemployed. We are in the thick of a pandemic that could elevate to a second wave in the fall should our reopening efforts fail to contain the virus. Will those traditional jobs return or is this a shocking new paradigm brought on by a pandemic?
The reality of what was the real economy is now the old normal. Today, we have to avoid congregating in masses – packed restaurants, theatres, sporting events. Even getting your haircut has been a real challenge. Now, those activities haven’t gone away but rather they have to adapt to a new environment and it’s not easy. The Canadian Tech giant Shopify has assisted small-to-medium size businesses by providing a cloud-based E-Commerce platform to carry on business in the lockdown. But how does a restaurant survive at 50% capacity when the profit margins before the pandemic were slim to begin with? It’s no wonder that online food delivery services like Uber Eats and Skip the Dishes are thriving as they assist those restaurants that could adapt quickly to a new model.
Dominoes Pizza is a direct beneficiary of the stay-at-home economy and the stock reflects this, up 33% year to date*. Meanwhile, the average mom and pop business lacks the size and scale to compete in this new paradigm. “Online everything” is the real economy now. For example, PayPal, a financial payments system, is really a tech company that has a $165 billion market cap (that’s 50% larger than Wells Fargo’s (symbol WFC) market cap). But PayPal doesn’t have brick-and-mortar bank branches like WFC so they can operate and grow in the online world even during a pandemic. At Ocean Wealth we can operate completely remotely in our home offices and so can the three millennial students in my family. Everyday, a package arrives on my doorstep from Amazon Prime and I bet they paid for it using a payment system like PayPal.
So, until we get a vaccine, it is likely we are going to see these stay-at-home stocks stay relevant for now and into the future. Some may continue to outperform the traditional market participants. Therefore, “Staying in is the new going out”…for now.
Article as published in DouglasMagazine,com