The economic downturn caused by Coronavirus pandemic has had a huge impact on all large and small businesses all over the world. On the other hand, it also has impacted our lifestyle too. These days we hear things like “the death of retail”, “the crash of globalization” and “the death of retail business” very often. Accordingly, a lot of business owners say that a lot of things are going to change in our lives. Therefore, businesses have two options to survive the current economic downturn, either by transformation of the whole business or by filing for bankruptcy.
The truth of how businesses cope with the recession and brace for recovery reveals a very different tale, one of pivoting business strategies that are beneficial to short-term survival alongside long-term sustainability and development. Transforming is a strategic step that provides enough equity for the consumer and the business to share.
Consider Spotify, the global pioneer in online music streaming. In theory, this type of business has all the elements of success in the quarantine economy: clients trapped in their apartments who would like to run away from a depressed reality by listening to music smoothly streamed to a playback gadget without need for physical distribution.
And yet the Swedish business failed to find a solution that would help it to resolve a simple issue: unlike Apple Music, Spotify depends heavily on free customers that choose to listen to ads. Before the pandemic, the organization assumed that commercial sales would rise much more than the free customer base, becoming a crucial contributor to the end result. While the concept had already showed certain signs of maturity, its shortcomings were not immediately evident until the pandemic struck and advertisers slashed their spending.
One turn of Spotify’s approach was to deliver original content in the shape of podcasts. The website saw musicians and fans upload over 150,000 podcasts in just a month, signing exclusive podcast contracts with celebrities and beginning to curate playlists. The change in policy suggests that Spotify will become more of a taste-maker. In the long term, the corporation is going to double down on Netflix’s not-so-secret formula for survival in a market where content owners reap robust profits while pure-play streamers fail to become competitive.
Transforming is definitely effective with streaming networks, but is it supporting established businesses? Let’s look at the world of restaurants. They were beaten by the lockdown, with many owners thinking about whether to shut down for good. The typical way to talk of restaurants is to see a dining area next to the kitchen. Restaurants, though, are kitchens whose production can be distributed to consumers in a variety of ways and use various forms of business models. Eat-in, take-out, deliveries, and catering are only the tip of the iceberg.
One of the transformation methods would be to give a flat rate for a fixed number of servings per week or per month, with restricted menu choices. Restaurants can increase their margins by learning how to handle captive demand. Another turn will be to provide a mix of pre-cooked meals with side dishes or variations that could be made at home with ingredients provided by the restaurant. The restaurant may submit a connection to a video that leads the client through the preparation process, thereby adding a conceptual and learning dimension. Deliveries may be big enough for a few meals in a single week. All transformations will contribute to a larger diversity of business strategies, which may become a permanent aspect of the restaurant environment, particularly if the movement towards remote work from home is continued in the long term.
The recession has led to a collapse in supply chains, as illustrated in the alarming images in bare store shelves — a void that provided small farmers with a rare opportunity. After watching their sales to supermarkets and convenience retailers drop after the quarantine, several small-scale farmers set their eyes on the demands of homebound customers. This transformation involves investment in IT , communications and logistics which might prove to be competitive in the long run as the movement towards shorter supply chains is gathering traction. Additionally, some producers and local retailers migrate to Shopify, the Canadian e-commerce website, which has seen a surge in e-commerce at a gap of less than 15 miles between vendors and buyers — a portion of the internet sector that powerhouses like Amazon have historically ignored. Shopify’s main goal was to offer a robust cloud-based subscription platform that lets sellers control prices, pay bills, predict cash flow challenges, and automate delivery.
We also seen major multinational corporations pivot in the crisis. While demand for basic goods has grown, Unilever has moved to give preference to its processed food, surface cleaners and labels of personal health products over other things, such as skincare products, where competition has fallen. The organization does not yet realize which improvements will become permanent. If the upturn in remote work persists, Unilever can find that some of those transformations remain in place. Nonetheless, shifting towards home-based consumption can entail repositioning not only foods but also personal care products.
A far bigger challenge to existing labels is the growing desire of customers to play with new products throughout the crisis. Consumers hold labels and businesses to a higher degree than before, preferring those seen as doing much more society. Industries like Unilever and Procter & Gamble, who have dozens of brands in their holdings, have no option but to transform in response. Brand loyalty may no longer be taken for granted, so repositioning of the brand can in many instances be appropriate. But the purpose of branding and messaging will need to be altered laterally, not restructured, as customers are becoming more involved in safety, experience and comfort as a side effect of the pandemic.
Not all of the transformations end in strong market results. Three measures are required for such side-movements to work. First, a transformation must align the company with some or all of the long-term trends formed or amplified by the pandemic, such as remote work, shortened supply chains, social distancing, customer introspection and improved use of technology. For example, if social distancing appears to be the law for the foreseeable future, Tinder’s casual dating app will have to follow Bumble and Facebook Dating by offering video dating.
Second, there will be a lateral expansion of the current resources of the company, solidifying — not undermining — its strategic purpose. Faced with the complete collapse of travel, Airbnb moved quickly to help hosts economically and connect them with prospective customers. Hosts will also offer online dining, yoga, art therapy, magic, songwriting, interactive tours, and several more events, with users joining for a nominal fee. This transition is also another step in Airbnb’s changing strategy from its conventional market model to making it easy for hosts and visitors to migrate to a full-range lifestyle site. In the future, online interactions will help travelers explore new places and on-site events and help hosts offer improved service. Airbnb may become a forum that people use not only to plan their next holiday, but also to cultivate a multicultural mindset during the year, to learn from a distance about other cultures and to celebrate the uniqueness of the world on a regular basis.
Third, transformations will deliver a viable route to sustainability that retains and strengthens brand trust in the minds of customers. The global recession caused by the coronavirus pandemic does not automatically mean the death of whole sectors or businesses. This challenges business models that refuse to shift into a modern environment marked by shorter supply chains, remote jobs, social differences, customer introspection, and increased technological use.