The contours of demand are changing

Apr 15, 2020

I expect most readers are familiar with "the hammer and the dance" theory of mitigating coronavirus by now.

The idea is essentially containment by harsh lockdowns today ("the hammer"), varying measures of social distancing over the next 6 to 18 months ("the dance"), until a vaccine is finally found.

Demand Catalysts during the dance

This article by Brett Bivens does a stellar job articulating a framework to predict the future for markets (as much as possible) by anchoring on the demand-side. Specifically, it focuses on Demand Primitives and Demand Catalysts as below:

Demand Primitives- Where is high "engagement" already observable but significantly under-monetized or effectively monetized but in narrow segment of broader market? Demand Catalysts- What cultural, economic and technical shifts (already in-flights) will make it possible to bundle multiple demand primitives to build companies that create entirely new categories?

When the two meet with positive forces is when we see non-obvious demand emerge in huge, emerging market opportunities. This interaction can take founders years of waiting but they describe the holy product-market-fit that startups vie for.

For certain categories, catalysts that would have taken years have hit with full force in a matter of weeks.

In this phase 1: harsh lockdowns (i.e. the hammer") today are driving a sudden change in lifestyles everywhere.

We've seen this up close, especially in online education and entertainment businesses. While consumer technology adoption looked to follow a healthy, growing curve even before Covid, now each has had its near term TAM curve tilted straight upwards.

Hell, even my parents are on Zoom now!

What does life look like in the dance?

When coronavirus is over, and I mean truly over, it's clear that we will be in a pretty different world. In an article last week Azeem Azhar highlighted that, while the economy will eventually bounce back, the structural composition of it will be quite different:

What I'm interested in today is this containment phase ("the dance").

If you refer to the Demand Catalysts above, thus far what we're seeing are buying behaviours "pulled forward" significantly more than we are seeing the creation of entirely new behaviours.

6 to 18 months a long enough period that day-to-day life will have to adapt. It will shape what the post-covid world looks like and create opportunities of its own. What could these look like?

Here are a couple of recent anecdotes:

I recently spoke with the investor of a foreign luxury retail chain. In many countries, stores and F&B remain open as long as the number of people in the establishment are limited. To stay in business, the team had set up an appointment-booking facility. This actually helped the business perform better: only customers with an intent to purchase bothered to book slots, and salespeople were able to assist them so more sales happened.
I'm currently stranded in London. Most queues for supermarkets take 30 minutes because only a handful of people are allowed inside stores at a time. I always thought apps which replaced queuing were a waste of time, but suddenly I would pay good money for these stores to use them.

What does these mean for startups? Is there an opportunity to build an aggregation layer for offline retail? Perhaps it starts with appointment booking, then listing inventory, local commerce search and finally home delivery?

Takeaway

People's lives have changed drastically, very quickly. This is creating Demand Primitives in the form of new emergent behaviours. This is a time to leapfrog growth. Wedges built today can grow massively tomorrow with the new Demand Catalyst in town.

Etc.