Predicting Pockets of Demand as the Economy Re-Opens

Adam Hark |

There are plenty of consumer spending trends that have taken hold in this economic downturn. We see the shift in purchasing preference to online and mobile platforms, and away from brick-and-mortar retail. We see the devastating effects the pandemic is having, and will likely continue to have, on the airline, cruise, resort, and hotel industries. We also see the bifurcation in the restaurant industry, where high-end dining outlets are getting hammered, but there’s life for food service players who have the ability to pivot to a pick-up / delivery model.

For payments providers and integrated SaaS companies which cater to SMBs, the sectors your clients operate in will, in large part, determine how well they will be able to weather and adapt to the current economic climate. But responding to contemporary challenges is not, in of itself, sufficient to successfully grow. The best providers in both payments and SaaS will end up being those which can correctly anticipate the future of the economy, including which sectors of SMBs will emerge healthy.

The need for payments and SaaS companies to refocus their marketing and sales resources has become a growing part of our consulting business. We’re doing a lot of work with our clients to help sort out risk exposure within certain merchant SIC codes, and optimize for the “after shut-down” economy (as I’ve written about before). But one element of the optimization process that I haven’t spoken to previously is how to anticipate specific sectors of growth.

Notionally, I’m talking about the ability to predict, identify, and leverage specific sectors where there’s a high probability of finding pent-up demand; demand which will be realized as states begin to ease lock-down restrictions. When the restrictions ease and people feel sufficiently safe to travel to businesses that they had been heretofore restricted from visiting, I want my clients to be properly prepared to pounce on growth opportunities.

Many of the sectors worth targeting will be service oriented. Service industries, beholden to an in-person experience, have been largely shut-out from the surge in ecommerce (for obvious reasons). As such, that’s where I’ll be focusing my sights: upon service industries which satisfy a consumer need. It’s important to make the distinction between consumer wants and needs, as it’s the need-based services that I anticipate having the pent-up demand. As much as it pains me personally to be deprived of a luxurious dining experience, dining out doesn’t constitute a need for me. On the other hand, I have two cars with mechanical issues, inspection stickers to renew, and routine maintenance services to fulfill. As such, auto services is one of the sectors I’m extremely bullish on right now.

Properly identifying pockets of demand for future business isn’t always the most intuitive process. It requires thoughtful assessment and insight-based predictive ability. But if properly anticipated, it will provide much needed pay-offs to payments companies and integrated SaaS companies, many of which have suffered greatly in the pandemic.

Adam T. Hark is Managing Director of Preston Todd Advisors. With 15+ years of consulting in payments technology, SaaS, and fintech, Adam advises clients on growth, exits, and market positioning strategies. Adam can be reached at  adam@prestontoddadvisors.com