Persistent adoption of mobile ordering platforms
As people are trying to avoid leaving their homes, mobile ordering apps (e.g., Instacart, Uber Eats) have had strong and cheap customer acquisition. As a result of COVID, people will realize that apps like Instacart are not too expensive when you consider time and effort saved and have great user-experiences. I expect a lot of the growth these apps experience during COVID will persist. In a 2017 blog post (Cntrl+F “Instacart”) I shared a map of cities that Instacart operated in at the time and it was very limited to the coasts and some large cities throughout the rest of the US. At this point, it seems like they’ve expanded to all 50 states. Instacart is serving a critical role for consumers during COVID and is attracting a lot of new ‘shoppers’ as Uber and Lyft drivers have seen their number of riders drop off a cliff. In the second bullet of my post on grocery stores, I talk about some of the additional accommodations stores should make for Instacart shoppers.
I also believe that companies like Chipotle that have invested in building their own mobile ordering apps will do well during this period. I used the Chipotle mobile app and it had a surprisingly exceptional UI. Aftership created a Doordash API that companies can use to offer delivery to customers all within their own apps. Ubereats offers the same service so that restaurants can offer delivery in their own apps. This is great for large restaurant chains (Chipotle, McDonald’s, Starbucks, etc.) that want to own the user experience and data and can then outsource delivery without ever having to require a user to leave their mobile flow.
The rise of CloudGrocers:
I wrote a longer post talking about how grocery stores should react to COVID and how they might change in the future here. The question I keep asking is why are CloudKitchens coming to prominence but CloudGrocers are not? To borrow from my other post, the closest example of this idea is GoodEggs. GoodEggs has no physical storefronts and has an inventory of high-quality, organic, etc. products that you can have delivered to your home the same day. While they seem to be the only real player in this market, their products are too expensive and do not appeal to a mainstream audience. What I imagine is possible is that existing chains like Safeway (or a startup) could buy up cheap warehouse space, stock inventory Costco-style, and then allow people to place orders online. Over time, they could augment with robotics to make the packaging of items seamless and inexpensive. It seems like what GoodEggs doesn’t have is their own inventory though. I imagine a startup that creates its own private label products (e.g, Safeway’s “Signature Select” or Whole Foods “365 Everyday Value”) and supplements with other manufacturer brands so that they own the whole value chain. They could either start doing delivery via Instacart or have delivery be a key part of their own company from the start. I have to imagine that in many cases, consumers don’t actually care whether they are buying private labels or Clorox. Consumers want the highest quality at the lowest cost. A ‘CloudGrocer’ could be uniquely positioned to deliver this.
New Tools for Online Shopping
A lot of shopping has already moved online and in the same vein as the last two bullets, I expect to see more and more adoption of online shopping of all kinds across new demographics. With this, companies and startups will need to develop tools to make online shopping even simpler. A friend of mine put together an analysis (that I don’t have permission to share) that highlights some of the mobile e-commerce trends that happened in China during COVID. In China, e-commerce grocery shopping benefitted the most and net new adds to Chinese mobile e-commerce spiked the most for people 30+ in tier 3 and tier 4 cities. With more shopping moving online, it makes sense that tools will continue to emerge to make this process even easier. My friend runs a startup called Encarte which is an incredibly easy to use Chrome extension that allows for instant checkout on 10,000+ retail sites. Tools like Encarte (think of it as a simpler version of the “Pay with PayPal button”) that bring an “Amazon-like” shopping experience to other sites will be of tremendous benefit to shoppers and independent online retailers.
Amazon Continues to Dominate
Inevitably, Amazon will continue to grow during COVID. The fact that they are still able to provide 2-day delivery on so many of their products, provide Amazon Fresh delivery via Whole Foods, keep their warehouses running, have a streaming video service, own Twitch (the largest live streaming service outside of China), have kept AWS running at full speed, and are now creating video games is baffling. The Financial Times wrote an article titled, “Amazon auditions to be ‘the new Red Cross’ in COVID-19 crisis” that perfectly sums up the point.
