Exploring post-pandemic trends in Global trade

The coronavirus pandemic, which swept the whole world in early 2020, created a real roller coaster for the global economy. What began as a local Chinese threat, by the end of March turned into a record loss since 2008 for the global market. Not only the most vulnerable segments of the population and the middle class, who lost their jobs and income, but also richer people whose fortunes in a short time decreased by more than a trillion dollars. Despite the development of vaccines, many are still wondering what a recovery might look like.

The Covid-19 crisis continues to change the realities of our daily lives and the world around us. The path to the normal path becomes more and more difficult to imagine. Companies, governments, and individuals are grappling with transformational change that has set new and unexpected trends in motion in virtually every industry. As the likelihood of reverting to a pre-pandemic state decreases, three key areas affected by the pandemic are the corporate environment, consumer behavior, and company operations. The changes caused by the pandemic have already changed our lives and our shopping habits. Trends such as work and homeschooling, as well as online shopping, are prompting a huge number of people to adapt to the changing world and use modern technology in their daily lives.

 

Demand for sustainable development in post-pandemic world

 

Companies and economies are recovering but not going back to normal. The trend says that the recovery is going back to a NEW normal.

According to economists, governments and businesses are motivated to take the trend into account while estimating the recovery plan. It is becoming mandatory to reduce emissions and make a transition to more sustainable energy sources and sustainable production methods. The past shows that when breaking into nature can have disastrous consequences like pandemics, the stronger the global warming is, the more pandemics and other disasters there will be.

If pandemics costs us 10% of GDP, maybe it is more reasonable to spend higher percent of GDP on investments in renewable energy sources and sustainable production to prevent the future disasters instead of combating them?

Thus, more and more governments consider the recovery as an opportunity to induce money into the economic green recovery rather than into what it used to be normal before pandemics.

There is the obvious demand for the sustainable development transition because we see how costly it is for people to intrude into nature. Expenditures on renewable energy sources can cost less and, in the future, will help to mitigate possible risks.

 

Company activities and corporate environment

 

While governments are taking significant steps to tackle the coronavirus, companies are rapidly adapting to the changing needs of their employees, consumers, and suppliers, while addressing their financial and operational challenges.

Many businesses are faced with challenging times to go through. The main challenges were: a decrease in revenue, the risk of personnel infection, interruptions in supply chains, a lack of crisis management, and uncertainty in the future.

Some of the main beneficiaries of the coronavirus crisis are video conferencing companies, and especially Zoom. The service allows a large number of people to communicate via video, thanks to which, in the conditions of a massive transition to remote telecommuting, it is used by businesses, universities, and educational institutions. For many people in isolation, such services have become an opportunity to generate at least some income.

As the economy recovers, many companies plan to combine telecommuting with office time to achieve the best possible balance of productivity and collaboration.

 

Corporate debt

 

Governments offered loans as a lifeline, and businesses jumped at it. One of the results was an increase in corporate debt. The Bank for International Settlements estimates that non-financial companies borrowed a net worth of $ 3.36 trillion in the first half of 2020.

 

Consumer behavior

 

Even though the pandemic has made serious adjustments to consumer behavior, the penetration of digital solutions into various areas of life familiar to humans has been a steady trend over the past few years. Mass self-isolation in the world served rather as a catalyst for the transition from traditional formats of consumption of goods and services to online formats.

Data compiled within The Global eCommerce Playbook

This shift to digital consumption creates new consumer habits: people get information online and can make more informed choices. At the same time, the variety of this choice opens up more opportunities, and competition often forces sellers to lower prices.

Key Ecommerce Data in 2020:

  • 1% of all global retail sales are e-commerce sales
  • There are approximately 1.92 billion digital shoppers worldwide
  • An average of 19 transactions per person per year. Generation X is the largest demographic for online shoppers
  • China's $ 740 billion e-commerce market is the largest in the world
  • With a gross merchandise value of $ 768 billion, Alibaba is the world's largest online retailer.

Here is a quick look at Ecommerce statistics that show where we are today and where the industry is heading.

 

How global supply chains may change after the COVID-19 pandemic

 

The pandemic of the new coronavirus has led to the shutdown or slowdown of many industrial enterprises around the world. This is reflected in the global supply chains through which the countries of the world usually receive all the goods they need.

Multiple national restrictions continue to slow down or even temporarily stop the flow of raw materials and finished goods, resulting in disruption to production. However, the pandemic did not necessarily create any new challenges for supply chains. Existing vulnerabilities have been identified in some areas and, of course, many organizations have faced staff shortages and losses due to COVID-19.

Economic scholars argue that supply chains are not diversified today. In many cases, the production of a particular product is concentrated in one country, sometimes in one city, or it is produced by only one company. This state of affairs leads to instability. The pandemic demonstrates the need to invest in reliable domestic supply chains.

Companies are challenged to make their supply chains more resilient without compromising their competitiveness. To meet this challenge, managers must first understand their vulnerabilities and then consider a series of steps, some of which they should have taken long before the pandemic broke out.

It can take a lot of research to understand what the risks are for your company to protect itself. This entails going beyond the first and second levels and displaying the entire supply chain, including distribution facilities and transport hubs. This is time-consuming and costly, which explains why most large companies have focused only on strategic direct suppliers, which account for a significant portion of their costs. But an unexpected disruption that brings your business to a standstill can be far more expensive than scrutinizing your supply chain.

In response to the need for greater transparency, there is a shift from linear supply chains to more integrated, multi-player networks. These changes are fueled by a variety of technologies, including various devices and sensors that provide valuable data about where goods are in the chain and their condition.

New technologies, sooner or later, will allow companies to reduce their costs or switch more flexibly between their products, making existing competitors or suppliers obsolete. Many of these advances also provide an opportunity to make businesses more environmentally sustainable.

 

Diversification and localization

 

Diversifying supply chains means distributing product sourcing to a wider range of suppliers and regions to provide support in the event of a disconnect. Many companies use a single supplier, often based in China, for each component in their products as this provides economies of scale. Obtaining a component from multiple suppliers provides sustainability, but can quickly become very costly, especially for products containing a large number of components.

However, it is also possible that companies can diversify their supply chains in the short to medium term, but return to using a single supplier in the long term, whether in China or elsewhere.

The second option for companies looking to rebuild their supply chains after the pandemic is localization: moving production closer to the end consumer. Some companies that have funds for this can partially or completely realize their production. Localizing supply chains will increase their resilience, ensuring that they are no longer subject to trade wars or other global events. However, most companies could not fully meet their business needs with local suppliers, and even trying to do so could significantly increase costs.

 

To summarize, in terms of output, the global economy is on track to recover from a downturn. Vaccines should accelerate recovery in 2021. But other consequences of Covid-19 will shape the growth of the global economy for years to come.

When the Covid-19 pandemic is overcome, the world will be markedly different. The supply and demand shock has exposed vulnerabilities in the production strategies and supply chains of companies across the measure. Temporary trade restrictions and shortages of pharmaceuticals, medical supplies, and other goods have highlighted their weaknesses.

Consumers will continue to pursue low prices (especially during a recession), and firms will not be able to borrow more just because they manufacture in more expensive domestic markets. The competition will ensure this. Also, the need for efficient operation and the careful use of capital and production capacity will remain unchanged.

As companies seek to improve their agility following the Covid-19 crisis, we see the potential to accelerate e-commerce and intelligent automation to improve decision analysis and increase the workforce. Examples of technologies include robotic process automation, artificial intelligence, the cloud, and intelligent machines.