It's unclear how our world will look, feel and function after the COVID-19 pandemic. The most recent novel coronavirus (SARS-CoV-2) is still front and centre on the world's stage as it continues to cycle through different parts of the globe. If you're thinking about starting a business, it's very understandable to contemplate if now is the right time.
For most, the virus isn't as deadly as viruses portrayed in Hollywood films, but COVID-19 does put specific categories of people at much higher risk. There's no certainty that the medical and scientific communities can develop a vaccine as effective as those that have nearly eradicated diseases of a bygone era such as measles and typhoid. Will the coronavirus continue to mutate? Will it continue to exist and become a part of the seasonal influenza category? Will we will simply have to accept that it will have a grave effect on a certain percentage of the population? Is herd immunity a valid defence? Can you get COVID-19 twice?
What will happen to cities and densely populated areas? Is this the end of urban living? How will the pandemic affect the economy? How many will find themselves unemployed? What letter of the alphabet will the recovery look like? Are we headed for a recession and will it be worse than the Global Financial Crisis of 2008? Why didn't anyone listen when Bill Gates warned us in 2015?
2020 has felt like a lifetime, yet it's clear there's still a long road ahead. Governments have faced immense pressure to support their citizens. Unfortunately, many leaders ignored early warning signs. As a result, they had to rapidly develop and deploy extensive and expensive plans to protect both the health of their citizens and the economy. Lives have been lost unnecessarily. While hospital fatalities from COVID-19 are decreasing as doctors learn how to manage symptoms and discover more effective therapeutics, there's still a great concern about a second wave this winter. Let's hope authorities are preparing now, while currently, death rates are low in some areas. With no vaccine available, an uptick when weather conditions change, and people begin to spend more time indoors, feels inevitable. In the UK, the NHS is typically most stressed during winter months even when there isn't a pandemic, so it's critical to plan for the future.
The future of the economy
The UK economy decreased by 19% from March to May 2020, and recovery is slower than initially anticipated. In the month of May, GDP increased by 1.8%, far lower than the initially predicted 5.5% according to the Office for National Statistics. Experts feel recovery will be slow for the UK. In other words, experts are not optimistic about a “V“ shaped, or quick, recuperation. The Office of Budget Responsibility's most recent models predict the UK won't recover to pre-virus levels until the end of 2022. The OBR also anticipates that tax increases of £60bn are required to restore the UK's finances after coronavirus. Government borrowing is expected to reach £370bn in 2020. In July, Chancellor Rishi Sunak said companies should not expect relief for increasing debt levels and only said “there were tough choices ahead“ when asked about thepossibility of increased taxes in the near future. There are also concerns about consumer spending going forward as expenditures decreased by 14.5% compared to June of 2019, according to Barclaycard.
There's also concern about growing unemployment. Both UK Prime Minister Boris Johnson and Rishi Sunak have admitted there will be job loss. Every day additional redundancies are announced across the hardest-hit sectors such as aviation and retail, and many more are anticipated. High street retailers such as Boots, John Lewis, Burberry, Topshop, and Harrods have already cut jobs. Companies in other sectors have also made redundancies, such as Rolls Royce, Pret-a-Manger, British Airways, Easyjet, Upper Crust, Airbus, Accenture, Guardian Media Group and the BBC. There are even layoffs in the red-hot tech sector, which can be tracked by the website layoffs.fyi.
Unemployment could reach the highest it's been in three decades, with downside models predicting a peak of 13.2% in early 2021. For context, at the height of the Global Financial Crisis unemployment topped out at 8.5%.
The UK furlough programme, called the Coronavirus Job Retention Scheme was introduced in March 2020 to support workers but will conclude at the end of October. Currently, nine million workers, over a quarter of the UK's workforce, are on furlough and uncertain if they'll still have a job when the programme ends. The government is working to counteract the inevitable loss of jobs due to the pandemic. Rishi Sunak recently announced a £30bn plan to save the jobs and help those unemployed or currently on furlough stay in the workforce. The UK government will pay companies a £1,000 bonus for every employee who remains employed for three months after the furlough scheme. This initiative has already come under criticism. Many business owners who are unsure how recovery will look are wondering if £1,000 is enough of an incentive to keep someone on their payroll. In the case of a rapid, or “V“ shaped recovery, this makes sense, but in a slower recovery scenario, it's just delaying the inevitable while costing the employer more. To revive businesses (translation: create a “V“) and give furloughed employees a job to do, the Treasury has also cut VAT across the tourism and hospitality sectors from 20% to 5% for the next six months. Restaurants are receiving assistance through the “Eat Out to Help Out“ initiative by discounting in-dining meals and non-alcoholic beverages by 50% for the month of August. The discount only applies to restaurants registered for the scheme on Monday through Wednesday and is capped at £10 per diner. The chancellor also introduced £2bn “kickstarter“ scheme to create jobs for the younger part of the workforce.