Fitness and Health:
The Decline of In-Person Gyms
I predict that gyms will see a notable decline post-COVID. For long-time gym goers like myself, I am finding it surprisingly efficient to workout at home. With the exception of a squat rack/straight bar, I can do everything I would have done in a gym from the comfort of home. Right now, I suspended my gym membership, but given 1-2 more months of working out from home, I might not feel the need to resume my membership post-COVID. The rise of at-home fitness hardware will also make this transition easier for a lot of people. Besides expensive hardware providers like Peloton and Tonal, there are also less expensive options like doorframe pull bars, exercise balls, and kettlebells. For fitness studios, I could see a decrease in gym memberships going either way. For example, because I am no longer paying for a gym membership, I might be more open to paying for a monthly yoga membership or paying money to pick up a new physical hobby (e.g., Archery lessons), but still TBD.
Health (and masks) as Fashion Symbols
In Asia, it’s been the norm to wear masks for a long time. I believe this has largely been due to poor air quality. When I was living in Asia, I always appreciated how fashionable people looked in masks. I am excited to see how major brands can speed up this transition to mask-wearing becoming a norm in the US. I expect brands like Adidas/Yeezy or Nike to manufacture stylish, branded masks. You could own them in multiple colors to match your outfit for the day. As my friend Steve Weiner points out, “we’ll probably see this go further and be a big growth period for another layer of wearable / connected tech (heart rate, O2 capacity, temperature, embedded microphone, etc). This could even tie in with a personal health certificate / electronic medical record application on your phone or apple watch that can be scanned for “proof-of-health”.
Renaissance of Cooking
I’ve discovered a new love of cooking during this quarantine. Most groups I am a part of have added channels for “quarantine cooking” where people can share their latest creations. From what I can see on Twitter of people making sourdough bread, it seems like a lot of people are enjoying cooking, possibly for the first time in a while. This could be a win for DTC companies that make high-quality ingredients. Companies like Kettle and Fire and Anthony’s Goods come to mind. I think this will spur a lot more opportunities for YouTubers and cooking websites to monetize as people are turning to the web to figure out how to cook new recipes. My friend Steve again points out that this could also be a win for live streaming likes like “Twitch and IG Live. Group cooking is very social and much lower barrier to entry since people are cooking and streaming themselves much more”
During COVID, I have found myself becoming extremely conscious of everything that I touch. I think it will be tough to rid myself of his consciousness. I can see a whole generation of people turning into permanent germaphobes. This could long-term be good for hand sanitizer and long-term bad for public places like gyms (as I touched on above). Steve points out that this could also manifest in some unexpected domains like dating, “The AIDS epidemic caused people to start practicing safe sex much more frequently and asking a partner about their history. That wasn’t done before.”
Digital Spaces Replace More Physical Spaces
I saw a stat that OnlyFans new registrations have spiked during COVID. Can websites like OnlyFans continue to grow and become ’the digital strip club’ post-COVID? According to a company spokesperson, "the platform had received 1.85 million new registrations (both content creators and consumers) since Feb. 29. Between March 6 and 17, there was a 75% increase in people signing up.” I’ve read the same is true for Patreon, YouTube, and Twitch. According to Wikipedia, "As of February 2020, [OnlyFans] [already] has 20 million registered users and claims to have paid out $400 million to its 200,000 content creators.” Given that OnlyFans splits rev 80% content creator / 20% only fans, this stat implies OnlyFans has made 100M in revenue in its 4 year existence. The OnlyFans take rate is notably more than Patreon (5-8%) and lower than YouTube ads fee (45%).
While I was writing this post, I came across an article in the NYT titled “Inside the Strip Clubs of Instagram”.
