How to Covid-Proof Your Business? – Part 1 for Physical goods

Coronavirus aka Covid-19 has wreaked havoc across the world – infecting millions and killing hundreds of thousands of people. The economic impact is absolutely shocking, unprecedented and very underestimated. Unlike previous financial crises, this one will bring about a permanent socio-economic behavioral change in advanced countries, and huge disruption in poor countries. The degree of change and scale of disruption will depend on how long the virus lasts and how quickly and effectively the vaccine is available. Physical goods businesses – manufacturers, wholesalers, retailers will be hit hard and need to assess how covid-proof their business is. In this article, I’ve shared ideas and steps they can take to build resilience and be better prepared for an unpredictable future.

Traditionally, product-based businesses become successful when they are able to achieve the following goals:

1)     A differentiated brand with pricing power

2)     Sticky loyal customer base

3)     Good length, breadth and depth of product line

4)     Minimum cost of production

5)     Optimized distribution channels

6)     Diffused supplier base

7)     Strong finances

However, in the post-covid era, there will be significant changes which will redefine a firm’s success because traditional methods will fail. Here’s how:

1)     In a poorer, slow growth, older world, the sales of a product will depend to a large extent on its price. Cheaper copycats will appear soon, and most categories will become commoditized. Pricing power will minimize and there could be a race to the bottom.

2)     Customers will become more conscious about price, utility and value. We will see heightened increase in fickleness, confusion about benefits (due to suspicion and spread of misinformation) and decline in loyalty.

3)     Media attention will shift from jack of all trades to specialists. In the last decade, we witnessed the rise of artisanal, boutique, niche stores dedicated to a single category or product line. Customers connected to their story, history and exclusivity. This trend will further accelerate as product lines will become more compact and shorter.

4)     In the earlier days, cost minimization happened via outsourcing to factories in China. Now, due to geopolitical tensions and rise in nativist sentiments, we’ll see factories being built closer to home. Cost minimization will turn into cost optimization (via intelligent machines which require minimal human involvement). In the short term, profits will significantly reduce because technology is more expensive than labor.

5)     The importance of print advertising (newspapers, posters, flyers etc.) will reduce. There will be a huge jump in online marketing because more time will be spent in front of computers, on our phones and tablets. E-Commerce, M-Commerce and Social shopping will take over the traditional channels of distribution.

6)     Suppliers will fight each other for a share of the pie. Businesses will increasingly factor in supplier location, risks, potential legal issues, data leakage etc.

7)     Every week we hear of some companies going bankrupt (J.C. Penney, Hertz etc.) and skyrocketing layoffs (Uber, Airbnb etc.). Financial strength will depend on the agility of the organization as well as its ability to understand and adapt to the times we’re living in.

Pessimism aside, a lot can be done, to improve viability, sustain operations, and be profitable in such difficult times. The key is to understand your inherent weaknesses and adopt digital solutions best suited for our current work-from-home age. Here are some steps that businesses can take for a better future:

1)     In a commoditized world (e.g. sanitizers and face masks), you can either choose to keep reducing prices in order to fight ever increasing number of competitors and die slowly OR you can choose to narrate your unique story, highlight your background, ties to the local community, and positive customer experiences to stand out – we call this re branding for better positioning in the post-covid era.

2)     With so much information circulating online and reduced attention span of customers, a strong digital focus on educating customers about price, utility and value of a product is imperative. Social media marketing can help businesses find customers, engage with them to capture attention, and boost sales by running feature and application focused campaigns. The ROI will justify the initial cost.

3)     Businesses need a website which is aligned with their new covid era goals, is search engine friendly, and easily accessible by stay-at-home purchase ready customers. If your website is confusing, complicated, slow and ugly – then your sales will be zero.

4)     Cost optimization means letting experts take over and running operations in the most effective way. For a lot of SMEs, digital marketing is still very underrated and unexplored. They need to hire professional agencies who can meaningfully contribute and add value to their digital presence. To optimize your costs, you need to discuss your marketing goals and business vision with experts and then delegate all the tasks.

5)     Shoppers are too afraid to go out. They want super-fast contact less deliveries. Amazon makes it very easy to sell online and Shopify allows everyone to run an online store on their own terms. If you’re not connected to your customers online, you’re missing out on the biggest and most important distribution channel.

6)     Employee costs and office rentals can be big overheads. Hiring and firing takes up too much time. The easier way to go about is to find experienced English-speaking individuals from a friendly part of the world, sign Non-Disclosure Agreements and delegate specific tasks to them.

7)     You need to lower operational costs. Businesses should build a corona war chest – having the necessary funds to sustain a lean organization in the current phase of the virus and later on tackling the business challenges when situation has improved.

The above ideas and steps are not conclusive but address the current challenges to a large extent. I welcome all suggestions on how we can ensure survival, sustenance, and growth of businesses. Keep watching this space for Part 2 of this series where I will focus on the unique challenges and steps that service industries should take.