Just as the pandemic closed certain businesses, it also opened the door for entrepreneurship in other areas. Austrian economist Joseph Schumpeter would call the fallout of the pandemic a “creative destruction" -- a term he used to describe how market disturbance compels individuals to summon new ideas for doing business.
2020 exemplifies “creative destruction,” as shifting consumer behaviors created openings for startups to have life. According to the Peterson Institute for International Economics, business startups in the United States “grew from 3.5 million in 2019 to 4.4 million in 2020, a 24 percent increase.” The United States is leading the international surge for entrepreneurship, with the most common startups in 2020 being food services, retail trade, and recreation businesses.
What does all of that mean to brands and marketers? When put through the pandemic lens, it means that those who doubled down on investing in customer relationships will have a higher chance of fending off the next wave of challengers. With this marketplace, opportunity comes from volatility.
And it has to come quickly.
Consumer confidence is showing signs of rapid decline, which may stymie the economy. The University of Michigan attributes a sharp decline to the “surging Delta variant, higher inflation, slower wage growth, and smaller declines in unemployment.” Coupled with supply chain issues, brands need to accelerate loyalty efforts in anticipation of marketplace tremors.
The impact of lackluster consumer confidence is underway, as retail sales dropped by 1.1% in July 2021. Businesses should continue to look at opportunities to invest in digital innovation, deepen customer relationships, and prepare to pivot as the roller coaster continues with supply chain issues, qualified labor shortages, and a continued pandemic.
The slowdown in the retail market may foreshadow a larger scale decline for markets across the board. For example, the auto industry has already seen an impact; the sale of cars and auto parts dipped 2% in July. Prices have skyrocketed to account for the high demand and low supply of vehicles.
Although the pandemic ripped the wheels off the wagon for many businesses, the U.S. economy proved its resilience as the year resulted in a positive GDP gain. Consumer trends such as increases in digital adoption, online spending, and health awareness led to the exploding business growth shortly after the initial grasp of COVID-19. Industries that benefited the most were ecommerce companies, food delivery services, outdoor and sporting goods, and verticals associated with regional road trips as consumers were dramatically restricted in their air travel. The shifting needs of consumers also opened the stage for an entrepreneurial boom, especially as individuals who went “out of business” needed creative solutions to regain their footing.
The conversations that come out of the chaos during a time of creative destruction would make Schumpeter smile. The key to breaking through the clutter that comes with chaos is to let data serve as a guidepost of consumer sentiment and, in turn, match media and creativity to round out the equation.