The Covid-19 pandemic is not only a stress test for the global health system, it also has major economic consequences. Companies of all sizes and industries are affected by this – from start-ups to traditional businesses. While parcel services, the e-commerce sector or even the food or drugstore sector from the current Consumer uncertainty benefit, most retailers struggle primarily with the negative effects of the crisis on the user experience.
The regulations and exit restrictions are forcing consumers to make serious changes in behavior. What was done analogously before Corona takes place online today. The consequence: traditional retailers cannot maintain their previously good offline user experience or customers stay away. This is how most retailers are trying with the Scaling existing online services and in some cases forced digitization with new models created overnight.
Poor user experience in e-commerce
Although many long-established companies from the offline world had online branches before the current crisis, they are now relentlessly revealing their weak points. For example, the e-commerce boom in retail has resulted in one Logistics overload. As a result, the user experience of traditional companies deteriorates significantly. Where the delivery had previously usually worked, there are now weeks of delivery times or there are no delivery windows to choose from.
Newcomers and start-ups are struggling with the same bottlenecks, but seem to cope better with the increased demand. And for one simple reason: the strong focus on the customer and the user experience is part of their right to exist. They also act very quickly and are used to growing quickly.
User Experience: Success of online supermarket Picnic
A good example of this is the online supermarket Picnic: Since the company also delivers itself, it was better possible for it to keep the customer experience relatively high over the last mile. In the wake of the Corona crisis, the company increased the number of drivers and delivery slots at short notice, so it now simply delivers on Sundays. The company was able to use the crisis to expand and opened an additional logistics center in Herne within just 14 days.
Time horizon is a crucial factor
With regard to the Expansion of logistics capacities and with regard to consumer behavior, it is crucial how long the crisis lasts. A short-term crisis with a time horizon of a few months would mean that consumers will return to old patterns of behavior after the exceptional situation has been overcome. In our view, however, the scenario of a longer-term crisis and thus a new reality is much more likely. In this new normal, the balance of power shifts in favor of providers with a better user experience. It is a central aspect, also with regard to the added value.
User Experience: Agile business development
The current situation therefore offers enormous opportunities for a fast, agile and customer-focused business development. This also applies to established providers. Companies with foresight and financial reserves have one advantage: They can position themselves digitally and thus for the future. Because the crisis situation reveals a high degree of dependence on offline business models – and thus creates pressure for management to act. While the core business in many companies is under pressure and measures for increasing efficiency are more likely than expanding capacity and investing in growth, at the same time the establishment of new business models and entire business areas is cheaper than it has been for a long time.
The most important reason for this is that during the crisis, the marketing budgets of many providers are cut or reduced, competitors are partially or completely withdrawn from the market, and the advertising efficiency of the remaining budgets increases. Marketing investments for scaling but are usually the most expensive thing in building digital business models. Finally, significantly lower prices for M&A transactions are also to be expected, because some of the previously promising start-ups are already struggling with liquidity problems.
Just like some traditional providers, by the way; we also expect the overall market to consolidate at the same time. All of these developments will result in the balance of power being shifted by the crisis in favor of those providers who see the crisis as an opportunity.
Sustainable and diversified development of online business
In the current situation, it is more important than ever for traditional companies Expansion of their online business models with a strong focus on the needs of the customer. At the same time, companies should also take the opportunity to position themselves more broadly and thus make themselves less dependent on individual business areas. The crisis is giving some companies a painful lesson. Right now is the best opportunity to press ahead with building a strategically sensible portfolio of digital companies in order to be prepared for the next crisis.
About the author: Jan Sedlacek is the founder and partner of Stryber, an independent corporate venture builder. Stryber combines approaches from the venture capital and start-up world and makes companies future-proof by building strategic corporate venture portfolios. In addition to his specialist knowledge in venture building and in the digitalization of companies, the Swiss native brings his expertise and training in international management and business psychology to his work. (sg)