It’s obviously bad for business when demand dries up — just ask the bars, caterers, barbershops, and thousands of other businesses that have been forced to close their doors.
But businesses seeing spikes in demand are finding that the surge doesn’t necessarily mean higher profits.
During a pandemic, success can be expensive
Delivery companies, online retailers, and social-media companies are all seeing increasing demand — but also lower margins and rising costs:
Fedex saw a 7.2% increase in low-margin residential deliveries, but a 3% decrease in profitable B2B deliveries through the first 3 weeks of March, with even sharper declines in the forecast. It may have to lay off workers.
Twitter’s daily usage has increased 23% this year, but ad revenue declined 20% as advertisers started to cut their budgets.
Target saw sales of low-margin products like toilet paper increase, while sales of high-margin products flatlined. Target’s sales rose 20% in March, but the company expects its gross margin to fall through the quarter.
Big newspapers saw traffic spike up to 140%, but expect ad revenue to drop. Local newspapers had it worse: Gannett’s digital subscriptions increased 72% in a week… but its stock is down 80% since February.