COVID-19’s Impact on Businesses
Updated: May 22, 2021
Economic units have been the most hit during the pandemic. Businesses found it difficult to not only make profits but also survive in a COVID-19 infused environment.
We can see a negative trend in statistics everywhere. Most businesses took a massive downfall and lost a majority of their profits. This is because of the restriction of physical labor, and lack of sales due to a fall in the disposable income of clients, which in turn was caused due to unemployment.
The International Labour Organization estimated an equal of 400 million jobs lost across the globe in the second quarter of 2020 due to COVID-19.
India’s growth rate in FY20-21 fell to 2%, while its previous ranges were 4.7%-5.2%, as predicted by ICRA Limited.
Physical stores saw a 90% drop in visits in a single month of March due to imposed restrictions on in-store policy and social distancing.
Yet, all is not lost.
Online-based businesses saw tremendous growth opportunities as physical units collapsed. We witnessed a 50-70% increase in internet usage as people started working from home and streaming increased by 12% as they used services like Netflix more often.
This resulted in massive growth for all online-based businesses.
“E-commerce will be the other sector that will see a revenue boost as a result of the pandemic, adding $175 billion in revenue in 2020, which represents a 5% increase.”
– Maria Rua Aguete of Omida, the tech research arm of Informa Tech
We will now look into various businesses and their experiences during COVID-19.
Small businesses are privately owned units, sole proprietorships, or partnerships that have fewer employees and revenues than a regular-sized business.
The U.S. Small Business Administration has formulated a table for small businesses on basis of size and the industry:
According to reports:
22% of small businesses went out of business between February and April of 2020.
African-American businesses witnessed a 41% drop in business activity.
55% of businesses needed to change their workspace to follow social distancing norms.
The U.S. Small Business Administration is providing various relief options to small businesses that are hit by the pandemic. The COVID-19 Economic Injury Disaster Loan provides loans to all U.S. states, Washington D.C., and territories to “meet financial obligations and operating expenses that could have been met had the disaster not occurred”.
Startup Businesses are young businesses that are funded by the owner, their family, etc. Usually, they make a prototype of their product to pitch and develop their brand.
Despite a vast majority of startup businesses failing, Microsoft, Ford Motors, and McDonald’s were all once startups. 2019 saw investments in startup businesses increase to $14.5 billion from $550 million in 2010.
Most startup businesses witnessed a decline in supply and demand, excluding those which were involved in essential services, gaming, streaming, etc. The value of investments in startups in India fell from $1.73 billion in March 2019 to $0.33 billion in March 2020, decreasing at nearly 81.1%.
A major issue dealt with by startup founders was problems with funding, as stunted cash flows across the economy, coupled with reduced revenues made it difficult to grow capital.
The Action COVID-19 Team has set up an INR 100 crore (INR 1 billion, USD 13 million) grant to provide funding to startup businesses that could aid in combating the COVID-19 threat in India. They seek “capital-efficient, scalable solutions from NGOs and innovative startups which need an initial seed grant to fight the spread of the pandemic”
Electronic commerce or e-commerce refers to the buying and selling of commodities, and the transfer of money for these transactions on the internet. It does involve the sale of physical products, but it is facilitated through the internet.
There are 4 main types of e-commerce models, including Business to Consumer (B2C), Business to Business (B2B), Consumer to Consumer (C2C), and Consumer to Business (C2B). It involves sales in Retail, Wholesale, Dropshipping, Crowdfunding, Subscription, Physical Products, Digital Products, and Services.
Due to pandemic norms, many people halted brick-and-mortar shopping. Thus, e-commerce replaced their conventional shopping needs and witnessed tremendous growth.
JD.com, China’s largest online retailer saw quadruple growth in common household staples during this period.
Common Thread Collective has provided insights into the sales growth of various e-commerce sectors. Many sectors experienced growth, except for a select few.
We can see that despite the COVID-19 threat, e-commerce has become one of the most profitable businesses and is effective in the pandemic-infused business environment.
Freelancers are self-employed professionals who take on contract work for other businesses. Thus, they are one of the best businesses to start from home.
The Intuit 2020 Report published in 2011 predicted that over 40% of the U.S. workforce would turn to freelance, contract, and temporary workers by 2020. In 2019, nearly 41.1 million Americans identified themselves as freelancers in an MBO Partners’ survey.
Like e-commerce, freelance too faced tremendous growth potential. Freelancer’s Fast 50 Q2 Report shows that freelancer jobs increased over 25% in the second quarter of 2020.
Freelance job postings too rose 41% to 605,000 in the same period.
Mathematics, game development, and e-commerce were the fastest growing sectors in the freelance industry, at a median pay of $203, $300, $260 per project respectively.
