As per a McKinsey report of 5th May 2020, 44
percent of consumers in France plan to reduce their discretionary spending over
the next two weeks, compared to 34 percent in Italy, and 28 percent in Germany.
The same report says that consumer pessimism is high in countries like Spain,
France and Italy while it is less in countries such as China, Germany and US.
In the B2B segment, the effect is profound on commercial
airspace, air & travel, oil & gas, fashion and consumer services. On
the other hand, the pandemic has benefited industries such as healthcare
supplies and distribution and pharmaceuticals while its effect is less in sectors
such as telecom and personal and office goods.
With this information in hand, the first inference we can
take is that the companies will respond very differently when it comes to B2B vis-à-vis
a B2C. In the event of B2C, maintaining the safety and precautions at the end
customer touch-point becomes so important that this can be a selling point for
the company. Zomato for example gives the body temperature of the delivery
person when he is picking-up the parcel. Swiggy provides the precautions that
restaurants and the delivery person is taking and uses it as a selling point.
Similarly e-commerce companies are also doing the same.
Staple B2C companies like a HUL or ITC does not look like
using this safety issue as a marketing tool. They have got core issues to
handle such as manufacturing and supply chain. These companies and thousands
more that supply the staples across India remain at the core of maintaining the
food supply to our citizens. They must have done deep market research to realign
their product portfolio as there was news in the market that FMCG companies are
pushing high margin products during the lockdown which are considered as
essentials. We can assume that the activities in these companies are almost
back to Pre-Covid 19 levels. Market Research activities are also expected to
pick-up as companies will try to gauge the consumer demand and plan their
marketing activities accordingly.
Restarting the industrial and services sector will have a
wide variance. The variance will depend on the size and scale of the company,
the amount of funds that they can deploy to restart operations, mobility of
staff, safety precautions etc. In advanced economies and to some extent even in
India, the Government has stepped up collateral free funding at very less
interest rate for small and medium businesses. This is helping many businesses
from the verge of collapse and helping them to restart their business
activities. At this point injection of capital is the single most important
factor that is helping companies to restart the wheel.
A successful restart will require addressing a large number
of interdependent issues simultaneously. Some of the core operational issues
here is the clarity in decision making and speed of execution. The restart will
also depend on some genuine challenges that companies face on the ground. If
the company area falls in a containment zone then there may be challenges to
make people move in and out.
The key focus of companies lie in regular situational
assessments and taking tactical actions based upon them. Market assessment and taking tactical decisions
can make or break a company in this scenario. I am taking a few examples from
the Small and Medium Industry in India. A pharmaceutical company with product
line-up in areas such as pain relievers, adult diapers and vitamins made a sudden
pivot and started marketing sanitizers in large quantities to fulfill the market
demand. This immediately led to wiping out the losses that it had incurred
during the lockdown. Similarly the agricultural machinery segment both in the
primary moving machinery such as tractors and hand tractors and implements such
as rotovators are in great demand because of the robust monsoon in India. However,
there are instances where I have seen a report in a business news channel that
manufacturers making industrial machinery are suffering losses because
customers who had placed orders by paying a 10% advance have not taken delivery
of the same thereby blocking capital. These are unfortunate scenarios wherein
capital injection is the only way out of the situation. Therefore, companies should have a pulse of
the market in order to ensure that they stay ahead of the situation.
A recent Accenture report states 5 very important points on
what companies need to do at restart. These are communicating with the
workforce with compassion and confidence to help the workforce get rid of their
anxiety, care about employees problems, build trust with people and prove that
with purpose and turn furloughed workers into flexible workers.
Returning to work will not be as easy. It will not be determined
by market demand alone, but by readiness and confidence of employees. The organizational
need to reopen will be just one factor. As we move to the new normal employers
need to move with confidence but with utmost precaution. There have been
multiple instances in industrial areas wherein companies with 100 + employees
have been sealed because of a single employee testing positive for Covid 19.
We are working with SME’s to ensure product offtake and enable
them to keep their cash registers rolling. If you are looking for a well
meaning report that can help your firm to press the restart button drop in a
line at firstname.lastname@example.org