8 ways business may change after lockdowns end
As COVID-19 social distancing measures continue to stretch from weeks into months, many are understandably eager for a return to regular day-to-day life. Businesses, especially those who rely on in-person interactions, are likely struggling with this altered reality. The news is changing rapidly, with updates of closures, cases and more details changing by the minute. This makes it particularly difficult to determine when measures such as social distancing will cease to be necessary.
Is it reasonable to expect that life will return to normal, with no lasting impacts from the pandemic? Unlikely.
Looking to a re-opened Wuhan, China
One only has to look to Wuhan, once the epicenter of the virus and now slowly resuming activity after 76 days of strict lockdown. The city of 11 million people began allowing travel, non-essential work and other functions in early April. While many were eager to depart the city after the long shutdown, others remained cautious and traffic levels were well below normal. Though government enforcement remains in order to prevent another outbreak, some experts say it is practically unnecessary since resident behaviour has fundamentally shifted and most are still exercising caution as a result of their long, tense weeks at home in a deeply affected city.
As such, it is likely there will be lasting effects of the pandemic after quarantines end. The following are eight ways that businesses – and their consumers – may change when life resumes post-pandemic.
Unpredictable customer behaviour
A major challenge for businesses will be understanding the varying ways customers interact with their company once work restarts. Some will be eager to purchase and continue as normal while others will be more cautious and hesitant about spending.
While businesses in Wuhan are re-opening, in many cases staff are reduced, demand is down and company spending has been cut. Such moves are likely to be seen in many other areas once quarantines are lifted, as these outcomes are typical after a downturn. Following the 2008 financial crisis, nearly 9 million jobs were lost and household spending dropped to WWII levels. With a deep economic blow, it’s understandable that individuals would exercise caution in the immediate aftermath.
Alternatively, some affected groups demonstrate the opposite behaviour in what is known as “revenge spending.” The term was coined in the 1980s to describe the buying habits of consumers following a period of restriction. Already some Chinese shoppers are flocking to luxury boutiques as they reopen their doors but it is unclear if these actions will compensate for the previous months of shutdown.
Instead of working with typical relationship patterns (e.g. potential customer, new, existing, and loyal), businesses must be ready to adapt to new behaviours, requirements and standards.
A complete shift in strategy
At the moment, businesses must operate remotely and try to adapt their organizations to this environment. They are most likely focused on cost-savings, short-term planning and maintaining their current business relationships or contracts. When major areas re-open these same companies will have to shift their thinking once again by revising their overall strategy and determining what aspects of the organization require change in order to maintain profitability. They will need to ask themselves:
What areas require immediate action? (e.g. fulfilling orders, receiving overseas goods, balancing budget)
What is the most pressing need? (e.g. generating new revenue, keeping existing clients, freeing cash flow)
What do I want my business to look like six months from now?
During the beginning of the shutdown, companies had to rethink their original 2020 strategies and priorities. It is particularly challenging as it is unclear when the pandemic will completely subside. Their plans will vary depending on the length of the shutdown, but once normal activities resume, tactics will likely look very different than their original outlook.
Digital first
One of the biggest shifts will likely be the increased emphasis on digital capabilities and automation. While many jobs or industries may not seem easily adapted to an online environment, this new situation has showcased that digital, in its many forms, is no longer an accessory to business, but a necessity. It is not reasonable to expect all organizations to make themselves completely digitized, but it is likely that many manual tasks will become streamlined and automated so that the business can run more easily, efficiently and with less cost. Even seemingly small habits such as writing paper checks or manually handling invoices are prime for an update in processing.
Remote workers
There are mixed fields of thought on the effectiveness of working from home but those whose roles can be performed remotely are likely doing so during this time While many are eager to return to offices, it is possible that the current arrangement may become permanent in some cases. In one study, a workplace saved an average of $1,000 per employee per year due to less spending on office space. Additionally, if a business does not have to limit potential employees due to a geographic space, it could widen the selection of candidates to national or even international employees. After all, with today’s payment capabilities, it is just as simple to fund overseas workers as it is to pay those in the same building. Though work from home mandates were becoming more common prior to the virus, after extended periods of this practice both employers and workers may be more willing to embrace the trend.
Customer base expansion
There are a large number of businesses which are highly focused on singular functions such as distributing one product, exporting to a particular region or servicing a unique group. While such a practice likely helped establish the organization as a leader in that field, it also limits their potential if the group or region is unavailable, as might be case the during the pandemic.
These companies will likely have to re-evaluate how they can expand and diversify sooner rather than later in order to maintain their sales and viability. For some, this will mean expanding into a new market or repurposing their products and services to fit the current customers’ needs.
A softer approach to sales
The end of quarantine will be a challenging time for companies, as they are likely eager to compensate for lost revenue, but their customer base may be equally hesitant with their spending. That is not to say that net new sales cannot be generated during this time period, but businesses could benefit from a softer sell approach. This means that they can place more emphasis on articulating their value, providing support over a more aggressive sales pitch and highlighting any charitable contributions or matching programs.
Revaluating overseas suppliers
During this unprecedented time, it quickly became evident that there were serious challenges with the current supply chain management process. An incredible 94% of Fortune 1000 companies experienced disruption in this area. Many were overly reliant on a single country or source for the bulk of their materials and products, for instance the epicenter of the virus, Wuhan. While some large corporations opted to move some of their production away from the location early on, others did not have the resources or time to make such a dramatic move.
Luckily, it may not be necessary. While shuttered production will take time to return to pre-virus numbers, in Wuhan alone 97% of industrial businesses are reopened. And though some organizations may have contemplated leaving China, few are following through as it’s difficult to replace the expansive workforce and established operations found in the nation. Still, companies of all sizes will likely look to diversify their sourcing so they are not solely reliant on a single region, where possible. It is important to note that major structural changes can be costly, so it’s unlikely that businesses will rush to make big changes unless absolutely necessary.
Cost cutting & cash flow
Regardless of the industry, it is understandable that nearly every organization will look to cut spending or trim unnecessary expenses during this time. Even if their profits have not been hit severely, the unexpected and prolonged closure underscored the importance of a healthy cash flow. Expect businesses to look for any type of savings, from seeking new suppliers, to automating manual tasks, to delaying new hiring – at least in the short term.
Next steps for businesses
The COVID-19 pandemic has upended regular business practices with its temporary closure of many operations. Because it is unclear when the crisis will come to an end, employers and staff are quickly adapting to the new situation. Once physical locations are allowed to reopen, it will not be to the same working environment. The effects of the quarantine and economic ramifications will have an impact on nearly every operation.
The behaviour and demands of customers will inevitably change, meaning that their actions will be less predictable and easily standardized. Businesses must be able to adapt to shifting expectations and accommodate the new needs. Similarly, regular sales tactics will not necessarily be effective as the environment has changed and individuals can be more concerned with their own immediate finances rather than future investment. Yet because of this cautious approach, businesses will need to expand their target base or even revise their focus in order to recoup lost revenue.
In terms of an organization’s regular practices, adjustments will likely be made in several areas such as re-evaluating overseas partners and diversifying in order to avoid future blocks in their supply chain. Many companies are already prioritizing any digital elements including initiating remote working and automating tasks. Such moves may become more widespread and popular once quarantine limitations are lifted. Finally, most businesses will likely look for cost-saving opportunities to protect their operation during an uncertain time period.
Owners should be prepared for the shift and make adjustments now, to bolster their chance for success in the new environment.
