In today's article, we continue with the Study of the startup ecosystem and we analyze the other side of the coin: in which sectors have startups seen their activity diminished during the Covid-19 crisis and have they been forced to reinvent themselves and to pivot their business models to avoid extinction?
The Covid-19 pandemic has caused a great loss of human life and an unprecedented economic crisis for the entire planet. The recession experienced in most countries has resulted in a sharp decline in global GDP and a sharp increase in unemployment. Comparatively, Spain's GDP has fallen more than that of the Eurozone as a whole and the economic outlook is exceptionally uncertain. The impact of the crisis has affected practically all economic activities, especially accommodation services, restaurants, artistic, recreational and entertainment activities and retail trade, which together with administrative activities and auxiliary services account for 65% of the destruction of employment. It's about activities that generally require a great deal of social interaction and where distance makes it difficult for them to be carried out optimally.For startups, which by their very nature are characterized by scarce liquidity, being forced to stop their activity without warning, meant for many of them the partial or total loss of the competitiveness they had managed to achieve so far. Having the capacity to reinvent themselves and pivot their business models, making use of specific policies and measures promoted by the Government in the most affected sectors of the market to boost growth, has in many cases been the only escape route to continue existing. Today we analyze how the pandemic has affected startups in sectors such as tourism and hospitality, the textile sector, the automotive sector and leisure and culture.
Tourism and hospitality
During the pandemic, the various agents that until now operated regularly in the tourism and hospitality sector were the most affected from the outset when, in many cases, they were forced to cease their activity as different governments enacted public health measures for each of the affected countries. In Spain, the impact of the crisis leaves no room for imagination: while in 2019 the figure reached was more than 12%, in 2020 the share of tourism in Spanish GDP did not even exceed 5.5%. In a summer characterized by a drop of more than 70% compared to the previous year in the number of foreign visitors who arrived in the country, startups dedicated to the traveltech sector have had to reinvent themselves and adapt their solutions to what is known as local tourism, in search of moderate and sustainable growth that would allow them to continue their activities. Although domestic trips made by Spanish citizens themselves fell dramatically during the first semester, for many of the startups analyzed, they represented the main source of income for the rest of the year. The figures that startups in the hospitality sector have had to face are not far behind: with more than 100,000 establishments closed and the loss of 300,000 jobs, the consequences of Covid-19 have affected both companies that marketed their products and services in the sector directly and all those startups that, with a B2B business model, acted as intermediaries offering solutions to improve the efficiency of the former. La forced digitalization of the sector has been the main key for many of these companies to manage, with greater or lesser solvency, to face the crisis caused by the pandemic.
Textile sector
In Spain, the fashion industry, one of the country's great powers so far, has been one of the most affected since the beginning of the social and economic crisis caused by Covid-19. Specifically, the textile sector registered at the end of the year losses of 39.2% of sales, compared to the year 2019. The figures recorded during the first months of the lockdown are much more drastic: Spanish stores dedicated to the production and sale of fashion and accessories closed their balance sheets with losses in sales of around 70, 80 and 72% in March, April and May respectively. Since most of the Spanish startups in the fashion sector were born under the concept of native digital branding, unlike the situation experienced by traditional businesses that have been forced to digitize to try to alleviate the consequences of the crisis, the forced closure of stores has not been the main problem they have had to face. The real problem has arisen from the inability to handle the large amount of stock caused by the fall in sales: on many occasions the only way out for startups has been to resort to discounts to try to boost sales and obtain the liquidity necessary to survive. Now, brands in the industry are faced with the challenge of adapting to a consumer who you have changed your shopping habits and preferences: the reduction in the number of social events and celebrations to attend, together with the increase in teleworking, among others, has caused customers to delay purchasing decisions for many products that they previously purchased more frequently.
Automotive
In the mobility sector, Covid-19 has wreaked havoc both on large companies dedicated to automotive production and on small emerging startups dedicated to urban mobility and ridesharing, which saw their activity completely stopped overnight with no room for maneuver. For startups dedicated to offering solutions for vehicle users, the pandemic has only worsened the situation of a diminishing market since 2017: with Spanish car production plants closed for more than one The month before the closing of the Nissan factory in Barcelona, the number of registrations in Spain was around 851,000 vehicles, a far cry from the nearly 1,300,000 achieved in 2019. On the other hand, startups that based their activity on private passenger transport have directly suffered the consequences of social distancing and restrictions on the mobility of citizens, imposed by the different governments of the country. The increase in teleworking has resulted in a direct reduction in the flow of vehicles and passengers in large cities. With millions of people unable to leave their homes for weeks, the existence of startups offering carsharing, motorsharing and ridesharing solutions lost all meaning. In addition, the prohibition of sharing vehicles with people other than those who are strictly cohabiting and the generalized fear of contagion, given the impossibility of disinfecting vehicles after each use, has caused a significant drop in the number of active users who continue to use this type of application.
Leisure and cultural activities
Since the beginning of March 2020, sports competitions were the first to interrupt their activities and close their doors to the public. Gradually, concerts, theaters, shows and other cultural activities were forced to take the same measures in different parts of the country. Just two weeks later, in the toughest moments of the pandemic, most sports competitions and musical tours were canceled or, at best, suspended and waiting for the situation to improve, in order to be able to resume. On March 13, when the Government declared a state of alarm, to deal with the expansion of Covid-19, the venues dedicated to leisure were completely closed until further notice, which was a serious blow to the more than 25,000 companies and 200,000 people that are part of the leisure and entertainment market in the country. Specifically analyzing the situation of the most affected startups in the sector, those dedicated to the sale of tickets and tickets online stand out, a market that until now was experiencing an economic boom and that for a year has been completely paralyzed. In particular, already during the first moments of the pandemic, Visits to ticketing websites or apps decreased by 55% (taking as a reference the data obtained in the week of March 9 to 15 compared to the week of February 17 to 23, 2020). Until a year ago, startups in the leisure and culture sector relied on holding face-to-face events. A year later, the situation has not yet normalized (sports competitions continue to take place behind closed doors, concerts and shows have to comply with strict capacity measures, etc.), so those solutions dedicated to music events and festivals, booking and programming activities or selling gifts that included cultural activities have most of the time been forced to pivot their business models in order to survive. *Source: StatistaMore: [embed] https://intelectium.com/analisis-del-ecosistema-startup-que-sectores-se-han-beneficiado-del-covid-19/[/embed]
