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"To be multi-channel... or not to be"​ - a brandcell article
​There is no doubt that the Covid-19 pandemic took the whole world by surprise. Besides Bill Gates and very few futurists, not a single government have predicted such scenario where millions of people will be hit and consequently a global economic meltdown will bring businesses down and unemployment up. While this crisis will have to end better sooner than later, it will leave its marks and some deep scars on the society namely how we work, socialize, trade and entertain.
Focusing on the economic and business side of the equation, would we say that all sectors are being equally affected? Obviously not. Restaurants, hotels, fashion retail and movie theaters are hit hardest. Meanwhile, F&B, Pharmacies, movie streaming (Netflix), online communication platforms (Zoom, MSMeet,..) and last mile delivery to name a few are flourishing. Taking a closer granular look on this thriving segment, we realize that in reality, only brands and companies who built a multi-channel strategy (store, online, click-&-collect, mobile, call center,..) early-on with efficient logistic and seamless delivery process, are the true share winners (growing bigger that their industry average). More interesting is that most of those locals are nimble & relatively small-size companies like totters, Yala grocery stores and other new fast mushrooming players.

The question that comes to mind is: "Why for instance major retailers the like of BHV, ABC, or Aishti to name few, who all basically have the scale & resources to build multi-channel offerings have missed the train? with dire consequences on their revenues, financial health, staff moral, salaries cut, lay-offs and so on.

The answer can very complex like the well-known 'innovator's dilemma' principle that states: Under normal or growth conditions, moving resources to build new uncertain offering will take away from generating more revenues in existing ones. Thus by refraining to invest in emerging products, they left the entire floor open for new players to fill the gap and gradually take on their customers,

But in Lebanon, the most likely answer is yet simpler. They all adopted the old-time famous business inertia:"If it ain't broken, don't fix it."

In other words, why bother to invest in new channels as long as they can have customers coming to them? why canibalize brick-&-mortar revenues by selling online? Their baseline assumption is that customers are a uniform and static entity with minor deviations and overall stable & predictable needs & behavior! We call this having a 'Fixed mindset' or a mental frame of mind that beleive that things are set and no effort can change them.

But then why elsewhere retailers and even the same brands they carry have all provided customers with multi-channel options in most markets despite their widespread geographical stores footprint? Again we often hear the conveniently simplistic answers: Lebanon has a small geography and people can easily commute to their stores. Or there is not enough demand to support alternative channels profitably.

To check, let's put some (pre-Covid-19) facts on the table :
  • According to the last available data, e-commerce generated US$ 341 million in sales in 2016, representing a 9.8% growth from 2015 (US$ 310 million).
  • The market is characterised by a general interest in cross-border trade - for both Pan-Arab and international websites - and the lack of a local general retailer giant. Ali express is one of the leading e-commerce sites in Lebanon, while Amazon only offers limited delivery, mostly of books.
  • 2.3 million people shopped online in 2016, compared to 2.1 million in 2015, which represents an annual growth rate of 9.5% (State of Payments, PayFort 2017). Younger age groups (below 30) are the most active online users (50% of internet users). Regarding income levels, mid-income category (US$ 533 to US$ 1,065) had the most active online shoppers. The top shopping categories were clothing (44% of online shoppers) and travel services (42% of online shoppers) while electronic equipment (tablet, TV) were among the least bought products (PayFort). Lebanese people tend to shop online mainly for three reasons: competitive prices, group offers and exclusive products.

In other words, Lebanese consumers have spent abroad multi-millions $ amounts for things & reasons that could have been easily provided by any enlightened retailer or company. That would also have limited the foreign trade balance deficit at times where hard currency is literally hard to find. We call it having a 'Growth mindset' meaning having the willingness to change status-quo by exploring and opening up to new realities

Back to today with Covid-19 putting its toll on personal revenues, the conventional wisdom might say: "who wants to buy clothes or not-a-necessity items in time of crisis with purchasing power dwindling?" Here again the answer might sound simplistic: No one. Looking closer and according to 'RedPoint' a global IP protection firm recent research on impact of Covid-19 on e-commerce sales reveals different realities:
  • 58% of customers are buying more online than usual
  • 73% of respondents will further increase their online shopping compared to in-store if COVID-19 outbreak continues
  • 59% of U.S. shoppers are making more snap purchasing decisions in light of the pandemic
  • 60% would increase online shopping if they were worried about catching the virus in stores

Here's what it means in terms of some emerging opportunities:
  • The internet is quickly becoming the only place for shoppers to get what they need, whether basic necessities or gadgets to pass the time. Also in a similar category would be board games, puzzles, journals, and musical instruments.
  • Demand for office supplies has grown as more people are trying to work from home, and the same is happening with homeschooling materials.
  • Personal care products, household products, and packaged goods are at the top of the list. This makes sense, as people want to stock up on items that they regularly use or consume in daily life.
  • With more time inside, people can treat themselves to at-home spa days. Home exercise equipment may also see an increase in demand so people can stay in shape while avoiding the gym.

The big question is whether this short-term increase in online shopping will translate into long- term change. If people who are new to online shopping have positive experiences, they may continue to incorporate more ecommerce purchases into their spending habits. More so, brands need to establish a continuous insights-generating mechanism to gauge consumers sentiments, identify the 'over-served or under-served' segments of customers who can represents early wins opportunities and build a proper channel-market fit i.e. matching customers with their preferred channel. Without insight into future growth, companies will drag behind the growth trend rather than ride it from the start.

When combining Covid-19 with a structural weak economy in a downturn, moving may be the last thing on CEO's minds. As revenues slow and margins are squeezed, management switches its focus to cutting costs to maintain earnings. This being legit as survival becomes the #1 priority. Nevertheless smart re-allocation of resources and small scale agile foray into promising new adjacent offerings, prototyping of innovative business models and multi-channels delivery to meet the customer where he is right now (in home) may be an equally important salvation act by generating new revenue streams for the company. Worth mentioning that it will also allow them to re-allocate their idle or unemployed human capital into fulfilling new functions mandated by new model and re-skilling them towrads future business needs and standards.

What should not be an option is inertia which can quickly deplete value for shareholders and even bring the company to a near-death experience ( remember Kodak, Nokia,..). Here lies an important difference between winners and losers. While big gains require big choices (most of share-gain winners had a distinctive business-model with multi-channel advantage), you don’t have to do much to qualify as a loser. Adopting a passive posture may well be enough and the market and everybody will notice it soon enough.

In summary, the Corona crisis just confirmed the famous Darwinian 'Survival of the fittest' theory. Brands that invested in multi-channel delivery & logistic are reaping the greatest rewards while those who adopted a 'Build it & they will come' or a 'wait & see' old fashioned approach have simply ceased to engage with their customers and are completely shut-down proving that nowadays either you are multi-channel or you simply are not existent.


Should you want to have a conversation about this topic & more, do email me at joe.ayoub@brand-cell.com.
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