Adjusting to The New Normal

OPPORTUNITIES IN POST COVID19 SCENARIO

Since the start of the year, and especially after the World Health Organization (WHO) declared a pandemic in March, one item has dominated the global news cycle – Novel Coronavirus Disease 2019 (or COVID 19). What started out as a respiratory disease outbreak in Wuhan, China in December last year has since spread around the world – resulting in what is perhaps one of the fastest growing pandemics in recent memory.

 The numbers make for bleak reading. As of time of writing, more than 3.5 million people around the world have been infected, of which 1.13 million patients have recovered while more than 245,000 have passed on. In Malaysia, there have been 6,298 cases, with 4,413 recovered and 105 deaths.

Things could be worse. In March, Malaysia actually had the highest number of COVID 19 cases in Southeast Asia and the fourth highest in Asia – after China, South Korea and Iran. It was for that reason that the Malaysian government introduced one of the strictest set of restrictions ever imposed on the country (short of declaring a state of emergency or martial law).

Known as the Movement Control Order (MCO), it effectively shut the country down for a period of 8 weeks from 18 March to 12 May. The rationale behind such a drastic decision was to “flatten the curve” of infections by taking steps that would lower the rate of infection. As such, all types of gatherings were banned, movement was tightly controlled and all work deemed non-essential was stopped.

From having the highest number of cases in the region, Malaysia is now ranked fourth behind Singapore with more than 18,000 cases, Indonesia with 10,000 plus and the Philippines with more than 9,000. From 15 April to 1 May, new infection rates dropped from triple digits to double digits, indicating that the stringent measures were working.

This was affirmed by the country’s Director-General of Health Datuk Dr Noor Hisham Abdullah who said in late April, “The MCO has succeeded in flattening the curve and our country is entering the recovery phase.”

As such the Malaysian government decided to relax the terms of the MCO by easing restrictions on work and travel, while maintaining a ban on large public gatherings including businesses that would bring in crowds or where people will be at close contact with one another such as cinemas, entertainment centres, reflexology parlours, and events and exhibitions.

The New Order of Things

 While there have been some concerns over whether it is too early to ease restrictions, the effects of the MCO have been quite damaging to the economy. As reported by Prime Minister Tan Sri Muhyiddin Yassin, the country has lost around RM63 billion since the MCO was implemented on 18 March, with daily losses calculated at RM2.4 billion. Furthermore, any further extension of the MCO beyond 12 May could result in 2.4 million Malaysians losing their jobs as reported by the Malaysian Institute of Economic Affairs.

In order to prevent an even worse economic crisis, Malaysia has to get back to normal. However, with COVID 19 still being a local and international concern, the old ways of doing things can no longer continue.

Instead, people and businesses have to adapt to “the new normal” – a situation where there is a heightened awareness of the importance of social distancing and taking precautions by wearing personal protective equipment (PPEs) such as gloves and face masks. In addition, people will likely continue to avoid crowds and aim to reduce contact with others as much as possible.

Affected Industries

Like in any situation, there are and will be winners and losers in this new reality. Quite obviously, among the losers are the businesses that depend heavily on crowds, in particularly retail, entertainment outlets and cinemas.

As stated by Dr Oh Ei Sun – Senior Fellow at the Singapore Institute of International Affairs – in the Malay Mail, shopping malls and cinemas, which had already been under pressure from online shopping and video-on-demand, may see their viability even more severely impacted in post-COVID 19 economy.

Other business sectors that will also likely struggle to get back to normal, even after the MCO is lifted by 12 May, are restaurants and other F&B outlets (especially those that depend on dine-ins), tourism, MICE and hospitality.

In fact, since the MCO was announced, a number of hotels have shuttered for good, unable to wait for good times to come back. These establishments include Ramada Plaza Hotel in Melaka; Syuen Hotel and Kinta Riverfront Hotel in Perak; Jazz Hotel, Hotel Penaga and Jerejak Island Resort in Penang, and GTower Hotel in Kuala Lumpur.

Ecommerce and Digitalisation Ride High 

 While the post COVID 19 scenario may present a unique and unparalleled set of challenges, it has also demonstrated that there are opportunities available for businesses that are ready to embrace and adapt to them.

First and foremost, the pandemic has enhanced appreciation of the importance of digitalisation and the role of ecommerce. Because of the restrictions imposed by the MCO, more people have eschewed going out to buy things, relying instead on deliveries from ecommerce platforms.

To illustrate, in 2019, the Malaysian ecommerce sector generated revenue of RM15.95 billion, and it is expected to be significantly higher this year. According to an Ipsos Malaysia survey in April, during the height of the MCO, around 48 percent of respondents said that they have been buying more things online.

Another survey, this time in late March during the early periods of the MCO, revealed that 17 percent of respondents said that they have purchased food from a food delivery app for the first time.  

