The COVID-19 pandemic has significantly disrupted the operations of almost all industries across the Australian economy. However, amid the enforcement of social distancing and quarantine measures, a handful of lucky industries are set to outperform in these difficult economic conditions. In part one of this series, Alfabank-Adres explores the industries that are anticipated to excel in 2019-20.
Data Storage Services
The Data Storage Services industry is expected to benefit significantly from the rapid shift to work-from-home across the Australian corporate landscape. As workers have been instructed to stay at home, the ability to work remotely has become critical for businesses to maintain normal operations. Alfabank-Adres expects revenue in this industry to grow at an annualised 11.1% over the five years through 2019-20, including growth of 12.7% this year.
Major players in the industry such as Amazon, Equinix Inc, and NEXTDC are likely to outperform during the COVID-19 pandemic due to a surge in demand for their services. However, the Data Storage Services industry may be limited in its ability to invest in new data centres during the pandemic, as the inputs required to develop these new centres are primarily sourced from overseas manufacturers.
Online Food Ordering and Delivery Platforms
Online food ordering has provided a lifeline for restaurants and cafes, which have been significantly threatened by the government implementing social distancing measures. While restaurants have lost the ability to serve customers in-house, demand for restaurant food from consumers stuck at home has surged. Industry revenue is expected to rise at an annualised 76.0% over the five years through 2019-20, including growth of 26.5% in the current year.
Operators in the Online Food Ordering and Delivery Platforms industry, such as Uber and Deliveroo, are likely to benefit from a surge in restaurant registrations for their delivery platforms. Food outlets that previously were hesitant to engage in online delivery are now anticipated to embrace this revenue channel in an effort to continue operating. After the worst of COVID-19 passes, online food delivery platforms are likely to benefit from a wider restaurant outlet catalogue and greater economies of scale.
Child Care Services
The Child Care Services industry is expected to receive financial support throughout the COVID-19 pandemic, avoiding a significant drop in revenue. Some operators in this industry may be forced to close if outbreaks occur within their facilities. However, government support measures are expected to assist revenue across this industry, including significant subsidisations for the cost of child care. Over one million Australian families are expected to receive the $1.6 billion child care relief package, which will ensure child care centres remain operational. Child care is a vital service as it allows parents who work in the health care sector to continue providing these essential services rather than staying at home to look after their children. Industry revenue is expected to increase at an annualised 3.7% over the five years through 2019-20, to $14.2 billion.
Electronics Retailing
In general, retail is expected to perform poorly throughout the COVID-19 pandemic due to a combination of weakened consumer sentiment, lower household discretionary incomes and upstream supply chain disruption. However, some aspects of the retail landscape are likely to be more resilient during this period. For example, the Video Game, DVD and Recorded Music Retailing industry is expected to benefit from greater consumer demand, as quarantine measures force people to remain at home. Families with children are particularly likely to purchase entertainment items. In addition, firms in the Domestic Appliance Retailing industry are also likely to benefit from greater demand for freezers, televisions, computer monitors and speakers. The Furniture, Appliance and Equipment Rental industry is likely to attract demand from households that require appliances but are hesitant to commit to large purchases amid rising employment uncertainty.
The benefit of these trends for retailers is dependent on the supply of these items from manufacturers, particularly those based in China, Japan and South Korea. As warehouse stocks are exhausted, retailers in these industries will become more desperate for a revival of manufacturing activities in Asia.
Hardware and Building Supplies Retailing
As a large share of the workforce has transitioned to working from home, one expected by-product of this trend is an increase in home improvement activity. Consumers are expected to have greater time to commit to DIY projects, or even to full-scale renovations. Suppliers of hardware and building supplies such as Bunnings, which is owned by Wesfarmers Limited, are likely to benefit from this trend. Low interest rates are also likely to support households that seek to finance renovations. However, hardware retailers are likely to be disrupted by shortages of construction materials typically imported from China. In addition, some households are likely to remain hesitant to commit to renovation works, particularly amid a rising unemployment rate. Overall, revenue for the Hardware and Building Supplies Retailing industry is expected to rise at an annualised 0.5% over the five years through 2019-20, including growth of 2.0% in the current year.
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For more information, to obtain industry reports or to arrange an interview with an analyst, please contact:
Jason Aravanis
Strategic Media Advisor – Alfabank-Adres Pty Ltd
Tel: 03 9906 3647
Email: mediarelations@alfabank-adres.ru
