“Uncertainty and risk - the main difficulty and the main business chance.”
David Hertz, American mathematician and analyst
Do you know that the average recession since World War II lasts 11 months?
Starting from World War II recessions became shorter and less harsh. The longest post-World War II recession began in December 2007 and ended in June 2009, a total of 18 months. However reduced timing unfortunately does not make recessions pleasant. Recessions can be caused by multiple factors like Arab oil embargo of 1973, soaring interests, import taxes legislation of 1930 or a pandemic shock such as COVID-19.
We all have faced with consequences of COVID-19: many of business didn’t survive this pandemic; many cut personnel; many cut salaries, many are re-negotiating lease contracts and so on. These cuts in personnel have led to people cutting their day-to-day costs, which results in lower demand and lower revenue for b2c businesses. Due to movement restrictions put out by governments and some of the businesses continuing practice of work from home sales of b2c businesses moved from offline to online. Many grocery stores noticed movement of their high sales days from weekends to working days in the middle of the week. Due to school restrictions kids had to study online. But will these changes continue to exist and how businesses can respond to these changes?
1. Increased Service Scope and Capacity Brings More Revenue at Low Cost
Cutting day-to day costs by users have led to decrement in number of accounts in Telecom industry: for example instead of 2, 3 phone numbers, users started using only one, businesses don’t hire big conference rooms, they establish online meetings. Providers respond to such cost cuts by changes in pricing strategy and increased capacities. Facebook has created Messenger Room with up to 50 participants in a meeting; now Whatsapp allow having up to 8 people on a call. From finance standpoint such changes are not very costly for providers, but bring good revenue increase for their services. Furthermore such enhanced services allow for effective cost saving strategy for the business users.
2. Little Free Service and Lifestyle Engagement Builds Loyalty Over Product and Increases Revenues
Closure of movie theatres and public places, social distancing has created gap in people gatherings. Together with cutting costs it created an issue for entertainment industry, restaurants, education entities and so on. Netflix for example has responded to this challenge with changing focus to lifestyle values and engaging relatives and friends of their subscribers: it has created Netflix Party, which allows to synchronizing videos among several accounts and sharing thoughts about movies in online chat. Educational companies responded with providing more free content and again engaging friends: Coursera, EDX now offer many free educational courses, Duolingo offers 7 days free language study plus bonuses for inviting friends and relatives. These free products are free for users, but are paid off to companies via display of advertisements. It is effective revenue increment strategy, which allows increasing revenue by attracting new customers without costly advertising campaigns, which not all of the businesses can afford nowadays.
3. Digitalization and Artificial Intelligence Allow Providing New Experience to Customers and Cutting Costs
More and more companies focus on digitizing day-to-day routine simple tasks to make their work more effective and less costly. Spinneys and other retailers implemented automated self-service cashier desks, which increases pass-through capacity and eliminates lines in the shops. CLO Virtual Fashion, MemoMi, Magic Mirror, Nobal Technologies produce smart mirrors that allow sizing service, playing with combinations of things, comparing sets, connecting shoppers to social media and so on, so that mirrors become personal assistants and fashion advisers. Neiman Marcus, Ralph Lauren, Adidas, John Lewis, Uniqlo, are installing such mirrors to be compliant with social distancing, increase their customers’ satisfaction, building loyalty and increasing sales. Same is happening to call-centers. Good news is that 50%-70% of people work is routine, where artificial intellect can substitute people, allowing more time for more humane tasks. End of routine work for people doesn't mean end of work for people. Though those employed in the mentioned areas will have to get educated for other jobs same as coachmen transferred into drivers with the time.
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