REOPEN WITH CARE
Steps towards full-fledged reopening
Relaxing lockdown measures in phases
Reopening will require changes to work, commercial, and social life
A change in behaviour after lockdown
Consumers are cautious, but they are ready to spend
EY conducted a survey to track emerging consumer behavior and sentiment across key five markets [1]. There are five very different consumer segments as the crisis abates. “Cautiously extravagant” consumers (25% share) are financially conservative but expect to increase spending in non-essentials once the crisis is over. “Get to normal” consumers (31%) are determined to resume normal life as soon as possible. “Back with bang” consumers (9%) are younger and working. Although their daily lives had been disrupted the most, they are the most optimistic and spending much more in all categories. Only a third of consumers – “Stay frugal” (22%) and “Keep cutting” (13%) – expect to spend less.
Hardest Hit, Slow Start and Quick Start sectors
Businesses or events that involve large gatherings in enclosed spaces will be hardest hit
The health risks associated with reopening will differ across industries, depending on the extent workers can engage in distancing with minimal loss of output. The least risky industries include software, manufacturing, telecommunication, professional services, banking, insurance, and agriculture. Food manufacturing is riskiest among the manufacturing sub-sectors. The riskiest industries are air transportation, healthcare, education, arts and entertainment, accommodation, and food services.
Strategic response to reduce reopening risks
Solutions for Hardest Hit industries – effective vaccine, digital tools, and substitute products/services
For any industry to recover, individuals need to feel safe and confident that they are protected from the virus. A scalable vaccine is the most effective solution while reopening, but that will not be available so soon. Technology can help make society more resilient during a pandemic and other threats, while helping businesses to stay open or resume operations. There are 10 emerging technology trends, including digital payment, telehealth and robotics. In the absence of a scalable vaccine and digital tools, businesses need to find ways to substitute their offering with products or services that allow greater ability to work remotely and reduce health risks.
In the absence of a vaccine or scalable treatment, reopening will have to remain gradual and prudent
Risky industries can reopen safely with digital tools
Essential to seek substitute products and services
Service reform
- The Hardest Hit sector needs to find substitute products and services that allows the ability to work remotely and reduce health risks and collaborate with “tech” platforms which have strong traffic. For example, movies and concerts can be substituted with content delivered via Netflix or Facebook Live. They also need to collaborate with e-marketplaces while scaling down off-line stores to reduce rental expenses.
- A direct substitute (moving to an identical competitor) is not a good option because those businesses would also be affected. Therefore, the focus would be on indirect substitutes (something different to achieve the same goal) that can respond to new normal consumer behavior.
Top 10 trends: Biggest influence on businesses in Thailand
Healthcare: Towards a digital health ecosystem
Meeting challenges by developing new service offerings
Developing new services while reducing investment in new hospitals
Air transportation: Raising public health standards and seamless travel trends
Hotels: Swift upgrade to ‘smart hotels’ to meet rising demand from Gen Y and Gen Z travelers
Restaurants: Increasing digital business services
Modern trade: Developing omni-channel platforms and building partnerships with other businesses
Retailers will improve health and safety standards and develop strategies to offer value-for-money products
Real estate for sale: Moving towards online sales and the use of VR
Real estate for rent: Moving towards scalable floor space and flexible rental contracts
Transportation and Logistics: Greater adoption of data analytics and digital technology
Automobiles: Build resilient supply chains and offer rental services to sustain long-term business
Construction: Accelerate adoption of digitalization and scale up off-site construction
Agriculture: Taking the opportunity to strengthen food security
Transitioning to smart farming using advanced technology and shifting towards value-added products
Changes in the agriculture sector
How is the pandemic reshaping the agriculture sector?
The pandemic has affected the agriculture sector in 3 ways: (i) Labor shortage issue has worsened; (ii) logistic problems; and (iii) rising public health concerns. This will prompt players in the sector to change process to be less labor-intensive, broaden their distribution channels, and try to build consumer trust in their products.
Recovery trajectories for major industries after reopening
Our analysis suggests only Hospital and Food Manufacturing sectors would return to pre-pandemic level by end-2021. Air Transportation, Hotel, Restaurant, Auto dealers, and Amusement & Recreation sectors would continue to suffer until end-2022. Construction, Retail, Wholesale, and Beverage sectors have been severely affected but they would rebound faster than other sectors.
Automobile: Temporary plant shutdowns triggered by falling demand will lead to 37% drop in 2020 output
Automakers accelerating adoption of digital technologies to strengthen supply chains, expand marketing channels
Hotels: Following the ban on inbound flights, there were zero tourist arrivals in Thailand in 2Q20
Hotel bookings continue to rise after hitting bottom in March and April when COVID-19 cases accelerated
Hospitals: Thailand might have the opportunity to become a medical hub sooner than planned
Housing in BMR: Demand has tumbled, prompting developers to hold back new projects to ease oversupply
Retail space: Retailers severely hit by weak consumption, especially among the middle- and low-income groups
Rice: Pandemic has increased global demand for rice, but higher price for Thai rice could dampen exports this year
In the first 5 months of 2020, Thailand exported 2.6 million tonnes of rice (-31.9% YoY), generating USD1.7bn receipts (down 12.3% YoY). Exports slipped against rising sales in India, Vietnam, Pakistan, Myanmar and China because the 2019-2020 drought had reduced the output of off-season rice and lifted the price of Thai goods relative to their competitors, by an average of USD140/tonne, the widest price differential in 6 years. Although the pandemic has increased demand for rice overseas, higher prices for Thai rice would depress exports in 2020. We project rice exports would drop by 12-16% to 6.1-6.5 million tonnes this year, from 7.58 million tonnes in 2019.
Despite near normal rainfall, there is still drought risk due to low reservoir water levels and a delayed rainy season
Note: [1] EY surveyed 4,859 consumers across the US, Canada, UK, France and Germany during the week of 6 April 2020. The survey questionnaire covered current behaviors, sentiment and intent.