Although the government has given much relaxation for industries to resume business in green and orange zones, the COVID-19 cases are still on the rise. The question, however is – “how to restart the business?” There are many things at play here, such as how relevant is the business model in times of a pandemic? Economic forecast for India doesn't look promising; some financial institutions have projected it at 1.9% while some have said 0%. Economist has also given two different perspectives, some suggesting a sharp V-shaped recovery and some foresee a long time required for the economic recovery.
Despite the ambiguity and difference in our opinions about economic recovery, a few facts remain unchanged. The world is eating out of their savings. And it is same for families and bsuinesses; the only difference is no one knows just how big the hole will be in our pockets. Families and organisations today are extremely cautious with their expenses. For example, if my 15-year-old fridge stops working, I won't be buying a new one. Instead, I will have it repaired, even if I wanted to change the refrigerator before the pandemic began (Don't worry, my fridge is new and under warranty).
There is a significant shift in consumer sentiment, not only about spending only on essentials but also the threat of being jobless soon. Small and Medium Businesses contributes over 40% of employment in the country, which are currently at higher risk. One hundred twenty-two million Indians have already lost their jobs due to the coronavirus outbreak, and it may increase further if the situation continues. There are anger and resentment amongst the labours who didn't find any support from their employers. Think of people who are living in rented accommodations, paying EMIs and suddenly without any job. Think about people who had invested in their business, and now they are at risk of losing everything. There is jealousy, hatred, racism and anger which doesn't suit the use and throw economic model.
In a nutshell, we are heading towards a circular economy and shifting from the use and throw economy. The circular economy involves sharing, leasing, reusing, repairing, refurbishing, and recycling existing materials and products as long as possible. It is different from the traditional, linear economic model, which follows a take-make-consume-throw away pattern.
It will be like the 70s again where we valued what we had and we took care of it so that it lasted longer. A circular economy is 100% in alignment with the environmental goals. So, whether we believe, the virus emerged from labour market, the fact remains that climate change is a much more significant threat to human existence. This pandemic is just a wake-up call.
The circular economy is not only better than linear economy; it is the most human thing to do. It creates more opportunities for everyone across the value chain if we consider a hypothetical situation of the automotive industry which recorded zero sales for the month the first time and which is heading towards the rural setup to cross over the temporary phase. There is absolutely nothing wrong with that, except the potential business from retrofitting. Between the years 2005-2010, Indian automotive industry sold over 12 million vehicles, which also means they are approaching the end of life. Now that the economy has fallen to the rock bottom, it is less likely that the same customers will spend on a new vehicle shortly. Instead, they will be happy to retrofit their vehicle, which will help them meet the environmental norms as well as the next five years. It also creates opportunities for auto ancillary and service stations. All industries, large or small, can benefit, from a circular economy, which is not only the right thing to do but also allows us to do more with less.
For a country like India, it makes even more sense and resonates with the middle-class value of life. India cannot make things cheaper but surely can make it durable to last long. The world has headed to china to reduce their costs of manufacturing, while it is suited for the linear economy, it does not fit the current and future.
Catastrophe doesn't give rise to sustainable business models. However, it forces an organisation to focus on short term business models. Entrepreneurs in our country are resilient, and many have adapted their business model to fit into the essential category. I came across a video showcasing Haldiram has transformed itself into grocery retail. In the papers, we read about Wow Momo entering into the grocery delivery business and Rolls-Royce into Honey.
There is more to the story here; if everyone jumps into the business of essentials, if every other store becomes a grocery store, the market pie will become too little for any player. Besides that, there is a question of acceptance, will customers accept them in the new avatar, and can you possibly stretch your brand to be recognised in a radically new category? How easy will it be to re-skill employees into a completely new domain, which until now was never in radar? Will the short term investment in the entirely new field yield long term results?
There are many questions to look at before making the shift. However, the circular economic business model is here to stay in the long haul.
We have been working with my clients and friends in pivoting their business models across verticals such as at-home education, new technology products, retrofitting for industries and customer service and more. We will be happy to be of any help to you in spotting new opportunities for your business, creating new brand identity, digital marketing. Feel free to connect for a free of cost consultation.