The COVID-19 virus is responsible for a stunning shut down of our work and leisure activities. As news of the virus started to filter out of China in December of 2019, few could have anticipated the lock-down conditions imposed there would have been even a remote possibility for us to now contend with here in the United States, and almost every other nation around the world.
Unfortunately, most businesses, including dealerships in the office products and business equipment space, would not have had a contingency plan for dealing with the situation we now find ourselves in. In fact, short of a hoard of excess cash it's difficult to even imagine the possibility of developing a viable contingency plan.
Furthermore, regardless of the onset of the COVID-19 pandemic, the pre-existing business conditions mean many independent dealerships were already suffering from reduced revenues and shrinking profits. The chances of many dealerships having access to sufficient cash to weather the storm is remote and, even with government assistance, it's difficult to project a rosy outcome for many of these businesses.
Having entered the lock down, it is difficult to visualize a swift and clear-cut exit that would be necessary to facilitate life returning to normal. With rational talk of a vaccine being at least 12 months away, and with the logical assumption that 100% of the population is susceptible to infection at some point, then, absent a reliable test to prove antibodies, many people will never know whether they have been exposed and whether or not they are still at risk.
It is the combination of these circumstances that appears to pose the greatest threat for any kind of return to normal. If you don't know whether you've been infected [but you have and didn't display symptoms] then, in the absence of a test to prove one way of the other, your tendency will be to stay in isolation, thereby extending the effective duration of your personal lock down.
Businesses will adapt to the circumstances but it is unavoidable that there will be a significant business contraction. The United States, along with other developed countries with mature economies, has a larger share of its economic activity focused in services and leisure activities. Many of the legacy manufacturing jobs were outsourced to lower labor cost environments, such as China, years ago.
While we can still buy widgets from Amazon and still have them delivered to our homes while we remain in lock down, we can't enjoy leisure activities such as sporting events or rock concerts, going to the cinema, or even our favorite restaurant. This means, in a service dominant economy, we are spending far less money than we were a month ago and explains why such a massive reduction in economic activity has already taken place.
Even if your employer can continue to pay you and to accommodate you working from home, it is because so many aspects of economic activity have been quickly and drastically reduced that it's likely your employers' business activities have also been adversely impacted. This probably translates into a reduced demand for your goods and services which quickly has a negative impact on cash flow and profits. As an individual, you will probably be aware of this possibility and it has probably led to an increased level of uncertainty with regards to the continuity of your income.
So, in addition to there being much less cash available to spend, there are also much greater levels of uncertainty which serve to further reduce the likelihood of spending whatever cash is available.
When these conditions are combined with the uncertainty for the timing of an exit from the lock down, it becomes very difficult to predict when economic activity will get back to something resembling normal.
Because of the likelihood for an extended disruption to our economic activity, it becomes less likely there will be a return to the "old" normal. Leaders will emerge from different sectors of the economy and position themselves to take advantage of the opportunity the crisis has created by implementing the economic and technological solutions necessary to facilitate establishing a "new" normal.
The "new" normal may be shaped around a workforce that is more likely to work from home and that may be more open to buy what they need from local sources. The economic shock we're experiencing may also play into an increased trend for repatriation of offshore manufacturing into capital intensive, highly efficient, onshore manufacturing facilities. Such a trend could be expected to reduce the risk of future shutdowns in economic activity that could otherwise develop from similar threats.
With our foundation for the current economic conditions established, we will be assessing the impact on the office products and business equipment industry in a series of blogs with a special emphasis on the role of the independent dealers that serve the industry.
Our goal with this series of publications is to help dealers visualize a blueprint for success within a "new" normal and from which they are able to grow and prosper as the economy emerges from the crisis it is currently overwhelmed by.
- What will happen to the centralized-print value proposition?
- What role will the Internet of Things (IoT) play?
- What will the impact on dealer-based equipment territories, sales quotas, and legacy compensation plans?
- What impact on billing systems and billing methods?
- The increased impetus for deploying technology to reduce cost, improve efficiency and elevate the value proposition.
- How to survive when competing with the behemoths.
- Facilitating higher levels of economic activity in local markets.
- A vision for the future - establishing digitally connected local marketplaces.
- The independent dealer - reducing its own cost while facilitating technology to help its customers sell more.
- Laggards and legacy players combine to assert their waning power to try and prevent change.
To learn more about the impact of the changing environment on the reseller's value proposition please sign-up for our blog to receive automatic notifications as we publish important new material.
You may also be interested to access to our resource page, "Channel Convergence and the Impact on Independent Resellers" or, to learn more about the full scope of this material and to access in a downloadable e-Book format, please click the cover image below.