New Social Experiences
As people crave more social interaction, potentially long-term if remote work truly picks up, people will seek to create new social experiences from actions that previously weren’t social. I believe in the past there were social sites specifically curated for food. I could see a company like Tasty successfully launching an Instagram-like feed purely for photo foods + recipes. It would be great for them to insert their own content alongside user-generated content. They could add options like “Keto” or “Vegan” so you could curate your feed to your own dietary preferences. Chinese companies like Pinduoduo (summary video of the company) have succeeded with making shopping social and at least one US-company, Supergreat (notably, backed by Benchmark Capital) seems to be attempting to do something similar for beauty products and shopping. Video Games like Fortnite and Roblox have done a lot to create one new type of social experience, but there are still many untapped frontiers.
Less Funding Towards Companies focused on the Physical World
One trend I have noticed in venture funding is a lot of money going towards companies operating in the physical world. I use companies like Uber and OpenDoor as examples of companies that are clearly technology companies, but that have a large physical presence. I’ve said to friends that there is a fine line between OpenDoor and WeWork, where OpenDoor is a tech company that tries to do things in the physical world and WeWork is a physical company that tries to be a tech company. Possibly due to the success of companies like Uber, scooter companies, etc. VCs have been keen to fund companies that dance on this line, but seeing as these companies are getting crushed the most in this COVID downturn, we may see VCs back away from companies going after these kinds of problems.
Extra credit: Ben Thompson’s ‘What is a Tech Company’ describes this better than I could hope to.
New types of Online Learning
There has been a lot of talk about remote learning from a few different angles, but one that I find most interesting are companies focused on learning for practical skills (cooking, fitness, woodworking, pottery) that you pay for possibly on a monthly basis. Similar to wikihow, but where the video creators take home a large chunk of the revenue for the videos they create. An overly simplistic framework for a company doing this:
- Total monthly rev for the company is $1M
- January has 10M total views across all videos
- Ryan creates an archery tutorial that drives 1M views in a month (10% of total views)
- Ryan makes 1M * 10% * 80% = $80,000 for the month of January
I recently came across Jumprope, a company that makes it easier for creators to create ‘how-to’ videos.
Jen Yip makes the great point that there is a huge difference between watching a how-to video and thinking you understand doing something and then trying it and realizing how tough it is. A company that could bridge this gap by e.g,. Merging online instruction + real world practice (in the form of studios or take home kits) would be really interesting.
Since 2017 when I started following some of the 2nd order impacts of the gig economy, I began to recognize the importance of portable benefits for 1099 workers. I wrote more about portable benefits in my post on the future of work (section 2.1). At the highest level, portable benefits allow 1099 workers, who may have multiple streams of income and no full-time employer to easily manage and contribute to their healthcare-related benefits. The idea here is that many people are working multiple contractor jobs that provide multiple income streams, but no fringe benefits and easy way to manage their benefits. Companies like Etsy have proposed ideas such as enabling tax withholding for 1099 employees, streamlining flexible spending accounts, or creating a “Federal Benefits Portal, which would tie all benefits (retirement, health insurance, paid leave, tax-advantaged savings accounts, disability, etc.) to the individual, providing a single marketplace to view, choose and pay for their benefits, regardless of where or how they earn income. Companies like Catch Benefits are working on this now and I expect to see them continue to grow or for additional players to pop up in this space. What I would be really impressed with would be seeing an association of companies with the largest gig workforces (Uber, Lyft, Instacart, Amazon, Etsy, etc. etc.) getting together to come up with an agreed-upon standard and then propose legislation for being able to also contribute directly to their workers’ portable benefits accounts.
Tighter Spending Practices Accelerating Remote Work
Moving forward, a lot of companies will have much tighter rein on their spending. This could mean hiring CFO/VP Finance much earlier for many companies. Or it could mean a boom for outsourced tech/human in the loop firms.
Companies are realizing (1) they have a lot of headcount they did not need (2) they pay a lot of money for talent and office space in SF/NYC/Boston/Seattle/LA.
This, in combination with companies realizing how effective their workforce can be when remote could be the push that remote work needs to become the default for a lot of companies. There are many downstream impacts of remote work becoming the norm.
