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July 27, 2020, 2:16 p.m.

A New Horizon – models for changing times

Understanding the opportunities and changes post lock down for SME's. What will be the new normal?

Changing with the tides
Surviving the Peak of the Pandemic was one thing, but staying afloat amongst the changing tides in the coming months is a whole different story.

With the wider hospitality sector opening up again across the world, its important to understand attitudes, sensitivity and business models have widely changed for the vast majority of SME’s. This will further continue to change as governments and companies start to retract their leniency and support packages available such as mortgage & rental reliefs. An understanding of converging market pressures is essential in order to traverse the months ahead.
Rental Value Decimation
Having just passed the 2nd quarter of this challenging year, early statistics showed that British retailers paid only 13.8% of their rent. With pressures to renegotiate rents or face empty units, landlords are looking at turbulent times ahead and the reality is that long term leases will soon become a thing of the past as companies seek out greater flexibility given the continuing uncertainty of the retail market.

However, even with better terms, prices and extended rates holidays, a number of retail operators will still not be able to meet even variable costs given the increasing dominance of online retailers and dwindling footfall which has only been exacerbated by falls in tourism. This trend will further accelerate a tiered collapse of the retail landscape, beginning with SME’s with retail outlets, followed by larger brands with outlets and lastly online retailers selling non-essential goods or those that have a lack of online exposure. In short survival is dependent on cash flow management.

While most service providers and retailers themselves have been historically quick to shred physical space, a huge element is being missed which is the cost and ability to propose a value proposition solely online. Most successful online retailers (not marketplaces) once had or have a prominent physical retail space which is embedded with brand value in the customers mind as they experience its aisles. Therefore it’s as important to equally address values of both a physical & digital presence, and specifically assess the digital outlet of the business by looking at the difference in customer distance created when leaning to either physical or digital, a relationship that is almost never addressed when it comes to restructuring.

So you’re probably wondering where the advantage lays in this? Well if you’re a micro-organisation with a cult like following this may well be your opportunity to snap up a retail outlet or even extended storage at leveraged rates. Other opportunities include the ability to cut white label deals with small retailers struggling with stock who will be looking to clear their inventories. For everyone else, observational learning from those recently collapsed is essential to be able to navigate now.
Flexible Mortar Model
For many SME’s who want to expand into retail or are having to shred their stores, an equally viable solution is the use of concessions in malls, high footfall public spaces and pop up stores. These forms of physical presence come with their own set of advantages for brands such as the ability to place themselves in more targeted locations & at the same time being able to test locations, products and offer experiences while bearing the least contractual commitments.

One may argue flexible mortar doesn’t hold the same value as a cemented store but nearly the same value can be achieved if done right as your outlet offers your brand experience! Most commonly, failures arise where brands remain too passive, being irrelevant to current trends or simply due to improper preparation and attempting to do it all themselves.

That said for retail brands going down the concession route its vital to show the customer the end product they will receive through the door, so they can experience it end to end instead of attempting to sell the bulk of their stock on site. Rather the focus should remain on building online trust for the digital point of sale & showcasing what they will receive which is where flexible packaging comes in playing a pivotal role for many brands, due to its flexible format suitable for both physical and online retail.
The Rise in Price Sensitivity & Private Label.
The recession is coming, the downturn has begun, this will create demand for economically priced goods. Many SME’s may have ceased trading during the peak of the pandemic and a price war and increased competition against value supermarket brands and discount retailers will pile further pressures on companies that are already stretched. However, advantages can be gained by SME’s that are able to offer a quality premium for the same price point.
Changing Attitudes towards Single Use
Conventional environmental wisdom till date, had been single use packaging was a threat to human kind but in light of recent events this is far from the case, in fact multi use packaging poses a far greater threat due to its ability to hold and spread contamination of any sort. That doesn’t entirely mean single use is the best, we have to resize the footprint accordingly through the use of recyclable packaging as an alternative. For multi-use packaging the safer options then remains portion packaging within multi use packaging.
Let us help you
With all the changes happening around us the speed of adaptation is key to survival & growth and packaging is even more important than it ever was especially due to more direct consumer sales through the internet. Book a free consultation with us below and let us help you define the next normal and achieve the competitive advantage you’re looking for.

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