Coronavirus has become a hot topic of discussion over the past couple of months. While some speculate that the impact of this outbreak will be similar to the SARS outbreak in 2003, other claims suggest that this comparison is untenable due to the relative importance of China in the global economic system.
The outbreak, which started in Wuhan, recently named as the COVID-19 by the WHO, is not only disrupting life as we know it but is also sparking a global financial crisis. The consequences of coronavirus, therefore, go beyond the disease and the efforts to quarantine it.
Articles and announcements by business giants like Mastercard, Microsoft, Apple, and United Airlines paint a bleak picture of how the virus is affecting consumer behaviour and business sentiment. It’s resulting in broken supply chains, disrupted manufacturing, emptied stores, and has even led to demands for increased wages due to precarious working conditions.
Tourism takes the first hit
The spread of infectious diseases is invariably linked to travel.
With the spread of coronavirus, tourism is already bearing its effects. Travel restrictions took effect as early as mid-January within parts of China, during Chinese New Year celebrations; a time when travel and tourism are high among Chinese nationals.
With the increasing number of cases and the rising death toll, officials in other countries took quick and drastic action to contain the spread of the disease. Airlines reduced the number of flights in and out of China and some cancelled all flights with immediate effect. Countries like Russia closed its land border to China and some countries shut down their borders, cross-border ferries, and railways.
Most countries put into effect travel bans to all Chinese citizens coming into their countries and advised local citizens to avoid travelling to China. The market response to all these activities reflected a percentage-point decrease in share prices of major airlines, cruise lines, and tourism companies.
Further, since tourism’s supply chain involves everything from agriculture and fishing to banking and insurance, industries like the hospitality, recreation and entertainment, transportation and travel industries are already experiencing serious losses.
Industrial supply chains are heavily affected
The coronavirus outbreak is increasingly affecting supply chains and disrupting manufacturing operations around the world. Since most companies rely on parts or raw materials of their manufacturing to come from factories in China, things aren’t looking very bright at the moment.
Due to strategies such as lean manufacturing, offshoring, and outsourcing, which were pursued as a way of reducing supply chain costs, a disruption in the supply chain can cause manufacturing to stop quickly because of the lack of materials or parts.
Even if companies have three to five weeks worth of inventory, supply chain disruption for longer than a month could force manufacturing or assembly processes to stop entirely. Automobile companies like Fiat Chrysler, Hyundai, tech giants like Apple, and consumer-packaged goods manufacturers are in serious trouble because of significant shortages of supply chains.
Experts suggest the peak of the impact on global supply chains to occur in mid-March, which is just a couple of weeks away. They explain that this will force losses or a temporary shut down on assembly and manufacturing plants in the U.S. and Europe. Mainly because these companies rely on parts or materials of their manufacturing from factories in China.
A paralysed logistics industry
According to authorities, coronavirus has not caused the docks or ports in China to shut down. Rather, they are overflowing with goods that can’t be exported due to the lack of trucks and because of numerous roadblocks, quarantines, and factory shutdowns. There’s plenty of difficulty getting the goods to and from the docks because of attempts by towns and cities to keep infected travellers out.
Global shipping, similarly, is experiencing serious disruption due to the paralysed logistics industry in China. Container volumes have dropped by 2.7% at American ports, cargo volumes are decreasing in great numbers, refrigerated container fees are increased to prevent spoilage, and container shipping lines are cancelling sailings due to the lack of finished products.
Even air cargo operations are affected by the outbreak of the coronavirus. Due to extensive flight cancellations in and out of China, freight forwarders are struggling to find adequate space on planes for their shipments, while airlines refuse to load extra cargo to ensure flight safety.
Stock markets are making a comeback
On the 3rd of March, with leaders and policymakers preparing to remedy the economic damage caused by coronavirus, stocks in global markets demonstrated a slight upward momentum, after their worst week since the 2008 financial crisis. Stocks of supermarkets and drug companies surged while the value of airline stocks decreased.
