The Changing Business Models

The Changing Business Models

I have written a small write up below on how I think businesses will get impacted in short and long term due to Covid-19. I hope you enjoy reading it and do write in your comments. It will be good to know your thoughts on the same.

Home delivery of all essential goods and other retail items will strengthen further with Covid-19. Even when the lock down is removed in a staggered manner, people will avoid unnecessary meetings and unnecessarily stepping out of their homes for at least 3-6 months. Going to shopping malls or crowded markets may remain a taboo for a few months at least in urban areas. Rural markets may still see normalcy return sooner than cities.

Most retailers are already training in store staffs for online sales and home deliveries. Restaurants are training their staff for takeaways and home deliveries. Film makers and producers who were used to online release just 2 weeks after theater release are now bracing for direct online premier of their already completed movies. Most of the businesses will soon find their models turn on their heads at least in the short term.

Most companies will soon start realizing the potential of work from home and the savings it may actually bring in, if properly implemented. Of course, employees have to play a crucial role. They need to work with all sincerity and efficiency showing similar or better output while working from home. This may lead to long term impact on businesses with services industry opting to work from home for at least 25-30% of their staff. This percentage in any case will be higher even when lock down is opened in a staggered manner. As part of risk mitigation, at least 50% people will have to continue working from home.

This will have a big negative impact on cab aggregators and airline industry. The more people WFH and do not travel for meetings the requirement for cabs and aircraft goes down. A major chunk of Indians who fly is because of office work. There may be a significant impact on the industry due to WFH.

The biggest gainers of work from home will be telecom and ISP companies. There should be spurge in sale of laptops and mobile devices as well as companies will gear up to arm their people with the right infrastructure to continue working from home. The meeting apps like Zoom and MS team will gain in popularity and should do extremely well.

The worst hit will be the real estate sector that too the commercial real estate. First of all, there will be an immediate issue of payments of rentals. Most of the retailers will show inability to pay high rents and will negotiate the same downwards. Landlords who are not willing to negotiate may not find it easy to get an alternative lessee and may actually end up losing a large part of their earnings. They will be smart to negotiate even at a lower rate with the existing lessee for a period of one year and let them continue. Secondly, once offline retailers realize the potential of online business and consumers too become more and more dependent on online ordering, rentals in general and requirement of commercial space in specific will go down. Additionally, most companies will look at WFH model even when Covid-19 threat subsides completely leading to significant reduction in value of commercial real estate.

Some social habits will gain significance for the better. Basic habits like washing hands with soap and avoiding crowded spaces may gain prominence which will be good overall. This will lead to higher sales for consumer goods companies like HUL, Godrej, Nestle etc. It will however be interesting to see how people will commute in Mumbai local or for that matter in Delhi Metro? How social distancing be followed and how quickly will people forget about it?

What do you think?