The biggest pandemic since the Spanish flu had a massive impact on local businesses. They have tried different strategies in order to be prepared for the future – with different success. Companies are partially recovering from this.
A research by Pia Klaus, Lisa Herbst and Emre Eikam
Covid-19 affected all the people around the world in a similar way: schools were closed, families and friends had to live without any physical contact, people were so to say trapped inside their own homes and the whole German economy has been affected in a huge way – as well as businesses around the globe. Especially local businesses are still fighting for their existence. City centers, shopping malls and public places looked deserted. Even though the public life is normalizing again, people are still affected and scared by the virus. Therefore consumer behaviour is not even close to be on the same level as before the pandemic. A retail forecast by Forrester showed the possible impact of the pandemic across North America, Asia, Europe, and Latin America. The scenario model demonstrated that retail will be hit hard and in 2020, global retail sales will contract by nearly ten percent. Due to many uncertainties, nobody can say how big the exact impact of Covid-19 on the retail sector will be.
Claudia Schmucker is the program director for globalization and global economy of German Council of Foreign Relations (DGAP). She wrote that a result of globalization is an increasing mutual dependence of the global players. This leads to an increasing economic vulnerability of single countries when it comes to a global crisis.
The monthly development of retail sales in Germany shows negative growth in nearly every economic sector. The textile sector and the trade in goods sector are most affected. The willingness to consume has also been plummeting over the last months. As hystreet.com reported, the visitor frequency dropped in every bigger German city.
In Germany, the monthly sales development of mail order and internet commerce has been increasing rapidly since January 2020. And the number still seems to be rising. Especially already existing and experienced online retailers are profiting from this development. At the same time, the local retail sector suffers from their gains. During the exit restrictions, even the last sales dropped. In order to support local businesses, different strategies were invented: the most popular one was to build websites that bring the local business sector together with inhabitants of this region.
Inhabitants: 60, 000
Localisation: small town near Stuttgart in southern Germany
Catchment area: 35 communities
380 businesses in the city center
Corona restrictions for Baden-Württemberg started on March 23. Some business owners did not go into shock but became active: two local newspapers and the trade association “Handels- und Gewerbeverein Schwäbisch Gmünd e.V.” (HGV) developed three online platforms.
On March 21, two days before the shops had to close, the platform called “Die Ostalb rückt zusammen”, which means ‘the district moves together’, went online. Visitors could click on the company of their choice and determine a voucher’s value. The website forwarded this information to the chosen business and the company would send the voucher directly to the buyer. 162 businesses participated and they were thus able to maintain their liquidity and not fall victim to a 100 percent drop in sales.
Ralph Wild and his agency “rawiMedia” manage the website. So far, they sold more than 1000 vouchers with a total value of 40,000 euros. Before launching the website, they calculated the selling of vouchers with a total value of 5,000 euros. “We never expected such a big effort. I am absolutely speechless about the support the population gave their local businesses!”, confirmed Wild.
On April 1, the trade association HGV launched its platform as a page on their website. The HGV has a total of 150 members, of whom 30 participate on the platform. There, they present their offer adjusted to the coronavirus exit restrictions combined with contact information and some pictures of the shop. Christof Morawitz is the chairman of the HGV and board member of the local savings bank “Kreissparkasse Ostalb”. He claimed that the main task for the local business during the exit restrictions was to remain in the people’s, the buyer’s mind, so that they are not forgotten and replaced by online wholesale.
One week after the restriction started in Baden-Württemberg, a third platform went online: “Hallo Ostalb” by another local newspaper. Wolfram Daur is the head of online marketing at the newspaper, “We wanted to give a future, not only to the business owners but also to the city center and accordingly also a future for the citizens and visitors of Schwäbisch Gmünd!”
Daur and his team planned their platform as an online marketplace with the offer to buy vouchers and a list with all the businesses that offer a delivery service.
50 stores participated on that platform. Until the end of the exit restrictions on April 20, they sold vouchers with a total value of 35,000 euros.
All three platforms in Schwäbisch Gmünd fulfilled the main goal of providing quick and simple help to the affected business owners. But there were also some problems: the loss of concentration in one platform confused not only the buyers but also the business owners. They asked themselves: what is the most effective way to survive the crisis? Three different shop owners from Schwäbisch Gmünd talked about their experiences and decisions during the exit restrictions and the Covid-19 crisis:
Christiane Losert, is the owner of “Casa Nueve”, a fashion boutique. When the exit restrictions were announced, Losert was with a coworker in the store. When she realized what impact this political decision would have on her business, she first started to cry. She and her colleagues formed a crisis team and coordinated the following steps:
“Casa Nueve” made 95 percent of its turnover during the exit restrictions via social media. The shop participated on two platforms but Losert was not sure about the effectiveness of these tools. She doubted that the platform-visitors actually bought vouchers, she thought that they only looked which shops were participating and then they would leave the platform again. But she realized that social media and online presence connected to the shop was important for keeping the buyers in the shop and in the city, too.
Kirsten and Christoph Markowetz are the owners of “Galerie der Sinne”, which means gallery of senses, a delicatessen. Two days before the exit restrictions in Schwäbisch Gmünd, they closed their shop and adapted their online shop to the new conditions. On a local level, they were present on two platforms and sold vouchers but also their presence on two supraregional platforms helped keeping their turnover as high as possible. Since local retail is authorized to reopen the businesses the turnover has been decreasing. Kirsten Markowetz saw the causes for this effect in the initial prohibition of gastronomes: “The city wasn’t that inviting and had no charm to lure the people into the city.” Markowetz sees the existence of different platforms positively because different platforms show the diversity, and this was important in the first days of the exit restrictions.