Apple has also seen increases in stock price, amidst the supply chain issues they’re facing with China, which is its biggest partner in manufacturing and assembling their electronics. Traders are hopeful good news is on the horizon with talks of meetings between central bank officials and finance chiefs.
Ending the continuous seven-day losses the Australian stock market was experiencing, Australian stocks also experienced a sudden surge. This happened amidst speculation that the Reserve Bank will cut interest rates further to neutralise the economic damage caused by the coronavirus outbreak.
In the meantime, heads of the IMF and World Bank have issued a statement stating that they are ready to help companies that have been affected economically by coronavirus. They have pledged to utilize their resources to finance, assist, and advise companies that are in need of support.
The Bank of Japan has also promised to increase liquidity and the Bank of England and the European Central Bank have both pledged to help wherever possible.
What action must e-commerce businesses take?
Leaders and policymakers must focus on containing the virus, mitigating its effects, and helping patients who have contracted the virus recover. However, the economic impact due to this outbreak is also significant; major industries to small and medium e-commerce businesses are feeling its effects in more drastic ways as the days go by.
So far, I’ve had a few clients reach out to us with concerns that their production is slowing down and their supply chains are being affected. While certain industries may be prepared to face sudden emergencies, the impact of this virus is more far-reaching than many of us expected.
So, what lessons can we learn and what actions must we take to strengthen our businesses during this time?
1.Prioritise employee safety and wellbeing
The welfare of your employees is paramount because they are a critical resource to your company. If history can teach us anything, it’s that companies who make a genuine effort to help their employees in a time of need, especially in circumstances like this, recover the fastest.
Track down your supply chains, manufacturing or assembling plants and make a genuine effort to ensure that all employees are safe. Check into the employees at the front-end of your company and ensure their health and safety too. Do what you have to do to protect your team, customers, and community.
2.Focus your resources on branding
Re-look at your brand values and make sure you are protecting your core strategies. Making a genuine effort to ensure the health and safety of your employees, team members, customers, and community will enhance your reputation among them and among others who are observing your efforts.
At the end of the day, people always remember how you treat them and how you make them feel in their hour of need.
3.Focus on products already in-stock
If your company is heavily dependent on Chinese supply chains, manufacturing, production or assembling, you may already be feeling the impact of the virus. If you’re a home-grown restaurant in the middle of Seddon, for instance, however, the virus is unlikely to pose a major threat to your operations at this point of time.
If and when you are affected, focus your efforts on pushing products that are already in stock. Check current market conditions and be ready to strategically change prices to create customer demand and a market need for what you have to offer.
4.Create a business continuity plan
With the fallouts of the coronavirus increasing every day, it’s about time to build a continuity plan that provides for contingencies in critical areas including back up plans for transportation, communication, supply, and cash flow.
With this kind of plan, you should be able to take the necessary steps to minimise any potential impact the virus has on your business.
5.Time your campaigns strategically and sensitively
With supply, production and manufacturing taking a hit during this outbreak, it might not be the best time to run marketing campaigns that make light of this situation or try to use it for comedic effect.
If your untimely marketing or advertising efforts are criticized by the media, consumers are sure to notice and join in on criticising your efforts. It’s not a great time to be facing this kind of criticism as your brand could be labelled as being insensitive.
As any company that’s been in hot water can tell you, the fallouts are not worth the kick you may get out of the campaign.
Stay updated and be prepared for whatever comes next
This isn’t the first time we are experiencing the impact of a global pandemic that has dire economic consequences nor will it be the last. Some may say it’s the best time to learn from the lessons of history but in my opinion, that could be a gamble – you can’t guarantee that things will unfold or resolve themselves the same way.
Expect the coronavirus to continue affecting life as we know it. Prepare for society and even your business to change in considerable ways. Going forward, see what lessons you’ve learned and make sure they’re reflected in your marketing strategies and plans.