Just as interesting is the type of goods that are being purchases online. Whereas in the past, people would prefer to go to a physical store to purchase groceries and common household goods, it looks like the pandemic has caused a shift in habits. Of course, being a health crisis, there has also been increased demand for healthcare and hygiene products such as gloves, masks, hand sanitisers, soaps and detergents on ecommerce platforms.

And it’s not just physical goods that have been enjoying good times. With so many entertainment outlets closed, people are turning to digital means of entertainment. For instance, movie and TV show streaming service Netflix reports that in the three months leading to April, its global subscriber base had increased by 15.77 million – more than double the 7 million it had expected before the pandemic worsened.

The rise in the use of ecommerce platforms has also resulted in more people using e-wallets and other contactless forms of payment, as people try to avoid handling money because of hygiene reasons. For instance, Maybank has reported that the download rate of its MAE e-wallet has more than doubled since the MCO was imposed.

Spurring Future Businesses

Of course, some might say that this is happening because of COVID 19, and once the crisis has abetted, people would go back to normal. But as explained before, this may likely not be the case. Not only because of lingering concerns over the virus coming back, but because people have gotten used to and appreciate the conveniences of online shopping.

To explain, why would people want to drive all the way to a supermarket or hypermarket, and then go in and spend time looking for what they want, wait in line to pay, pay for parking, pay for petrol, when they can get everything at the click of a mouse?

Granted that this was not the case in the past, but that’s because of the fear of the unknown where people did not want to use ecommerce because they did not fully understand how it works. But since the MCO has practically forced many of them to do so, the once Doubting Thomases have become true believers as they have experienced the benefits of online shopping.  

That being said, there will still be some people who will prefer to go to a physical retail outlet and some who will go to the cinemas. However, in order for the retail and entertainment sector in Malaysia to thrive, they have to embrace and offer ecommerce and digital options.

This in turn will spur other supporting businesses, particularly the logistics sector as retailers will seek service providers that can offer effective delivery and warehousing. With Malaysia aiming to be a regional e-fulfilment hub, the post COVID 19 reality may just help accelerate the realisation of this national mission.

Driving Demand for Better Connectivity

 Another national goal that is likely to enjoy a boost because of the new normal is the drive to enhance internet connectivity throughout the country through the National FIberisation and Connectivity Plan (NFCP). 

It goes without saying that if there is a push for greater take-up of ecommerce and digital entertainment, then there will be just as big a push to improve connectivity and solve internet latency issues. Consumers would want to have faster and more stable internet, and businesses will push for it because it will affect their bottom-line.

But more than just retailers, more than just digital entertainment providers, offices in general will also likely lend their voice to the demand for better internet infrastructure. This is because certain organisations may find it more convenient to have some staff continue working from home in order to abide by social distancing guidelines and reduce the number of employees in the office.

This has led to more people downloading and using software and mobile apps for remote meetings and video conferencing. In the United States, for example, downloads for Microsoft Teams went up 639 percent in March, and those of online learning platform Google Classroom jumped by 661 percent in the same period.

The winner, far and away, has to be video conferencing app Zoom, which enjoyed a 1,130 percent increase in downloads. Whereas only 783,000 users in the United States downloaded Zoom in February this year, that number leapt to 11.2 million downloads in March. 

Accelerating Industry 4.0

 The post COVID 19 world will also be one where the importance of Industry 4.0 (I4.0) will be even more emphasised than ever. Without a doubt, one of the biggest shocks to business health caused by the pandemic has been the shutdown of manufacturing plants around the world as governments impose measures to curb the spread of the virus.

There are two important lessons that can be garnered from this. The first is the danger of being too dependent on any single manufacturer or source. When China went into lockdown, it disrupted global supply chains as the country was a major supplier of both raw and finished goods for a myriad of industries including computing, ICT, telecommunications, clothing, and good.  Therefore, in the post COVID 19 world, it is very likely that companies will expand their manufacturing base.

The other lessons is that robotics and automation, two key areas of I4.0, are key to ensuring that a factory can become “smart” enough to continue operations with minimal human input. According to John Robinson, Strategic Client Advisor, Digital Supply Chain at SAP, there are a number of I4.0 technologies and innovations that can and should be looked into in the post COVID 19 manufacturing sector.

For instance, artificial intelligence (AI) and machine learning can be used automatically plan, assess and replan manufacturing processes. Also robots and drones can help perform labour-intensive activities, while reducing dependency on people. And, in cases where the factory needs a human input, that can be easily settled through remote monitoring and control.

At the end of the day, while the COVID 19 pandemic has and will continue to severely affect the local and global economy, it is important to remember that it is not all doom and gloom, and that there is still a silver lining in every cloud. And that’s how it has been for any crisis in human history. What’s important now is for industries to identify the opportunities, adapt themselves to it, and demonstrate confidence of a brighter and better tomorrow.

 In the following issue, International Business Review will continue its spotlight on the post COVID 19 business world by showcasing how companies are adjusting to the new normal. If you wish to know more on how to participate, do contact our team at clientservice@ibrasiagroup.com or call +603 7732 4886.

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