Ulrike Schmidt-Huber is the owner of Buchhandlung Schmidt, a bookstore. When she heard about the exit restrictions, Ulrike Schmidt-Huber immediately went to a store and bought a smartphone to make sure she could communicate and coordinate her business. Compared to other industries, she did not think that bookstores suffered as much as other shops. People had to stay at home and many rediscovered reading for themselves. She had a webstore even before the exit restrictions and that was her luck, she said. People bought their books online and Schmidt-Huber and her team delivered the orders to the customers. “The workload was way more intense, but that was worth it”, she said. She saw the advantage of the platforms in the recognizing effect, so people did not forget the stores in Schwäbisch Gmünd.
Schmidt-Huber appreciated the good structure and organization of her bookstore during the crisis. Everything and everyone worked as planned and they learned to adapt themselves and the store to that crisis. She said, “By shifting the business to the digital the population noticed that the big online concerns like Amazon, Zalando etc. are not really that necessary as expected. The local retail is able to provide online-commerce too and this is what the people learned.”
In Schwäbisch-Gmünd, the different platforms only had a slightly positive effect. The businesses that already had their own individual online strategy are the ones that were able to cope with the situations. The others did not. They would have needed the help of the platforms the most but did not receive anything due to the irritating and confusing situation the platforms created themselves.
Inhabitants: 137, 000
Localisation: middle sized town in the center of Bavaria
Catchment area: 69 communities
1, 500 businesses in the city center
In Ingolstadt, it went the other way. The consulting company ‘Achtzig20’ founded the website “orderlocal” together with ‘“N-City e.V.”, a marketing association, to help and support the local retail sector as well as the local gastronomy during the exit restrictions. The first step was made when the employees of Achtzig20 had a zoom-meeting two days after the exit restrictions in Bavaria were announced. Eugen Hoffart, head of the orderlocal-project, was not even part of this meeting where the decision to support the own region was made. “When I got into my office on Monday, I was named head of the whole project and asked “What is this orderlocal anyway?”, remembered Hoffart.
They started working on the project together with IN-City e.V. which is sponsored to one third by the city of Ingolstadt while the rest of the fund is provided by the participating businesses. The goal of IN-City is to “make the city center more attractive and livable.” Also, they try to support the local retailers by e.g. organizing events to raise customer numbers in the city center. The big advantage of not being part of the city’s council is that IN-City does not get slowed down by any bureaucratic matters as Teresa Treiting, General Manager of IN-City e.V.: “Because of this, we were able to start instant with Achtzig20 together on working and developing something to support the small- and middle-sized businesses in Ingolstadt right from the beginning.” The idea they came up with is, regarding Hoffart, “a platform for all businesses and not an isolated solution just for individuals.” That is important to them because they wanted something integral. They looked at already existing solutions on the market to solve the problems of the local businesses but did not find any platform. They just found solutions based on isolated online shops – but nothing that operates based on one, centrally organized platform, or, so to say:
First, they checked what the national operating competitors were offering and orientated themselves there. The end product of their thoughts and work was a platform where the user can order clothes, wine, food, or even his gardening tools on one website and only from local businesses.
Teresa Treitinger and her employees at IN-City contacted every listed clothing store, restaurant or retail store owner of their 1,500 line long list to get this variety. “Especially making contact was pretty tough during the first weeks because the shops were closed and therefore it was not easy to reach any of the owners.” This is one of the key driving facts, why orderlocal is succeeding in a big way: through their huge engagement they were able to fill their platform with a diverse variety of shops and restaurants. The diversity has such a huge value due to the complexity. There are two sides: the businesses and the customers.
At this point the part of IN-City gets even more serious. They organize events so that the platform gets a bigger supply while increasing the added value for the businesses to assure that orderlocal gets more popular and grows. For example, organized IN-City a line of car-concerts for up to 1,000 cars in Ingolstadt. More than 32,000 euros were taken by local business within ten days. While listening to their favorite acts the listeners had the opportunity to order food from the participating restaurants at orderlocal.
It is essential for Hoffart and Treitinger that everybody can participate at orderlocal. It does not matter how the online affinity of the business was before the pandemic or what it looks like at the moment. Sure, a computer would come handy but there are no requirements. It is important for them that they pick the owners of the local retail stores and restaurants up and hand them a solution which should support them during the crisis as well as afterwards. To secure that there is no one left behind, especially that the “not so online-affine owners” do not get lost, IN-City provides them with more than just offering and placing their business and their products on their “digital shop window.” They have three workers who support the owners on a daily basis.
But now, after the bigger part of the exit restrictions have ended, and life gets more normal again, the first businesses left the platform. There are several reasons why: like different cash register systems or just simple missing capacities for the delivery because the workers who delivered the meals earlier are now back in the restaurant serving or cooking the food. Of course, the heads behind orderlocal are already having a plan to cope with this development. The delivery-problem should be solved with cargo bikes. This would, aside that the businesses remain on the website, lead to a CO2-neutral delivery of the ordered goods or foods.
Furthermore, said Hoffart, they want to tie their platform to already existing merchandise management systems, to get “one complete package including a cash register system, a merchandise management system, and orderlocal so that the people do not have five different terminals of which everyone needs to be handled individually.” The goal: standardize everything so that the members of orderlocal want to remain on the platform and it can grow way further than it already has. Other cities and regions in Germany already got in touch with Treitinger and asked for white labels of the plattform, which are licensed copies of an already existing product. So maybe one day, there will not be not an local Amazon anymore – but maybe a global orderlocal.