In Part 5 of our “COVID Impact on Industry” series, we take a look at COVID’s impact on the Services sector and explore the sector’s outlook for 2021.
The service industry was turned on its head during the COVID-19 pandemic, with many businesses having to embrace a fundamental shift in business operations, at least temporarily. We’ll take a closer look at the economic impact of COVID-19 on the service industry, how businesses adapted, and what we can expect from the future.
The service industry is a broad sector that encompasses health and wellness, beauty salons and spas, financial and legal services, landscaping maintenance and contracting, and automotive services. Each of these subsectors was impacted differently by the COVID-19 pandemic.
The health and wellness subsector went through a transformation during the pandemic. It was estimated that the $4.5-billion industry lost billions in 2020 due to the sudden decline in brick-and-mortar business. On the flip side, there was enormous demand for at-home workouts. Sales of at-home workout equipment increased by 50% during the pandemic. This transformation is likely here to stay. As Nicole Dunn, CEO of Dunn Pellier Media, told Forbes, “I see at-home fitness increasing even more with so many people continuing to work from home. After many months in quarantine, consumers’ approach to fitness, health and wellness has shifted, and it appears that more consumers are taking control of their health now than ever before.”
Consumer behavior in the beauty sector changed in a number of ways as a result of the novel coronavirus pandemic. According to industry media outlet WWD, “Some binged on at-home or stealth treatments in car parking lots; others went makeup-free, and others still took an ‘anti-aesthetic’ route by shaving their heads or embracing extreme looks or makeup. Some tried them all.” According to the industry report Beyond Beauty, one of the most frequently asked beauty-related search queries was “How do I shave my head at home?”
Unlike other service-industry businesses, the financial and legal professions don’t rely as heavily on in-person services. As a result, they were better positioned to adapt to the work-from-home shift. While these subsectors still experienced downturns due to the pandemic, they may be better suited to weathering a downturn. Legal services, according to McKinsey, tend to be especially well-positioned for a downturn. For example, while transactional practices tend to contract during a downturn, litigation practices tend to be steady.
According to a survey conducted by Green Industry Pros, 50% of landscaping industry respondents indicated that the pandemic had affected their revenue in some capacity. Only 11% of businesses reported that they had experienced no impact. More than 60% of respondents stated that the pandemic has “delayed some capital,” while 30% reported that they’d experienced a loss of capital. Around 30% also said they’d had to reduce staff hours as a result of COVID-19.
Automotive repair shops were classified as essential services early on in the pandemic, allowing them to maintain business operations despite stay-at-home and social-distancing orders. But that status could not undo driving-related behavior shifts that led to a decline in business. With many people staying at home, they drove less. As a result, there wasn’t as much wear and tear on vehicles, and the need for repairs declined.
Some service industry businesses were designated as essential services, like automotive repairs and legal services. This designation allowed businesses to remain operational, mitigating the negative impact on revenue. The majority of businesses that remained operational in-person rolled out social distancing measures in line with CDC recommendations and local requirements.
Service subsectors that were not initially given “essential service” status had to find more creative solutions to business challenges. Many health and wellness businesses pivoted their business model towards an at-home-friendly approach, offering individual classes and streaming memberships. While this was easier for larger health and wellness companies with more robust resources to support the switch, small businesses were also able to adapt. Tiny Space to Breathe, a small meditation center and yoga studio in Chicago, offered virtual classes while the studio remained closed.
Beauty professionals, too, had to find innovative ways to meet consumer demand within their limited operating capacity. According to Beyond Beauty, beauty professionals were forced to become “hackers and hustlers” to address changing business needs. For some, this meant launching an online store to sell retail products. For others, it meant instructing clients on how to self-perform a service while at home.
What the service industry learned from the COVID-19 pandemic was similar to what the entire business community took away. This included learning how to work remotely, helping working families find a work-life balance, and finding ways to increase profit margins where possible.
Perhaps the biggest takeaway for service businesses was how to find an opportunity in the middle of a crisis. Some beauty professionals found ways to virtually walk their clients through dying their roots or touching up highlights. This may not be advisable to continue directly long-term (professional instruction cannot match the quality of professional application), but it demonstrated the ingenuity and revenue-generating adaptivity of small business owners in this sector. As digital transformations continue to reshape how we imagine our economy, this ability to innovate and find opportunities will continue to be important.
It’s expected that health and wellness businesses will continue to see a demand for at-home services going forward, as Dunn suggested. Many others, including beauty services, landscaping, and automotive services rely on in-person business in a way that suggests that they may not continue remote-service offerings in the future.
Then there is the case of financial and legal services. Of all service sectors, this one was perhaps the most suited for a shift to remote service offerings. Yet, a Vox report indicates that just because financial and legal service professionals can continue to work from home, that doesn’t necessarily mean they will, whether by choice or obligation.
Enjoyed this article? Check out the rest of our COVID Impact on Industry series: