Surviving the COVID Economy
Regardless of what your opinion of COVID-19 or the evolving and everchanging science around its health risks, its effects on the economy and business have been unmistakable. While some of these changes are likely temporary, many are going to be with us either permanently or for the long-term. COVID has been like rocket fuel for some existing trends, and at the same time, has forced entirely new trends unique to it, which are unlikely to be reversed or even slowed. In just a few short months, COVID has exacted years of change to consumers, businesses, and our daily lives.
For example, one trend which has been turbo-charged is the increasing desire of consumers to seek their goods and services online. Not only are consumers going online for more and a broader number of their purchasing needs online, but they are also interested in deeper and more robust engagement. Many companies have recognized this and have responded. According to a recent survey, companies have accelerated the digitization of their customer and supply chain interactions along with their internal operations by an astounding three to four years.
The businesses that have the best chance of surviving and thriving in this unique and precarious environment are those that adapt to the realities both short and long term.
Congress Acted
Faced with a disruption that was both sudden and potentially devastating for large swaths of the economy, the U.S. government acted quickly, passing the Paycheck Protection Program (PPP). The PPP, which was originated as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, was originally a $350 billion loan program intended to provide small businesses with an 8 week runway in order to weather and adjust to the effects of the novel Coronavirus pandemic.[1] Significantly, the programs allowed businesses to have the loans forgiven entirely if they used the funds for certain specific purposes within an eight week period.
Further revisions resulted in the Paycheck Protection Program Flexibility Act, making it easier to obtain forgiveness of the loans by providing more flexibility and a longer timeline for use of the funds.
Government Aid Is Not Enough
By September 2020, some 88 percent of small business owners who had obtained PPP loans had exhausted the funding, according to a survey conducted by Goldman Sachs 10,000 Small Businesses. Additionally, a full 32 percent of loan recipients had already laid off employees or cut wages in response to COVID. Thirty percent of those surveyed said that, in addition to depleting the PPP funds, they would go through their cash reserves by the end of 2020.
In fact, 300 companies that collectively received $500 million of PPP funds and which employed over 23,000 employees filed for bankruptcy within months of receiving the funds. This does not include all of the small businesses that liquidated rather than filing for bankruptcy protection.
Significantly, some two thirds of respondents to the Goldman Sachs survey have either found new revenue sources or adapted their business models in response to the pandemic. Simply put, government aid, by itself, was not enough to get most small businesses through this difficult time. In order to survive, and in some cases thrive, small business owners needed to also quickly pivoted in response to the new economic landscape.
Businesses Need to Act in Order to Survive and Thrive
Aside from what the early data shows, that businesses must do more than rely on government action is apparent from certain glaring realities. Many of COVID’s effects on consumer behavior and other aspects of the economy are either long-term or permanent. As such, businesses must adapt, operate, and innovate with these realities front and center and must do so quickly.
Consumer Behavior and Expectations Have Radically Changed
Consumer expectations of the digital capabilities of companies, and particularly those that they choose to do business with, has been elevated and at an increasing rate because of COVID. While there was a trend toward going online, the manner in which consumers obtain goods and services has changed as has the way that they engage with companies. Specifically, COVID has caused more than just a movement to online shopping and transacting. It has changed the way in which consumers — and businesses — do so.
Additionally, the way that consumers live and conduct themselves offline has also changed. This includes how people live day to day, how they interact with each other, and even how they work. These offline changes also translate into changes in needs and in turn, a change in shopping behavior.
Businesses Need to Digitize and Adapt
Simply put, digitization is no longer a choice, but a must. And it must be more sophisticated and robust than ever. Customers want to manage their online experience. They want to customize and be self-sufficient. Businesses must focus on the customer’s journey and success more than ever before.
Traditionally, small businesses have spent the majority of their online budgets on getting eyeballs on their sites and products through various methods, including search engine optimization, pay per click and social media advertising. It was a race to get in front of the consumer.
Today’s consumer is no longer satisfied with the top ads or search results. Consumers expect that once they select a link, the site loads instantly, and allows them to quickly navigate to what they need. Anything short of that will result in the consumer leaving and going to a competitor. Consumers are also sophisticated about upsell attempts. This means that companies must be very cautious and purposeful about upselling.
In short, small businesses must be sophisticated and purposeful about their marketing and sales in order to survive in the COVID economy. This requires adjusting their budgets to bring on experts in business management, marketing, and sales in order to avoid failure.
[1] The program was expanded in April, 2020 by the Paycheck Protection Program and Healthcare Enhancement Act adding an additional $310 billion in funding.
