Some enterprises have changed their business models to survive the hardship of the Covid-19 pandemic
“We have switched production of interior furniture for sale to wholesale buyers to making products like leisure chairs and animal-shaped seats for sale via e-commerce. With the change of business model, we can still sell our products, release material inventories and earn money though Covid-19 is raging. The profit is low but we can maintain jobs and income for workers.” This statement was made by Vu Tien Thap, general director of the joint-stock company D’Furni, to describe how his company has survived the Covid-19 outbreak which has ravaged the economy over the past months. Changing the business model to adapt to the new situation and consumer behavior is a method currently applied by many businesses.
D’Furni has switched production of interior furniture for sale to wholesale buyers to making products like leisure chairs and animal-shaped seats for sale via e-commerce – PHOTO: COURTESY OF D’FURNI
Business model change
When Covid-19 broke out, D’Furni’s traditional customers, who are architecture and interior decoration companies specialized in hotel, restaurant, resort and apartment projects, lost their business. As a result, many home interior furniture production lines of the company were also hit hard. Thap moved from his office to the workshop and encouraged workers to make new products from the materials in stock.
“We launched the leisure chairs for people indoors right on April 1 when the country began social distancing. The products have sold well and material inventories have been released to earn money. Our workers still have jobs and their income remains unchanged. At some points of time, we have even increased work shifts. The revenue in the first six months moved flat,” Thap said.
The Covid-19 outbreak has forced a wholesaler (B2B) like D’Furni to shift to retail (B2C) and e-commerce. The company’s retail revenue has doubled over the past four months.
Dynamic Retail Company officially opened its Beere honey store chain in early June, two months later than scheduled due to the Covid-19 outbreak. However, its director Nguyen Tien Dung has recently had to “kickstart” the worst case scenario, which is closure of outlets due to social distancing. Should it become true, the company’s available resources will be focused on e-commerce, with additional hotlines, communications with customers on social media and packaging service.
With the experience of closing five branches during the social distancing in April, Ho Kim Ngan, director of the Star Home Spa chain, knows how to change the business model to survive. Despite the closure, Ngan still had to pay space rent and salaries for employees; so, she decided to bring her service to customers’ home. Home spa service is traditionally offered by spa parlors who care for post-natal mothers. Most normal spa parlors do not offer the home service due to various reasons, such as service fees are high, employees hesitate to travel and customers are not accustomed to it. Though the service was launched when human resources and management tools were not completely ready and a number of obstacles and difficulties stood in the way, Ngan was still satisfied that she had made the right decision. The revenue from the home spa service is just 50-70% of the revenue from the normal spa service but it is the only source of income to help her cover costs and maintain jobs and income for employees. Therefore, she is not anxious now that the pandemic has returned and spa parlors may have to close at any time.
Besides the home spa service which has been upgraded and expanded to better serve customers thanks to additional training for employees and market research efforts, Ngan has developed own product for her business to create revenue. “We are improving technology to enable franchisees of Star Home Spa to earn income from the management of home service employees without having to open physical stores,” Ngan said.
Business in uncertain time
In the face of the threat of survival, businesses have to made a decision and to change. However, it needs preparation if they want the change to bring about immediate benefits. “We have identified our Home’ furni brand as a lively interior furniture supermarket online. We have 80,000 friends on our Facebook fanpage; so we connect with them for retail. The budget which was previously set aside for fairs and exhibitions is now spent for online channels. We also have workshops to make new products,” Thap said, stressing that whatever they do, businesses must be steadfast with their core values.
Since his company came into existence in the time of Covid-19, Dung of Dynamic Retail has identified a dynamic business model adaptable to the market situation, which may be both online and offline sales, online sales only, and both big stores and small stores. He has also built different business scenarios (good, average and bad) with appropriate tools and solutions. Each scenario even includes opportunities and threats where the company can concentrate resources to deal with.
Covid-19 has apparently forced businesses to change their thinking and become more dynamic. They cannot do business in the old way and may even have to change completely. Accordingly, they should identify their strengths and weaknesses, fully exploit available resources, and make adaptations to apply business models and launch products suitable to the market situation. This is the problem all businesses have to solve.
According to Nguyen Phi Van, an expert in retail and branch franchise, in the current situation, businesses must always be ready for change and modification. For the short term, it need changes in business model, approach, salesmanship, interaction and customer data collection for survival. For the long term, it is to seek sustainable development for new business models. Business plans should be made concrete and detailed monthly, and should be carried out immediately.
Van gave an example that a business wants to sell the copyright of many courses for US$500,000 to an investor seeking a brand franchise. Amid the Covid-19 outbreak and financial hardship, investors are more interested in models with small capital. So, what the business should do is to divide the copyright into small portions for short-term, long-term, online and face-to-face courses. “The business model now is to quickly break a product into pieces and assemble them into different units to suit the demand of customers, partners and the market. The goal is to sell as many products as possible. The more a business can break its product into many pieces and the more flexible it is, the easier it can survive,” Van said.