The impact of COVID – clear winners and losers so far, but still a fuzzy picture
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The impact of COVID-19 on our economy at large and our photo & video industry in particular is a hard one to summarize. Some parts of the economy (and our industry) are hurting and others are doing remarkably well.
What’s even harder is to predict how things will develop this holiday season and the first part of next year. Take the impact of yesterday’s announcement of the efficacy rate of Pfizer’s COVID-19 vaccine: it shook the stock market in multiple directions.
Overall, the Dow Jones index jumped 3%. Apparently, the stock market is counting again on things going back to normal at some point with the stocks of cruises, airlines, and physical entertainment companies soaring. Carnival Cruises rose 39%, United Airlines jumped 19%, and AMC Entertainment gained 51%.
At the same time stocks like Zoom Video dropped 16% and fellow “stay-at-home” stocks Amazon and Netflix dropped 1.6% and 4.7%, respectively. Teladoc Health slid 7.4% and Shopify fell by 5.5%.
That was just yesterday.
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So far, the jittery stock market.
But how about the real, i.e. non-financial markets? What happened to the overall economy this summer? Where was the biggest pain, and who did (perhaps surprisingly) well? And what can we expect for Q4?
In the last few weeks, a slew of Q3 financials have been announced, in addition to a few other noteworthy economic data reports.
Here is a snapshot:
Credit card purchases, for roughly the whole COVID period to date (March 12 – Oct. 15), as tracked by Cardlytics
- US spending at brick-and-mortar stores is down 14% year over year, online spend increased 25% YoY.
Recent US retail sales + holiday projections, from Kiplinger
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Retail and food service sales jumped 1.9% in September and are now near or above February levels for most store categories. After consumers socked away more savings in recent months, they have had cash to spend on big-ticket items such as cars and home improvement projects. They are spending more on goods right now than on services, so almost all retail sales categories are benefiting.
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Holiday sales are shaping up to be strong this year. E-commerce is leading the way with an expected 29% rise over last year. Even in-store sales will do well, up 5% over last year’s holiday season. However, gains are likely to be uneven. Many smaller regional malls have lost anchor tenants such as Sears and JCPenney, and so should see traffic diminish.
Global smartphone shipments, from IDC:
- Global smartphone shipments in Q3 were down only 1.3% YoY, reflecting more the slowing replacement cycles than a COVID-19 impact, as far as I can tell. IDC projected a 9% YoY decline.
- The smartphone image sensor market saw a growth of 15% YoY in the first half of 2020. Total revenue reached $6.3 billion for the six-month period.
Mobile app usage and app spend, from App Annie
- Mobile app usage surged 25% YoY in Q3 2020. In this period consumers downloaded 33 billion new apps globally and spent a record $28 billion in apps — up 20% year-over-year. They also spent more than 180 billion collective hours each month of July, August and September 2020 using apps, an increase of 25% year-over-year.
Q3 “tech companies” revenue bonanza (compared to same Q last year)
CEWE financial results, H1 2020
Camera shipments, Jan-Sep 2020, by CIPA
- Overall digital still cameras: down 47% compared to same period last year
- DSLRs: down 40%
- Mirrorless cameras: down 30%
So where does this leave us? Although so many things are very much still in the air, we can draw a few cautious conclusions:
- Although unemployment is still soaring, consumer spending in the US is strong and has been shifting from services (such as dining, cinemas or vacations) to physical – and even more so – digital goods (such as streaming video services, apps and games).
- The way consumers shop has further tilted towards buying goods online and through apps – in lieu of purchasing at physical retail stores. How much of that will shift back to “normal” after the pandemic is the multi-billion dollar question.
- At Visual 1st several speakers and attendees in the photo print product space pointed at a surge in the creation of photobooks in Q2 (homebound consumers taking time to go through their old photos), followed by a slowdown over the summer (consumers taking fewer holiday pictures) and somewhat of a recovery in the fall so far, leaving them with a more uncertain Q4 peak season than ever before. If the current trends of shifting consumer spending from services to goods continues, I foresee a surge in photo merchandise (personalized photo gifts), especially if optimism rebounds with vaccines on the horizon.
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Some pre-COVID trends can be expected to continue: longterm decline of camera sales; gradual increase of e-commerce over retail. Other trends are accelerated during the current pandemic and can be expected to continue at least for the next 3-6 months: accelerated growth of e-commerce, diminished market for photography services that require in-person contact with customers (e.g. events, school, sports, or wedding photography; value added sales or classes offered by camera retailers).
- Those in challenging markets who are creative enough to pivot will be the big winners. One example, highlighted by our Visual 1st judges who presented this startup with the Visual 1st Special Recognition Award, is Snapbar, which saw its photo booth revenues going to zero overnight due to COVID-19. It quickly and successfully developed digital alternatives through virtual photo booths and event boxes.
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Bloomberg reported that Apple quietly acquired Vilynx for $50M. Vilynx was a startup that delivered solutions to analyze a video's visual, text, and audio content with the goal of "understanding" what's in the video in order to generate metadata, automated video previews, and recommendations for related content.
Its co-founder Hendrik van der Meer regularly joined a grassroots Meetup for photo/video app developers held monthly in San Francisco 5+ years ago. Those were the days… small gatherings of super-talented entrepreneurs who shared their insights and experiences over beer and pizza.
Unless I mix things up in my recollection, I remember one Meetup a few weeks before our second Visual 1st conference (then still called Mobile Photo Connect) back in 2014 when a small group of (co) founders got together to hear Olga Russakovsky, one of the organizers of the ImageNet Large Scale Visual Recognition challenge, share her perspectives on the rapid progress image recognition was making according to ImageNet’s latest contest. Olga is now Assistant Professor of Computer Science at Princeton and was one of the fewer than 10 participants in that Meetup of which at least 4 that I know of have successfully sold their companies.
A success rate any VC will envy!
Besides Vilynx sold to Apple, the (co-)founders of Looksery sold their company to Snap, Orbeus to Amazon, and ImageChef to CyberLink.
While this Meetup no longer exists, I very much hope that other avenues for grassroots info exchange between imaging entrepreneurs will emerge (again) in different parts of the world! Of course, post-COVID and coupled with beer and pizza.
And why is that needed now more than ever? Check out this insightful podcast with Anna Dickson, one of our Show & Tell judges at Visual 1st and currently Visual Lead at Google, while formerly at The Wall Street Journal and The Huffington Post. She stresses that in times of uncertainty it's important to identify emerging opportunities and the best practices for staying on top of industry trends, including by sharing info and learning what others are doing at conferences such as Visual 1st. Check it out!
Best,
Hans Hartman
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