- Hire/Retain Talent: Competition for software engineers in the Bay Area is competitive and shows no signs of cooling off. This makes it harder to get candidates in the door and raises salaries. Even when you make a great hire, “San Francisco [has] the shortest average job tenure of any metro, and [is] well below the national average”. High turnover winds up costing companies a lot in the form of retraining, lost productivity, and decreases in morale that comes with turnover (especially for small companies).
- Save Money: Besides high salaries, Silicon Valley also has some of the country’s highest office space prices, health care costs, corporate taxes, food prices, utility costs, and transportation costs.
- Higher Quality of Life: Residents in the Bay Area also have higher taxes and general cost of living expenses (gas, food, etc.) than virtually anywhere else in America. If a company allows employees to work from less expensive geographies, it can become a competitive differentiator in the hiring process. This opens up the potential to hire experienced candidates who live in cheaper geographies because they want to raise a family, own a home, and save most of their income.
Reset of Commercial and Residential Real Estate Prices
In geographies like San Francisco, some other impacts that could have are a reset of commercial and residential real estate prices, making the Bay Area more affordable for the people and companies that do choose to stay in the area. Unfortunately, small businesses will likely be going out of business at alarming rates, this means even more commercial real estate opening up. As Steve points out, this could be a massive reallocation of CRE towards CloudKitchens, CloudXYZ, accelerating the trend toward a retail apocalypse.
Increase pace of Automation
Many manufacturing facilities that rely on large in-person staff are facing a lot of difficulties right now. While there may be skyrocketing demand for their products, they are stuck between keeping manufacturing running while also keeping their personnel healthy. I predict that post-COVID, many facilities will invest more in automation to prevent personnel issues in the future. In the first section of an older post I highlight data from Ark Invest that states, as the cost to manufacture robots has come, demand has steadily increased, and projections for future sales of industrial robots are steady across most, if not all, forecasts. This trend is already in motion, but I expect to see it sped up as companies want to preserve their resilience and decrease dependence on people in the future.
Tangent: In an older, unpublished post, I highlighted some of the other reasons why companies should invest in automation:
"In the warehouse environment, for example, one insurance professional said that in terms of cost and efficiency robots always beat humans (uh, duh). Some second-order effects invoked that I had not given consideration to are: 1) In a factory/warehouse environment where workers are subjected to dangerous work conditions are/or regularly lift heavy objects, the worker compensation costs are significant with humans, and are obviously 0 with machines. I am sure there are a number of other fringe benefits that robots eliminate. Also, if you’ve seen the Amazon machines moving through factories, their slim size can allow for smaller aisles and, in turn, better overall facility utilization.
People will Save more Money
Thanks to how my parents raised me, I am extremely cost-conscious and a big saver. Unfortunately, I notice many of my millennial peers like to spend basically all of the money they make. I predict that the shock that COVID sent through the system will turn saving into a more ubiquitous habit as people are now more conscious of downturns and layoffs. Saving money, investing money, and earmarking money for something other than short-term spending is a good habit that benefits people long-term. Apps like Acorns, Wealthfront, etc. that encourage savings and earmarking funds for e.g., trips will benefit from this change. My friend Charles Rubenfeld points out that interest rates could be zero for a very long time. This raises an interesting point of where people go to save money? This could lead to an inflow of dollars into passive and active investment strategies. It’s also a good argument for some of the crypto applications like Dharma that offer high (2-6%) interest rates in a “savings” account that takes advantage of crypto-lending on the backend. While the risk profile of an app like this isn’t == to a Wells Fargo savings account, it provides a consistent return on cash holdings.
2020 Presidential Election:
It’s easy to forget that this is a Presidential election year. I can’t see the democratic and republican national conventions taking place in person this August. A couple questions: which candidate benefits more? If Trump continues to dominate tv screens and Biden gets no coverage, it could benefit Trump. If Trump botches COVID, it could benefit Biden, etc.
As far as a quick search could tell me, US presidential elections have never before been delayed and there isn’t a process for trying to delay them.
If elections do take place, you know the results will be extremely contested.