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Can a recession sprout new industries?

Ask the mask-seller right round the corner. According to him, it does. The harder part to digest is that the mask-seller sells masks after losing his job at a software firm!

Dark humor besides, recessions do sprout industries. The first recordable instances took place in the US during its Great Depression in the early part of the last century.

Brewers in the US during those times of falling demands and Prohibition (1920 to 1933) diversified extensively into food and related businesses dairies, meats, and other agri-businesses. They also came up with neat tricks like “Near Beer”, Root Bear and the likes which has practically no alcohol but had the same taste as beer. And they stuck on through thick and think with the result that the top selling beers in the US today are related to those “die-hard” brands! For that matter, even P & G came out a winner thru the Great Depression with hard lessons learnt which has made it the brand it is today!

Another warrior born in another period of recession (1908) is General Motors!

In the present context, Uber came about in the worldwide recession of 2007. A recent study in the US has shown that 67160 new companies came about till the end of May 2020, an astounding 21% rise over those of 2019! Going further back, it actually fell by 3.3% in 2018!

What could be the reason for this apparent rise in the time of a fall?

  • Forced entrepreneurship. With job losses being rife, and time on hand, people are applying their mind and coming up with all manner of enterprises and businesses just to survive, much less prosper
  • Easy funding. The pandemic has forced most governments to flood the economy with easy money to start enterprise and get life back on track.
  • Existence of niche business models. Uber, AirBNB, Oyo (in the Indian context) are specialized businesses which came in times of a need
  • Existence of existing business with large potential: Diagnostic centres in most cases are the need of the hour. Practically every second business could be just that!

Photo by NeONBRAND on Unsplash