Coronavirus: A 10% shift in habits will destroy some companies

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by buttersquashcorgi

It’s that the needle is moved 10-15% this way and that way, causing businesses who relies on high degrees of leverage and economy of scale to eek out a profit due to their thin margins to shutter. Many of these fixed costs are ,well, fixed, so all that lost goes straight into their profits.

Think about how the following sectors will be affected by 10-15% decrease in traffic: malls, restaurants, bars, airlines, automotive, hospitality, office space and all businesses around offices.

Explicitly, airlines for example relies heavily on business travel to make a profit. Even with cheap oil prices, those business travelers are gone forever. I know a fair number of executives who vastly prefer teleconferencing – they get to stay at home with their family in their nice houses. Remember, these are people who are away from home 2 weeks/month. They hate traveling. They will literally take a pay cut to not have to travel. These are the people in business class and first class.

How about cars? I was thinking of getting a new car, but with all of this work from home, I am obviously not going to get a new one for a while, and when I do, I won’t get one as pricey or as nice. Why would I do that when I don’t spend anywhere near as much time in it? Margins for base models are razor thin.




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