Business after Lockdown
The life after the pandemic could be very different. As businesses start to open, business fundamentals would look very different than before. Few critical things which would change are if you have a Small & Medium business, the biggest question is how does world change in the aftermath of this COVID crisis
What does it mean for Business?
With most businesses, big and small, shut for almost a month now, the economic losses are growing by the day. In a worst case, the cycles of shutdown and opening up will continue till mid of 2021 leading to a huge loss of lives, employment and value creation. The obvious fall in profitability, a closure of a couple of months would bring in other problems for a running business. It seriously disrupts business planning, working capital, inventory planning and supply chains.
How does future look for your Business?
The life after the pandemic could be very different. As businesses start to open, business fundamentals would look very different than before. Few critical things which would change are:-
The price – benefit equation of the customer would change. The customer would hold on to cash and purchases. There would be new emotions of uncertainty, fear and anxiety impacting consumer’s buying behavior. The definition of necessity and luxury would change. The brand loyalties would change. The size and the mix of the consumer basket as well as the position of your product in her basket would change .
Lower growth rates would adversely impact disposable income leading to a demand side constraint. As growth goes down, the disposable income would reduce and so would be the discretionary purchase. Almost everyone would get pushed down the pyramid of income. Those already at the bottom would risk getting pushed out to no income. The number of customers wanting to avail your products would get reduced for most of the commodities.
The reduced demand would result in excess capacity, excess distribution and excess competition. It would become a fight for survival for many businesses. Few would become desperate and would adopt reckless approaches to defend their business. With stressed cash flows, severe working capital stress, excess & incorrect inventory, the profitability pressure would lead to dumping and severe price discounting. The ability to command a premium for brands would go down drastically as price would become the primary driver.
The supply chains would become more uncertain. The fluctuating demand on one hand and the hampered manufacturing on the other, would lead to unstable supply chains. In today’s well connected manufacturing world, there is a high level of interdependence. One single supplier unable to supply one single component due to one particular district under blockade would halt all your shipments. A disrupted supply chain would take a long time to stabilize back to the new normal.
So, what Should do?
While the challenges are enormous, businesses cannot afford to lose this precious time. It is of paramount importance, that while the health crisis needs to be kept at bay, businesses should plan and prepare for life after Pandemic. The first thing is to acknowledge and accept the chaos and plan for it.
Business after Lockdown
Your business planning and forecasting models would need a complete overhaul. With a stressed cash flow, you won’t have the luxury of keeping high inventory to avoid a missed sale. Ability to precisely forecast the future would become a key attribute. Unfortunately, it would also become a near herculean task as your past period models would fail. The age old wisdom that past is the best predictor of future would not work. In a more digitized world, you would require new & additional skills in your work force. E-commerce, web analytics, digital marketing, demand forecasting, Data analytics would be the areas of future. It would be a good move to retrain and retool your staff in these new technology related skills.
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