Report: 'K-Shaped' Recovery Divides Corporates, SMBs

The biggest brands in the U.S. — think Amazon, Starbucks, McDonald's and Walmart — are expected to get even bigger post-pandemic, while small- to medium-sized businesses (SMBs) fight for survival, the Financial Times (FT) reported Tuesday (Dec. 29).

This disparate “K-shaped” recovery is expected to define the country’s economic rebound from the pandemic gripping the world, according to FT. While people hunkered down, companies providing digital delivery of essentials saw business soar. Corporates that could quickly invest in new technology also benefited from the fast, unexpected pivot to living, working and learning online.

Wider access to bigger loans benefitted companies that went into the pandemic with healthy balance sheets. Having numerous ways to tap capital can often be the deciding factor when it comes to which companies survive tough times and which sink, according to Columbia Business School economics professor Olivier Darmouni, per FT.

A record $2.5 trillion in loans were extended to public corporations with investment-grade credit ratings, which helped big brands like Ford and General Motors prepare for post-pandemic demand, FT reported.

“The last year’s clearly been K-shaped,” James Manyika, chairman of the McKinsey Global Institute, told FT. He added that the company’s analysis discovered that “superstar” firms already at the top of their game just got stronger in 2020, regardless of the pandemic.

Manyika added that there was a gaping digital divide between technologically-savvy firms and those less inclined to tap new tech.

“The digitally enabled ones were ready for this moment,” he said, per FT.

A Dartmouth study found that SMBs struggled to “escape their class” because larger competitors had access to funds that could be used to further strengthen their brands and market positions, FT reported.

A Mastercard report indicated that globally, 20 percent to 30 percent of the coronavirus-driven digital shift is here to stay post-pandemic. The worldwide outbreak advanced the digital-first economy by about two years, according to the report led by Mastercard Chief Economist Bricklin Dwyer.

In an October PYMNTS interview, MerchantE Chief Financial Officer Shimon Steinmetz said he was impressed by Airbnb’s confidence to refile its initial public offering (IPO), calling it “a strong sign of a V-shaped recovery for most of America.”