Darwinian Shakeout: Adapt or Die
COVID-19 forced all companies in all categories to review their positioning in this stark new landscape and, for once, the much-maligned phrase “adapt or die” will not be an overstatement. It will be remembered as a Darwinian moment for the global industry.
NOW our world will be very different.
Before COVID-19, fashion was already a “winner-takes-all” industry. Now, even though we are only at the beginning of the pandemic, it is almost certain that the crisis will intensify the industry’s polarising nature. The shutdown of physical retail and the slump in both consumer and investor confidence will irrevocably alter the fashion business landscape by accelerating the decline of struggling companies and buoying stronger empires. This graph demonstrates the impact of the Corona crisis on startups & tech (source: dealroom.co)
The crisis will shake out the weak, embolden the strong and accelerate the decline of companies that were already struggling before the pandemic, leading to massive waves of consolidation, M&A activity and insolvencies. To secure their future, companies must adapt to the new market environment by evaluating divestment and acquisition opportunities to strengthen their core and capture whitespaces that emerge from the reshuffle.
Expected shifts in consumer behavior
Unfortunately, many people will feel more isolated, will lose their job, get confronted with sickness, face relationship issues,… if not all at once. On the other hand, Home takes on a whole new meaning as individuals and families figure out new ways to balance their work-life needs within the confines of their space.
What is Currently Happening in China?
A sharp and unprecedented drop in demand will have ripple effects deep in the value chain. but the question is what is happening in China right now?
Define your strategy
Now, define your strategy and switch from defense methodology to offense. It’s time to prepare for the next phase. Industries that were stable for a decade are now wide open to turn around. Fast and decisive movers will win.
Cosmetics company Lin Qingxuan was forced to close 40% of its stores due to Covid-19. The company redeployed its 100+ beauty advisors from the stores to become online influencers who leveraged digital tools, such as WeChat, to engage customers virtually & drive online sales. As a result, its sales in Wuhan achieved 200% growth compared to the prior year’s sales.
What to do now?
Let’s split the plan to Short term, Mid term and Long term.
Now is the time invest in innovation & R&D
The 100 most innovative companies spend even more on R&D during a recession, while others were stalling. In the long run, these investments are paying off in profitability & growth.
Gartner looked at 30 F1000 companies that accelerated during the crisis of 2008. All of them invested in new growth options instead of just cutting costs.
Also, Bain & Company came to a similar conclusion after analyzing 5000 companies over 10 years. Growing outside of the core business was named as one of the strategies to win.
Set up your new economy growth initiative
The post-Covid19 era will have an economy shaped by new habits & regulations based on reduced close-contact interaction and tighter travel & hygiene restrictions. The current disruption will change how we eat, work, shop, exercise, manage our health, socialize, and spend our free time — at an unprecedented rate of change.
