KUALA LUMPUR, April 15 — The movement control order (MCO), which has been extended for the third time until April 28, have afflicted damage to more and more companies as many of them could not run their businesses during the period.
Even though the government is allowing companies from selected sectors to resume operations during the third phase of the MCO, companies, especially small and medium enterprises (SMEs) which do not fall under the stipulated categories will be badly affected.
Hence, industry experts have once again revised their growth forecast for 2020 downwards, as the MCO continues for another two weeks.
The prolonged MCO means that most businesses face further losses due to the operational shutdown, and this would drag down local economic activities that were already severely impacted by the first two rounds of the MCO, which lasted for nearly one month.
Vernon Chua, retail data expert and chief executive officer of Innergia Labs, said with the MCO extended until April 28, this would mean many businesses would record minimal or zero sales for one and a half months.
Data gathered from SYCARDA, Innergia’s retail data analytics and business intelligence cloud platform, showed that food and beverage (F&B) businesses have lost 90 per cent of their revenue on average during March 18-April 12, 2020 period compared to the same period last year.
SYCARDA’s data helps SME retailers track and analyse their sales across their outlets in real time.
“During this MCO, we have aggregated data from a sample size of 100 F&B outlets and 10 supermarket outlets to see the MCO’s impact on sales. The result for the F&B segment signalled that their cash-flow situation will be reaching critical levels by now.
“This will force them to either downsize or shutter their businesses. The flow-on effect will be that their suppliers will have difficulty collecting existing debt, and will also lose future revenue,” Chua told Bernama today.
Even though supermarkets and convenience stores are seeing record sales currently, he said the mass closure of F&B outlets has caused a major decline in revenue for some supermarkets that are also doing wholesaling to restaurants.
Thus, Chua has come out with several suggestions for SMEs to keep their business going during the MCO, including reducing their operational expenditure.
“Now is the time to get on the phone or send an email to your landlord to ask for a rental reduction or even a moratorium. Your rental is typically the single largest item cost each month, and any savings in that area will give you an immediate cash-flow boost.
“In the Prihatin Rakyat Economic Stimulus Package (Prohatin) (additional measures) announcement recently, the government is also giving a tax deduction to landlords, equivalent to the discount they grant to their SME tenants for the April-June 2020 period,” he said.
He said SMEs should start asking for an extension of credit or a payment plan from their suppliers to help reduce their outgoings, while maintaining their supply for the next few months.
In these uncertain times, he said suppliers would probably be more willing to negotiate favourable terms with SMEs in order to secure their own cash flow.
Chua said that this is a good time to start streamlining the SMEs stock-keeping units (SKU), and understand how much they are contributing in revenue and cost.
“Many retailers don’t realise they are carrying a lot of stocks that don’t really contribute to their topline or bottomline, and instead are tying up their cash unnecessarily,” he added.
He also advised SMEs to be clear on what they are selling, as many F&B operators and retailers do not have a clear idea of what they are selling or the brand that they wish to build and present to their consumers.
“Take this opportunity to regroup and rethink your brand and what it is you are bringing to your customers.
“The benefit of clarity is a more disciplined inventory which means better cash-flow management and controls, as well as the ability to focus your branding, marketing and promotion of your key products. If you’re an F&B operator, this also means you need less training for your kitchen staff and better-quality dishes,” he said.
“SMEs need to begin proactively engaging their customers, starting with simple things like advising them on the status of your store operations and how they can still buy your products during this period.
“If you are closed, start planning your post-crisis celebratory sales and promotions and give them something to look forward to once this is over.
“If you already have a customer relationship management (CRM) system in place, then this becomes easy. If you don’t, then consider implementing one, because understanding, engaging and retaining your customers is going to be a key factor in surviving and succeeding in your cash-flow situation,” he said.
Chua advised SMEs to sell discounted gift cards or cash vouchers, if possible, to raise as much money upfront as possible to go through their cash-flow crunch, as they are going to need to get immediate cash-flow into their business.
“You will need to understand your customer behaviour such as the time they come in, what key products they like to buy, how they match your products together, their pricing sensitivities, and their median spend.
“With this information you will be able to design effective promotions that will, in turn, inject the cash necessary to keep your business running,” he added.
Finally, he said SMEs should take advantage of the government’s SME Digitisation Grant to help them digitise their data and start earning money from it.
“SME retailers sit on an asset and they don’t think of using or monetising: their sales data. Most of them don’t realise that manufacturers, market research companies and data companies are willing to pay them for their data. Of course, this activity must be subject to the Personal Data Protection Act,” he said.
During the MCO period, Chua said the government is focusing on providing liquidity to SMEs through loans, moratoriums and wage subsidies, which are especially useful in helping SMEs manage their cash flow for the next six months.
“However, most of our clients do not believe that their business will return to normal. Faced with the prospect of low sales and continued losses, many SMEs will be weighing the risk of exposing themselves to additional loans as a short-term liquidity boost.
“In this season, many business owners are considering three options: innovate, downsize or shutter, for those who can innovate they should take advantage of the government’s digitisation grants, and the wage subsidies will definitely help them,” he added. — Bernama