The great bounce back: Are businesses going all-in or playing it safe for post-pandemic physical expansion?
Published July 13, 2021
Is now the right time to expand your business—amid lingering uncertainty?
There is no post-COVID-19 recovery one-size-fits-all strategy. And it really comes down to how adaptable your model is to the pandemic, as well as the size and relative resources you have to pull through.
Big-name brands with extensive customer bases and profit margins have been best equipped to weather the storm. But resourceful small business owners have just been squeaking by with sustainable revenues—although, in some cases, small businesses have excelled in meeting changing customer expectations. How businesses choose to invest in their operations as we return to “normal” will depend on the financial shape they’re in post-COVID-19.
Because the world is still in uncertain territory, knowing the best way to reinvest for growth isn’t as obvious as owners and operators might like it to be. With so many just keeping their heads above water there’s been precious little time to think about opening new stores or restaurants—but now that may change and while uncertainty remains it may be the best time to expand your operations.
Related: The future of commerce: Who is the post-2020 consumer?
Slow and steady or a robust return—how businesses have been biding their time
It remains to be seen if we’ll see rapid economic recovery as there was in past pandemics. In a perfect world, we’d see an immediate return to business as usual. But it seems more likely that brands will play it by ear as they see which changes made over the past year or so are here to stay.
Speaking with Katy Huberty during the recent Morgan Stanley webcast, NCR Chief Financial Officer Tim Oliver shared compelling insights into how businesses have been responding to what will hopefully be a large-scale return of in-store traffic. “I think it will be more of a protracted recovery. This will be a thoughtful investment back into businesses’ physical plans. We saw capital spending and operating expenditure get reined in as businesses really focus their spending on things that deliver immediate value,” Oliver said.
“It will be more of a protracted recovery. This will be a thoughtful investment back into businesses’ physical plans ... as businesses really focus their spending on things that deliver immediate value.”
Larger businesses that managed to stay profitable were in a better position to open new locations. “Large retail businesses were open during the pandemic. They were incredibly busy and couldn’t afford to shift the focus away from satisfying customers,” Oliver added, “and then the big players on the hospitality side—similar to the big retailers—did really well.”
But even then, investment in physical expansion wasn’t a priority. “Think brands like Starbucks, McDonald’s and Wendy’s. They were extremely busy, so they had very little time to invest in a physical plan. Certainly, no new stores; they put new stores on hold,” Oliver said.
Small- and medium-sized businesses faced even greater challenges staying afloat. Flexible business models prevailed and the unfortunate cases where businesses failed have now been replaced by those that succeeded. And the ones that remain are in a much better position for expansion as the dust settles.
Related: Can past pandemics help reveal COVID-19’s silver lining for businesses?
Businesses that endured are now poised for physical expansion, regardless of their size
Enterprise-level businesses are now seeing the opportunity to ramp up physical investment alongside savvy small business owners who managed to fight through.
“On both the retail and hospitality sides, NCR’s business enterprise customers are now starting to spend. They are absolutely starting to open new stores,” Oliver said. This indicates that big brands are banking on consumers flocking back to retail and restaurant brick and mortars—a smart move considering that steady foot traffic through the pandemic will likely increase once restrictions are lifted.
On the other hand, smaller businesses were in a unique position to get more experimental with their business models and collect benefits unavailable to larger brands. These came in the form of government grants and tax subsidies that wise business owners are now using to buy up properties of less fortunate businesses that went under.
“I spoke to a customer the other day that runs five sandwich shops. ... [H]e’s [now] going to find all those locations that were closed and open five more—and we’ll be there to help him.”
Oliver concluded with an anecdote: “I spoke to a customer the other day that runs five sandwich shops. He told me that he had found a way to make money during the pandemic and that he had a $900,000 tax return coming to him. That’s more money than he’s ever had at one time to reinvest in his business, so he’s going to find all those locations that were closed and open five more—and we’ll be there to help him.”
Maintaining the momentum of multi-channel growth is the safest bet
Even if opening up new stores or restaurants is now a strategic priority, continuing to nurture the changes that enabled businesses to endure through COVID-19 is the more cautious—and potentially astute—investment strategy. This means maintaining digital-focused channels and new revenue streams, along with any other changes that create a more versatile customer experience.
“Coming out of the pandemic, we’re seeing both retail and restaurants institutionalize the changes they made to their businesses that were successful in helping them get through.” —Tim Oliver, CFO, NCR
We’ve seen that a flexible business model is the best approach for business sustainability through hard times. So, maintaining that flexibility is the best way of ensuring the transition out of the pandemic sees your business stronger than it was going in. All the best!