The big b
Oh, and there's Brexit. Remember Brexit? A no-deal Brexit is on the table.
What we can do
Let's take a look at what we can do and the tools we have to work and thrive in today's climate. According to the Office of National Statistics, approximately 49% of the UK's workforce that's still employed is currently working from home. Due to the widespread availability of fast broadband and cellular data networks, half of the country is fortunate enough to at least have the ability to work. Even a few years ago this would have been unthinkable. We're empowered with widely distributed fast broadband connectivity and a plethora of remote working tools that allow us to Zoom everywhere but go nowhere.
Use of platforms that enable employees to work remotely was already in motion before COVID, but the pandemic has certainly expedited adaption of these tools. The rapid and successful adaptation of these tools across multiple types of workplaces shows there's enormous scope for growth and invention, which means opportunities for new businesses.
Necessity is the mother of invention
We don't know how long we'll have to live in a COVID world. If there's always the threat of a virus that's like seasonal influenza, but worse and no way to develop a 100% effective vaccine, the way we live will change. We'll learn how to manage the virus better and adapt our way of life. This change creates opportunities for entrepreneurs and business owners who can identify market needs in this changing climate. Perhaps the next commonplace integrated appliance found in everyone's home is a UV sanitiser. Rather than walking through your front door and putting your keys on a console table, you'll place potentially exposed items into a UV light sanitiser.
Am I ready?
Rashi Menon, Entrepreneur in Residence and Lecturer at the University of Michigan's Zell School for Business, recently provided some guidance and questions for those thinking about starting a business during a crisis. Here's an overview of her key five questions:
- Need: Is there a need? Have you identified what consumers are looking for during the pandemic?
- Competitors: Can you provide your service or product better than the current competitors in the market?
- Experience and Qualifications: Do you have the qualifications and experience to execute your idea or concept?
- Access to talent?: If you're aware that you don't have the ability to create and operate all facets of your business idea, can you hire people who are? Do you know how to find them?
- Funding: Do you have access to funding so you can operate your business until it becomes profitable? Explore ways to access capital through funding solutions like equity funding as well as business loans.
One potential advantage to starting a company during a crisis is access to bargains.
- High unemployment? That means you have plenty of options available when it comes to hiring. There will be plenty of qualified and talented people looking for work.
- Do you need equipment? Fabulous, you can probably purchase it on the cheap from other companies who are liquidating their operations.
- Do you need commercial space? Great, there will be plenty of vacancies and landlords may be flexible around lease terms and pricing.
Let's take a look at once area that will inevitably undergo massive change. There will be developments in retail and shopping technology. Retailers must continue to embrace technology to reduce costs and operate more efficiently while appeasing demanding consumers. Unsurprisingly, consumers will buy even more online. Increased online sales also mean more online returns. Return rates were already a growing problem pre-pandemic, particularly for fashion items such as clothes, footwear and accessories. The second most returned category is beauty and wellness. More people are shopping online and expect a perfect experience that includes:
- Competitive pricing
- Free shipping
- Free returns
- Fast delivery
- With COVID-19, contact-free delivery and pick-up
- Long returns window
Today's consumer wants a seamless, free and easy process. Many consumers simply abandon their cart if a retailer doesn't offer the above services. Retailers and brands looking to grab market share must bear the brunt of shipping costs for both delivery and returns as well as managing returned inventory. The solution to this issue isn't as simple as building these costs into the price of an item as price-conscious shoppers will find the same item at a lower price from another retailer. Price comparison websites and apps and sales tracking tools make it easy to see prices for the same thing across multiple marketplaces.
In addition to free shipping both ways, consumers tend to purchase multiple items online with the intent of returning everything except perhaps their favourite piece. It's hard to quantify the average rate of return precisely, but estimates for fashion items such as clothing and shoes are between 25-40% online compared to 8-15% in-store. According to one survey, Germans are Europe's most fickle shoppers and return 52% of their online purchases.
