In this article we'll look at some of the impacts Covid-19 has had on business spending based on anonymized enterprise data.2020. We all know it has been an eventful year and that it has disrupted many things as we knew before. There have been enough posts around the internet about how it disrupted digitization, how working from home affects individuals, and how procurement has needed to adapt. We know we have not travelled to the beaches of Australia and the streets of New York this year, and maybe some of us have spent more money on baking powder for our banana bread. But how is the COVID-19 year presented in companies’ spend? Have companies spent more on consulting projects for help through the crisis? How much has the travelling spend actually decreased? How about fruits around the office? Have companies had the money to do market research? Let’s find out.
Sievo is in a fortunate situation to understand company spend due to us having access to over 800 billion dollars of spend from many different companies around the world who have given us access to it through our spend analytics software. As a disclaimer at this stage, we want to stress that we are using data only from clients who have given their specific consent to derive any anonymous summaries like this post.
Let's get right to it then. Perhaps one of the most obvious changes in spend compared to last year is regarding travel. This year conferences have been virtual and sales meetings have been held from the comfort of our own homes. Therefore, In 2020, global travel spend decreased by as much as -75%, and airline spend by -87% compared to the year before.
This is something we may have guessed, but the spend data also shows exactly when the pandemic started and when it started to affect travelling spend. After a few already lower months, one can see a clear drop from March onward as the pandemic hit most of the world. To this day, the global travelling spend has not yet shown hints of recovery to previous stages. It is also possible to analyze the travel spend by country (not presented in the graph), which gives us hints that as the pandemic situation started to recover in Asia, the region also showed slight recovery in terms of travel spend. At least the environment will thank us this year for not flying and rather learning to communicate with everyone on the other side of the world through our computers!
Around the same time, companies were in need of legal services, making the spend group rise by +25% from the year prior. Also spend on donations and gifts increased - hopefully not to bribe the legal entities! All kidding aside, the spend data from this year showed us that in times of difficulties, external services were considered to be helpful when trying to figure out what is possible, what should be done, and how to move forward.
Another spend group that increased is advertising. For businesses to remain competitive, several companies have held on to their advertising budgets or even increased them, resulting in advertising to have increased in double digits compared to the year prior. If you felt like you saw several advertisements about relaxed home-wear, for example, you may have had the right hunch. In fact, consumer goods companies actually spent a lot more on marketing compared to manufacturing companies when comparing to the year before.
With this being said, it has been a difficult year for many companies and therefore the total marketing spend has decreased along with, for example, advertising production spend. Reports such as the one from IAB (COVID effect on advertising, 09/20) confirm this, as it states how the total advertising has in many places decreased, while specifically digital advertising spend has increased quite a bit.
In addition to doubling down on digital, companies have pursued to stay competitive with understanding the market and the vast changes with market research. "What are consumers buying now?" "Will my clients go bankrupt?" "What is trending in USA?" This has resulted in market research spend increasing by +12% versus the year prior.
In addition to trying to survive the year by taking advantage of external services, ads, and market research, companies naturally attempted to decrease costs. Training is down by -33%, software by -12%, furniture by -48%, and utilities by -23% compared to the year prior. All spend that can be called unnecessary seems to have decreased, including office snacks. As employees are working from home, no more fresh bananas and apples are needed in the coffee rooms, possibly being one factor in making spend on fruits and vegetables decrease by -30% compared to the previous year.
We know that the aspects we can see from company spend are interesting and they do surely give us insights into what happened this year, but it must be remembered that they don't give us the full story. No-one can deny that travel spend did, indeed, drop drastically, but what spend data cannot show us is how the lack of travelling affected the sales teams' meetings, for example. We can see that advertising spend increased but we cannot see the long hours that the marketing team pushed in the middle of the night to get amazing content out. With this being said, spend data does show us the large trends that happened this year in companies around the world.
All in all, what spend data showed us is that this year was, indeed, quite eventful. The pandemic hit most of the world in March and businesses did not know what to expect. The stock market was fluctuating, stores ran out of products, and employees started to work from home. Spend data showed that to get through this, businesses started to drastically cut costs from various areas. They also started to rely on the help of external services, such as consultancies and legal services. To understand what is happening in the market, many also increased their market research spend. These measures ultimately resulted in clear savings. Who knew spend data could be so insightful?
Although it would be very useful to be able to see straight into the future and see how businesses will spend all of their money in 2021, part of procurement's fun is the freedom to decide, isn't it? Maybe next year businesses will all be spending on airlines, who knows. What we can state is that the year 2021 in spend cannot be as eventful as 2020. Right?