Loulwa Bakr and Khalid Suleimani are both senior partners at Chrome Advisory, a Saudi Arabia-based consultancy
As the global pandemic, the Coronavirus Disease (COVID-19), continues to spread, the economic impacts are already widespread. As a result, businesses across all industries are adjusting their strategies to respond to the slowdown. Initial impacts of lockdowns include drop in business activity, cancellation of travel plans and meetings (due to travel bans), as well as disruptions along the supply chain.
However, some sectors and industries, particularly those with a strong online presence and e-commerce capabilities, as well as companies that have quickly adapted to the current crisis, are thriving in such times.
The businesses that have seen increased demand, despite the repercussions of COVID-19, include:
- E-commerce platforms: Business-to-consumer (B2C) online shopping platforms that are delivering goods and supplies to people’s homes have seen a spike in business activity. Take global platforms such as Amazon.com which has announced that it will be hiring an additional 100,000 employees to fulfill growing demand. However, Amazon.com most recently reported that it will stop receiving non-essential products from sellers due to COVID-19. Regionally, Souq.com, Mumzworld.com and Bulkwhiz.com have witnessed a dramatic increase in sales, with many essential items out of stock. In Saudi Arabia, the grocery delivery platform Nana.sa, recently raised one of the largest funding rounds in 2019. The challenge for this category will be managing their supply chain to fulfill the increase in demand.
- Healthtech: The most evident category of institutions that are directly engaged in combatting the COVID-19 crisis are pharmaceutical giants and genetic research labs, as well as entities collaborating directly or indirectly with governments to develop either a vaccine, cure or preventive technologies for COVID-19. However, startups specialised in healthcare technologies, especially remote diagnostics, geriatrics care and disease testing and prevention, have seen an increase in demand for their services and products. In Saudi Arabia for example, the Ministry of Health started licensing telemedicine platforms, the first of which was Cura Healthcare which is also witnessing a surge in users since the start of the crisis.
- Big data analytics and data collection: China has effectively used big data analytics for disease tracking and containment by cross-referencing its national databases with information collected from the field. Specialised apps have been designed to track citizens’ movement and identify those who were in close proximity to a contaminated person or area, as well as map areas of safety, according to levels of contamination. Drones have also been used also in data collections including live streams (see next section). The chance for local startups to work on something similar is also an area to be explored.
- Drones: Drones have been widely used in China during the COVID-19 crisis not only for data collection, but also to disinfect certain areas, and insure adherence to imposed curfews, for example, dismantling clusters of people exceeding the authorised limit. Drones may be used to deliver medical supplies and other essentials to counter the high demand on delivery and the shortage of last mile delivery solutions.
- Remote online work platforms: Due to both the public and private sector workforce working remotely, either voluntarily or otherwise, there has been a worldwide surge in demand for online meeting facilities, especially platforms that support live video communications (features such as task and calendar management, chat and attendance tracking as well as screen sharing are a plus). Platforms such as Dingtalk, Zoom and Skype are experiencing a surge in number of users on their platforms.
- Goods & services delivery: With people forced to being homebound, apps that deliver essentials such as groceries, food, and medicine or even services, such as laundry and home maintenance services, are also experiencing growth. The leading providers have also promptly adapted their business models, to respond to the limitations, as a result of COVID-19. Such enhancements include contactless delivery, intensified health precautions among service providers and adding new products and services, to their suite of deliverable items (such as disinfecting residential and commercial facilities). For example, the Fanni App, the Saudi Arabia-based home maintenance services application, reported a 30 per cent surge in its customer orders since the beginning of the lockdown. They have also taken extra precautions to supply their service providers with protective gear (i.e. masks and gloves etc.).
- Financial technology (fintech): The technologies offered by fintech companies are becoming more popular. Peer-to-Peer (P2P) and online banking solutions are replacing the traditional cash transactions, due to a decrease in bank visits, the closing down of branches and people not wanting to handle currency out of fear of contamination. Those who were slow to adopt fintech technologies before, will now be forced to do so. This may have a positive impact on fintech apps, as it is highly unlikely for consumers who have adopted fintech solutions to go back to their old habits, once the pandemic is over.
- Education technology (edtech): Schools and universities have closed until further notice, but students are continuing their learning remotely. The services and platforms offered by edtech and virtual learning companies are now the go-to platforms for home learning. Classroom style learning at home allows for teachers to deliver lessons, assign homework and review all coursework online. Also, parents and employees who are forced to work remotely, are finding it interesting to learn something new using these platforms. Saudi Arabia’s Noon Academy, an online private tutoring platform, received one of the largest funding rounds in 2019, and is currently experiencing a spike in user activity.
Are businesses ready to respond to growing demand?
While an increase in demand for technological solutions is good news, especially in such circumstances, there are also many provisions that need to be taken. They include:
- With e-commerce platforms optimising their business models and experiencing massive demand from clients, stocks are limited. As a result, these companies may be faced with the inability to meet growing demand. This imminent disruption in their supply chain means they will have to negotiate better terms with their suppliers, including selling on consignment. Suppliers will definitely benefit as a result. Shortages in certain goods such as sanitisers and toilet paper in some regions has already been witnessed.
- Increased demand for online shopping would result in a ripple effect on last mile physical delivery solutions. Businesses need to ask themselves if the current number of available agents will be sufficient. Will there be enough seasonal staff available for hire? Will there be enough time to train them, and have them follow special sanitisation procedures? Will drones help? Can certain countries which require long licensing procedures for drone flying be able to cope and speed up licensing to meet demand? All these concerns need to be addressed if startups in the logistics segment are to effectively support the growth of online shopping and also benefit from the surge in demand.
- The surge of users on mobile apps and online platforms, may cause servers to crash. Companies need to assess the impact of sudden increases in users, as well as their capabilities to handle the numerous processes carried out on their platforms, and upgrade their support functions and services to meet this demand. Business continuity and disaster recovery plans should already be in place to respond promptly.
Companies seeking funding in COVID-19 crisis
- Many startups and scaleups that were vying for funding before the outbreak of COVID-19, may have their plans on hold for now. However, investors are still on the lookout for great investment deals. The implications of COVID-19 on the economy has resulted in many investors leaving the market. This means that investors will carry out more extensive due diligence on companies showcasing promising growth prospects. This could result in more stringent deal terms and longer due diligence periods.
- If a startup can respond with innovative features to adapt to unusual times, investors might take an interest. Some venture capital (VC) funds are reviewing their portfolios, to push their companies to seek new opportunities and strategise, to grow market share. Investors will also be keen to study the adaptability of companies in times of crisis and how various teams are responding.
Overall, how fast companies can adapt to the implications of the COVID-19 crisis will be crucial to their survival. It is important to note that crisis situations provide exceptional learning environments for companies to grow, thrive, adapt and test their internal systems and processes.