With the majority of us being in lockdown for the past two months, it is interesting to note which have been the most vulnerable sectors worldwide. Industries such as travel and hospitality would have seen a major drop in revenues, whilst events and entertainment have come to a stand-still. Most companies have taken reactive steps to ward off major losses, such as cutting costs, reducing employee workload and applying for government support.
Some companies may have experienced a burst of initial frenzy during the lockdown, but as the dust settles it's now time to start thinking about capturing new opportunities during these uncertain times. No more reactive thinking - it's time to get proactive.
Looking at emerging market trends, it is possible to identify three generic response strategies to match your company’s current infrastructure. Huge business opportunities are available to organisations that are agile enough to either change their infrastructure, their route to market, or their current product/service portfolio.
Let’s take a closer look:
Strategy 1: Same Infrastructure, Different Products
COVID-19 has dampened the need for some products and services, such as hotels, restaurants and air travel, but at the same time demand for others is high and even growing. Companies can take advantage of this change, by utilising their existing infrastructure to produce different products or to offer new types of services.
Pernod Ricard (alcoholic beverages) and LVMH (perfumes) are two such examples of companies that have quickly pivoted their product offerings, by switching to the production of hand sanitizer that is in short supply worldwide. Likewise, car manufactures such as Ford and General Motors changed their production lines in order to produce medical devices such as ventilators when car sales dropped worldwide. In China, the massive automotive company BYD Co changed their product offering to manufacturing millions of surgical face masks per week.
With the drop in hotel reservations, companies such as The Hilton and Best Western have offered their rooms to essential emergency workers and Covid-19 patients in order to temporarily pivot their business model and to ensure continued revenue.
Likewise, with the lockdown, restaurants have seen their income plummet owing to being limited to no-contact takeout and delivery services. Grocery stores on the other hand had to enforce limits per item per shopper owing to high demand. Some bakeries have changed their product offering by providing a bigger range of products, including groceries along with sandwiches and salads. Other restaurants have utilised Uber Eats as a delivery service in order to provide an instant new digital platform to clients.
Strategy 2: Same Products but using a Different Channel
The global pandemic has also had a massive accelerated influence on digital transformation within companies. This has allowed businesses in some instances to offer similar products and services through an online platform, app or channel. A great example of this are cosmetics companies that have redeployed their beauty consultants as online influencers, utilising social media platforms such as WeChat, Facebook and WhatsApp to drive online sales and to continue to engage clients virtually. In China, a single livestream shopping event in two hours equalled the revenue of four retail stores for one of the major retail chains!
Another great example is Nike, that had to close more than 5 000 of their retail stores during the height of the crisis. Their online operations however continued to engage consumers digitally by offering at-home workouts, which directly led a 35% surge in online sales, compared to the same period last year.
Even wine producers & vineyards have adopted different channels to reach their client base. Online wine-tasting lessons combined with digital purchases have seen sales dramatically increase during the lockdown period.
Educational institutions such as universities, private-sector education providers and schools have also pivoted quickly to online instruction for their learners, using platforms such as Microsoft Teams and Skype.
Strategy 3: Same Products, Different Infrastructure
It can be a huge challenge to acquire new infrastructure and, in some cases, companies will need to collaborate with external partners to bridge this gap. In the USA, Amazon is looking at employing an additional 100 000 employees to satisfy the massive increase in demand for online shopping during the lockdown. This was as a direct result of their struggle to meet demand for their products and services which meant that they had to quickly augment their infrastructure to increase production and/or delivery capacity.
The ride-sharing service Lyft has seen a massive drop in demand for trips and as a result partnered with Amazon to encourage their drivers to fill positions as delivery drivers or warehouse workers. Lyft employees can directly apply for Amazon positions through their driver web portal!
Another great example of this strategy is the sharing economy in China. Companies have for some time now shared cars, bikes and portable batteries, but have now extended this model to include the sharing of employees.
The supermarket chain Hema, owned by Alibaba, urgently required additional employees to cater for the surge in demand for their products during the lockdown. It developed an innovative plan to “share” staff, (that have been made temporally redundant), from restaurants, hotels and movie theatres, to address this increased labour need.
These “shared” or borrowed employees were trained to work as either goods sorters or packagers, and the supermarket chain agreed to an employee salary split with the original employers.
Finally, in Europe, some McDonalds' staff were given permission to work at Aldi stores, whilst the fast-food giant’s restaurants were closed. This employee-leasing agreement is for a limited period only, and all those who apply can simply return to McDonalds once their restaurants reopen.
The above three strategies may alleviate some of the strategic challenges that we all face during this crisis. It is vital to remember though that an openness to challenge assumptions and a willingness to look beyond the obvious is required.
Embrace the new opportunities and stay safe!
Warm Regards
Johan de Villiers
CEO
First Technology Western Cape