How the Coronavirus Crisis is Transforming Business Models and Analytics
Many pandemics, including our coronavirus (COVID-19), will have a transformational effect on business models in a variety of industries. In fact, crises have led to innovation and creation in business throughout human history. For example, supermarkets and laundromats were invented during the Great Depression. Although it appears unprecedented in its political, economic and social reach, COVID-19 should also be seen as a unique opportunity for business model reimagination and new business opportunities.
Analytics can do more than merely describe what has happened during this crisis. It can aid in predictions of the future and prescribe specific business initiatives. Coupling a broad understanding of ongoing trends with analytic capabilities is a blueprint for robust and flexible growth in this COVID-19 landscape.
eCommerce and digitalized retail
The contactless world of COVID-19 has launched the use of digital solutions to unprecedented levels. In fact, McKinsey highlights a nearly five-year advancement in digital adoptions in about eight weeks. From banking to concerts, customers are demanding digital services. A survey in April 2020 found that 75% of people who started using digital channels during COVID-19 will continue when things return to normal.
Additionally, shelter-in-place orders have accelerated online retail activity. A surge early in the pandemic might be a temporary shift in consumer behavior, but this thought is premature.
E-retail’s contribution to total retail sales is projected to increase from 14% in 2019 to 22% in 2023. Even when normalcy is returned, several ecommerce trends are anticipated to increase growth in digital retail activity:
- A combination of augmented reality and data analytics for on-site personalization.
- AI-enhanced automated assistants, chatbots and recommenders.
- Refined omnichannel strategies that connect mobile, social network, online, and brick-and-mortar experiences.
- Greater diversity in payment methods including digital and mobile wallets.
- Increased attention to environmental and sustainability concerns.
Grocery shopping illustrates a major transformation spurred by COVID-19. Purchasing groceries online is increasingly becoming more commonplace. In fact, surveys recently found that 42% of people shop for groceries online, with almost half stating COVID-19 as the reason. Even for those who don’t buy groceries online, 41% said they would in the next six months.
A dominant winner of grocery ecommerce is InstaCart. It fulfills online orders for groceries with multiple store partnerships, unlike competitors such as Walmart (which sells its own products). Ease-of-use and new ordering features gave Instacart a 300% boost in online sales, beating Amazon, Walmart, Target, Peapod and FreshDirect in increased sales during COVID-19.
Growth of contactless pay
Fear of the spread of COVID-19 has pushed many to use contactless payment options. Shares of contactless payment at stores and ATMs are expected to increase by 10-20% due to COVID-19, and a surprising 27% of all U.S. small businesses have observed an increase in the use of mobile payment options like ApplePay. With a moratorium on cash, person-to-person services like PayPal, Venmo and Zelle have increased in popularity as well.
According to Mastercard, 79% of card users now opt for contactless transactions, which have experienced a 40% growth in the first quarter of 2020. Speed and ease-of-use are primary reasons contactless is likely to persist post-COVID-19. In fact, being 10 times faster, on average, than cash transactions is partly why 69% of contactless users find it more convenient than cash.
Furthermore, the popularity of contactless is unlikely to dwindle post-COVID-19. This is largely because 60% of users feel comfortable with it because of the use during the pandemic. In fact, 74% plan to continue using contactless pay methods after the pandemic ends. A few features in contactless payment will likely reinforce its usage, including:
- Apps that automate the payment of goods in stores, like Amazon Go.
- Biometric payment authentication.
- Blockchain technology.
- 5G-enabled reductions in connection and transaction issues.
- Payments allowed by voice, gesture and wearable technology.
- Near-field communication enabled technology.
Point-of-sale hardware and software systems that integrate mobile and cloud services, multiple payment options, and back-end business functions will become progressively crucial in the future. POS systems (smart registers) can enable a business to manage inventory, customers, employees and sales all on a single device, both remotely and centralized.
Changes to insurance
COVID-19 has created major shifts in customer priorities and operational models for insurance providers. A few facts worth knowing:
- 18% of life insurance policyholders requested relief from premium payments.
- 19% of property insurance holders switched providers.
- Price accounted for 60% of all insurance switches.
- 66% of insurance holders used a digital channel for transactions.
- 21% of those insured have usage-based insurance.
By late March, driving decreased 35-50%. With reduced usage, the model of usage-based insurance (UBI) will become highlighted. UBI and its technology deliver several advantages:
- Policies are better aligned with customer’s actual risk.
- UBI sensor and communication technologies can be integrated with other vehicle-to-infrastructure solutions.
- Gamification of data can incentivize good driver habits.
In light of this information, a few trends emerge:
- Automation and simplification of operations.
- Expansion of digital services.
- Customization of insurance products.
Lemonade, an app-based insurance company, has leveraged AI and behavioral economics to refine the insurance model. It uses third parties (charities) to solve the dilemma of insurance: how to align the interests of the company with those insured. Its loss ratio decreased by 300% from 2017 to 2020 and has had a 65% conversion rate for renter’s insurance policies.
It goes without saying that companies can seek success in the burgeoning digital economy with strategies like AI, analytics and digital marketing. Governments should act to facilitate this digital economy by:
- Making connecting to it as seamless as possible with a modern legal framework.
- Keeping it safe to use with investments in cybersecurity.
- Keeping it open and running with investments in IT infrastructures.
Governments rarely succeed by themselves, so constructive public-private partnerships should also be pursued.
Analytics provides visibility into these shifts
MIT found that firms with data-driven analytical decision-making in their business model achieved output and productivity 5-6% greater than their counterparts. This is why IBM discovered 71% of banking firms attribute their competitive advantage to big-data analytics.
If you look back on the business transformations we identified, they all:
- Are producing new data to be analyzed
- Require existing analytics to be re-thought and expanded to a wider purview, and
- Require an new suite of analytics to support them
Yesterday’s 360 degree view of the customer, operations or supply chain, will definitely not be tomorrow’s.
As an analytics leader, there are steps to take to add new analytic capabilities to your business including:
- Give your team broader access to both existing and these new data sources, but in a well governed manner
- Find additional data sources your team can use, including ones external to your company to add further context to your analytics
- Offer the ability to discover and explore the data, combine it with other sources and see what new insights can be derived
- Let your team collaborate and share knowledge around the data and insights to improve data literacy
Often times organizations have data and analytics “blind spots” that keep them from seeing new business trends such as we are encountering now. The Neebo Virtual Analytics Hub lets analytics teams discover, consume and collaborate on any data over a disparate landscape with enterprise-level governance. Neebo enables faster, more valuable insights by breaking down the barriers to better use of data for analytics in a single, easy to use platform and eliminates data blind spots. To see for yourself, get started right away using our 14-day free trial.