COVID-19 will kill off thousands of well-known brands, expert says
COVID-19 is a historic calamity for the U.S., killing nearly 270,000 American and sinking the country into recession. But amid the rubble, business guru Scott Galloway also sees the building blocks for a healthier economy.
In a new book, "Post Corona: From Crisis to Opportunity," the professor of marketing at New York University says the coronavirus could prove transformative. He spoke with CBS MoneyWatch about how the disease may change the business landscape. (This interview has been edited for length and clarity.)
A range of well-known companies have gone bankrupt after being rocked by the virus, including retailers like J. Crew, Lord & Taylor and Neiman Marcus, restaurant chains Friendly's and Ruby Tuesday, and rental car business Hertz. Some of these brands had been around for more than a century. Are they gone for good?
Scott Galloway: A lot of these iconic brands are never coming back. I would loosely describe the 1990s and the aughts as the brand era. The general notion is that the greatest asset a company had was its brands. The companies that returned the most for shareholders were the big brands. That era is over. We will see hundreds of retailers go away — but we'll see tens of thousands of brands go away. Companies will put all of their resources behind their best brands and let the others die.
You do have some brands that have value, but that value doesn't overcome inferior products that don't fit the consumer's needs right now. Soft drink giant Coca-Cola is killing 200 brands. Everyone knows Tab. That seems to have value, but not enough to save it. The notion that all brands have value is over.
What does that mean for newer companies like Uber, which has become a household name but continues to lose money?
I think Uber survives, but rental car chain Hertz doesn't. Uber can survive because of their cost structure. They do not have to pay for keeping up their cars. These asset-light cost structures are amazing business models.
In your book, you say Uber exploits its workers. Isn't an exploitative business model bad by definition?
You would would like to think so, but look at Facebook. Its algorithm is basically rage. The easiest way to engage someone is to enrage them. When Facebook figures out that you are a Democrat, it feeds you videos of how much of an idiot [U.S. Department of Education Secretary] Betsy DeVos is. Republicans get videos of AOC [Rep. Alexandria Ocasio-Cortez of New York], and that all serves to make shareholders more money. Tobacco companies still make lots of money. So you can have a great business model and still be bad for society.
In the book, you say that despite all the business closures and soaring unemployment, some workers may find more opportunities after COVID-19. Elaborate.
There will be a big upside for a lot of people. If you are able and can afford to get into the office, it's likely your career will accelerate. The closer you are to the people who make decisions, the better you will be.
That's the same as it's always been, no?
It is and it isn't. If your inability to make it to the office was the source of your inability to work, you are going to get more opportunity; so that's a good thing. But if you work in a job that can be moved to Denver, then it could be moved to Delhi, That's not great for workers.
You also criticize the federal government's economic relief effort — specifically, the $2 trillion that was spent to help individuals and businesses stay afloat during the pandemic. Didn't that money help?
Putting $1,200 in the hands of households that need it was absolutely the right thing to do. But the Paycheck Protection Program — putting $700 billion into small business — that was the program I didn't like. That money went to firms that either didn't need it, or it won't help. And someone is going to have to pay this debt back. The only thing in this country that has bipartisan support is reckless spending.
I think we need some sort of targeted stimulus. There should not be any more money for companies, but the money for the neediest people makes sense. We need to be more magnanimous with people and less with companies.
One idea you have for bringing Americans together is something you call the Corona Corps. What is that?
Part of the problem in American right now is that we see ourselves as either red or blue. We need a way of getting back to working together. I think there is a lot of opportunity with young people out of work to create jobs. We have the ability to turn some of them into COVID-19 tracers.
It would be nice to create a generation of Americans that could make making America better their priority.