According to Fitch Ratings’ latest Global Economic Outlook report, Global gross domestic product amid the COVID-19 pandemic will see a decline of 4.6%. That’s roughly a global loss of more than USD 3 trillion. Many countries have put forward budgets to help their businesses and citizens to cope and to lessen the impact of the predicted economic recession. In Singapore, the city-state has also introduced three stimulus packages worth around 19% of Singapore’s GDP, or about SGD 92.5 billion, to cushion the economic damage. Since SMEs make up 99% of all business in Singapore, we want to better understand the financial impact on SMEs and what they can do to cope. We approached Felix Tan, Co-Head of The FinLab for his opinions.
In your opinion, how do you see the general business environment here in Singapore since the circuit-breaker measures are put in force?
Let’s start from before Covid-19, the business environment across the region was already challenging when the trade-war escalated between China and USA around early Q3 2019. Banks had started to provision for this in 2020 on the back of this alone. When travel restrictions were implemented, it became clear that travel-related businesses (airlines, travel & tour agencies, hospitality, conventions & exhibitions, etc) were to be hit badly. And when the Circuit-Breaker measures started on 7th April 2020 in Singapore (where the general public was told to stay home, and social gatherings of any size were prohibited in both private and public spaces), the crowds dried up at the heartland shops, shopping centers, as well as eateries and hawker centers island-wide. This then started a domino-effect that saw businesses across practically all industries getting affected as well.
I believe the full impact that these measures have had on Singapore businesses and the people they employ over the past 2 months will continue to play out even after these are lifted in phases starting from 2nd June 2020. It will not be anything like just “turning the switch back on” and things will then “go back to normal”. I think a “new normal” will come to into play.
Once the circuit breaker measures have been lifted, what can SMEs expect in the “new normal” in terms of consumer and buying behaviour?
For starters, many of us would have gotten used to shopping and buying online by now even if this wasn’t something that we did regularly prior. So, the entire premise of building and marketing your brand consistently and using the internet as an effective and efficient communications channel, must be something that you should start paying attention to, if you haven’t already. But fret not, there are many such marketing agencies that you can look for to help you here.
Next is that of convenience. Consumer behaviors are being shaped by the need to “save time” so they can spend more time doing what they enjoy more of. This has been in the making for quite some years now, but the sudden lock-down caused by the pandemic has put this sharply into focus for many.
So, as an SME, how do you then bring an improved level of convenience to your customers and improve their buying experience with you? If this is something you deem can give you an edge over your competitors, then you can think this through when you review your existing business model.
From your perspective, what are some of the things that SMEs can do to help themselves now?
Review your business model & operations
Business owners should always take time off to take stock of not just how their businesses have been run operationally, but more importantly, review their business models so that they consider the changing buying behaviors and business environment to stay relevant.
Where can technology be used to optimize business processes for better productivity and efficiency (thereby reducing costs and saving time)? How can technology be used to better market and communicate your value propositions, and to better serve your customer segments?
Continue to do Business
For SMEs in the B2C space, it should be clear by now that if your business is not represented and searchable online, and/or are not providing take-away or delivery options, you are in trouble. And depending on what you sell, you can easily find an online eCommerce platform that doubles as your online storefront and delivery channel – all for a fee.
For SMEs in the B2B space, this may not be as crucial to you as it is to your B2C counterparts. Still, in times when you can’t conduct business face-to-face, you can now do this using video conferencing tools over your smartphones or tablets if you haven’t already done so. And if you already have facilities through which they can place online orders, all the better.
Whether you’re in the B2C space or the B2B space, if you’re holding on to physical inventory (i.e. you have cash tied up), isn’t it time to look at having a sale? Demand is where you find it, and if you are on (or have) the right platform, have the right message for your target market, provide the right amounts of incentive, it is highly likely that you can start to move your inventory and generate the much needed cash flow.
Up-skill your Staff
If you can, look to up-skill your staff instead of laying them off. Especially in times like these, your staff will appreciate that they can still hold on to a job and be given the opportunity to up-skill themselves when things are generally slow compared to pre-COVID-19 times. This way, when things start to pick up, which they will as it’s just a matter of time, you will have staff who are better prepared and more productive to deal with a more digital business landscape compared to businesses that have not.
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Co-Head, The FinLab
Project Associate, ExpertConnect Asia