Processing returns, inspecting and restocking items are time-consuming and costly steps for retailers. Often returned items are not saleable, are thrown away or sold by a liquidator, although this varies across sectors. For example, luxury clothing retailers are able to resell approximately 70% of their returns. That said, by the time returns are processed, the item may be out of season and is not able to be sold at full-price.
COVID-19 consumers now have even more reason to bring the store to their home. High-traffic areas, such as shopping malls and department stores, are potentially dangerous. Retailers have introduced strict guidelines for in-store shopping experiences, which thankfully create safer conditions, but, quite frankly, aren't particularly fun. Shoppers will only continue to upsize their online baskets to recreate the in-store browsing experience at home. Technology and innovation to tackle this situation in a less costly manner for will surely be a success.
As mentioned, more efficient and cost-effective logistics and delivery solutions for shipping and returns will continue to grow. Currently, many retailers offer return services that require shoppers to drop off their return package with a carrier, such as the local post-office. In an effort to keep shoppers safe and drive sales, some companies replaced this step with an in-home pick-up. As shoppers continue to spend more time at home, they will likely want the complete in-home front-to-back shopping experience to stay.
Luxury reseller Vestiaire Collective rolled out an in-home contact-free shipping option for sellers on their platform. Previously, sellers would print a shipping label through Collosimio and bring the package to their local post office as a final step. Now sellers can avoid the post office and arrange an in-home pick-up through alternative carriers such as UPS, FedEx and DHL. These carriers are typically more expensive than local post services.
When shopping in stores before COVID-19, consumers were able to see everything in person, try on items in-store, and then purchase their favourites. In-store return rates are much lower compared to online. With less access to stores, whether to browse or buy, there will be a push to bring that personal experience online. Luxury retailers are at the forefront. Even before COVID, many high-end brands such as Gucci encourage in-store Sales Associates to provide clients with their contact details and communicate via WhatsApp. Sales Associates can communicate with consumers real-time and send photos, videos, and voice memos to clients. Texting is convenient for consumers, and bespoke communication helps answer any questions, including sizing concerns. High-end e-commerce platforms like Net-a-Porter and Matches Fashion measure each item on their site and include this information in their product description.More mainstream online shopping outlets such as Asos provide size guides but do not give exact measurements for each individual item.
The need for connectivity and communication around purchases translates to growth in size-guide technology. This was already evolving pre-pandemic but will now be fast-tracked. Only the most seasoned and savvy shopper is likely to know their size across multiple brands from different countries, each with their own sizing metrics. Few people outside of fitting models and designers know how to measure themselves (for example, where to measure your hips) or even own a measuring tape. Current online size guides can be helpful, but the average shopper doesn't know how to translate complicated size conversion charts included alongside online product descriptions. They also don't have the time or patience to go through size guides to make the right selection. Consumers want accurate answers as quickly as possible, with little effort or input.
The e-commerce arms of retailers such as Neiman Marcus and Zara have already added customised “find your true fit“ size guides. These measure-free and short questionnaires assist consumers in finding their right size for each item. This technology is equivalent to taking two sizes into a dressing room, trying on both, and purchasing the size that fits best. Retailers will continue to develop technology to replace the in-store try-on process and decrease shoppers ordering the same item in multiple sizes. Along with sizing, services and technology that enhance the texture, weight, and actual colour of garments will continue to grow alongside online styling and advice platforms. American department store Nordstrom already includes a video clip of a Sales Associate describing nearly every item on their website. They go over details such as feel, weight, and styling tips, but it's a far cry from actually holding the item yourself.
Additional sectors set to thrive
Fashion e-commerce is just one example of multiple opportunities within one industry. There will be innovation across various categories. The most obvious candidates at the moment are:
- Online fitness
- Online security
- E-learning/online learning
- Logistics providers
- Industrial real estate and distribution centres
- Cloud kitchens also called “dark kitchens“
- Livestreaming platforms
- Artificial intelligence
Show me the money
Starting your own business and working for yourself is not only exciting but potentially lucrative. There’s never the “right” time to start a business, so a pandemic shouldn’t hold you back. The straight-shooting American investor and reality television personality Kevin O'Leary once said, “If you can afford to take a risk and you're young enough, either start your own company or be involved with one where you're racking up equity. There's no other path to becoming a millionaire. No employer is going to let you make a million dollars off of their business. They don't have to. Realise that if you want that path, that journey to becoming a millionaire, you have to sacrifice a lot and work like a dog.“ The COVID-19 has presented unfathomable challenges and forced us to change. We're still dealing with the virus and reeling from months in lockdown.That said, change always creates opportunity.