“There will be a permanent step-change in both working from home and the use of freelancers by businesses.”
- Matt Barrie, the CEO, and founder of Freelancer
Much like e-commerce, freelancer businesses are also based online, thus making them one of the most profitable businesses.
Businesses now have to reconsider their processes to survive in the pandemic-infused environment. With the pressure of not only the virus but also government and social restrictions, businesses must install various new strategies to survive COVID-19.
Startups especially were affected as they have scarcer cash reserves and a smaller capacity to withstand a sudden hit.
A proper assessment of expenses and revenues must be conducted to provide the entrepreneur or the managers a perspective on the position of the business, and the basis for formulating new plans and strategies for the future.
The business model must be monitored every week, due to the dynamicity of the environment now. This will ensure the business is not as heavily hit by the pandemic happenings.
Planning on a 3-month/ 9-month/ and 18-month basis is crucial, as the future due to COVID-19 is highly uncertain. Thus, they must layer their plans based on three different time slots, expecting the worst in mind and trying to negate all possible negative outcomes. The three time durations are built due to the uncertainty over when the pandemic would end.
As the end of the pandemic is nearing, businesses are now planning future strategies.
Businesses must now consider their lockdown exit strategies. Physical businesses, in particular, must begin resuming their operations with COVID-19 precautions like mask policy and social distancing in mind.
Following the Financial Crisis 10 years ago, governments across the globe introduced various policies that would ensure a less intense hit to the economy in case of yet another such event. Businesses can thus expect a similar reaction by the government to the pandemic. So they must be prepared to face any new policies implemented in their sphere.
Technology is now widely utilized amidst social distancing norms. The world saw tremendous growth of communication services like Zoom and Microsoft Teams. The UK too has established a virtual parliament. Thus, businesses must embrace this new way of working remotely.
Businesses must finally also accept the cultural and behavioral shift that occurred amidst the pandemic. A majority of traditional processes have now been replaced by online systems— ranging from cloud computing rather than traditional records to online collaborations instead of physical meets. These are not only an obstacle but are also an opportunity for businesses to capitalize on.
Non-Profits affected by the Pandemic
As a separate section to this article, we will also look into organizations that are not operating to earn profits but to enrich the livelihood of humans, animals, etc.
76% of nonprofits surveyed by the Centre for Social Impact and Philanthropy (CSIP) at Ashoka University are actively engaged in COVID-19 relief operations like community awareness, setting health camps, etc.
But, they have still been affected by the pandemic in several ways.
The funding provided to non-profits is being used for short-term relief operations, leading to concerns over the long-term sustainability of plans and programs.
Lack of digital skills in Non-Profits from developing and under-developed countries particularly has resulted in reliance on traditional methods of business which are deemed ineffective during the pandemic.
Various other programs had to be suspended to focus efforts on COVID-19 relief operations, leading to a lack of efforts in other areas.
Bloomerang provides a general guideline to businesses based on dynamicity factors by adopting differing business models:
Non-Profits are now facing a crisis of internal or external conditions— thus warranting the need for a ‘Real-Time Strategic Planning Model’
Frequent meets are conducted to discuss the short-term objectives, queries of team members, and the progress towards before set short-term goals.
However, as we discussed already, it is necessary to switch from a short-term to a long-term perspective. Thus, Non-Profits must adopt an ‘Alignment Strategic Planning Model’. Due to the technical capabilities of today’s world, overcoming a mindset change will allow effective communication for long-term planning.
Yet another important method is to build and improve the site’s navigability. With effective SEO, the site can reach more people which can aid in its operations.
Performing a technology audit will allow the managers to find out and track various aspects of technology being used by the non-profit. This includes meeting platforms, data clouds, digital services, advertising, etc.
Planning virtual interactions with people will rally more towards their cause and also generate volunteering opportunities. This can be done via virtual fundraising campaigns and events, generating wish lists, etc. This will ensure that even if people cannot contribute through labor, they can still provide in cash or kind.
Finally, it is necessary to clean and maintain data so that there is no duplication of records, error in the database, or missed high-value opportunities. Proper maintenance of CRM is recommended for this cause.
We have covered various types of businesses and how COVID-19 has affected them. Negative or Positive, we were able to see a general trend across all fields— more and more units, be it business or people, have moved online for their needs and operations.
Thus, utilizing the newly boosted online platform is crucial for success during and after a pandemic-infested business environment.
Gowtham S is a freelance business strategy and marketing writer & the founder of typistcolumn.com. They aim to provide blogging and copywriting services at a global level to businesses regarding trust and relationship building with their clientele. They also present relevant business strategy and marketing focussed content on their blog to aspiring entrepreneurs.
Inputs and Edits by Aswin Raghav R.