Page 18 - IMDR EBOOK 20 OCT 2020

"Pandemic and Beyond: Naviga ng the New Normal" E - Book Year 2020

Overall, it appears that sales have seen a sharp decline due to travel restrictions, social
distancing, restrictions on sale of some commodities and customers resorting to
budget cuts and putting projects on hold.
4.4 Impact on Costs of doing business

While 52% respondents reported that there was no impact on costs, 24% observed that
there was an increase in costs of doing business. 16% of the respondents noted that
costs had decreased and 8% said they were unable to comment on whether costs had
increased or decreased.

More than half of the respondents reported that there was no impact on costs of
business operations. However an analysis of qualitative data reveals that costs per se
are not the real issue but the fact that there is no revenue generation due to sharp drop
in sales. As one respondent noted, “Fixed heads are by and large as it is, while the
wagon wheel is halted”. Here are some themes that emerged as encapsulated in Table 9.

Table 9: Impact of COVID-19 on costs of doing business

52% respondents reported no impact on costs, but concerns about recovering costs:
i. Reduction in sales has resulted in high overheads and reduced cash ows.
ii. While variable costs have declined marginally, xed costs have remained the same.
Recovering xed costs, when there is no revenue generations is an area of concern
iii. Some businesses have resorted to reallocation of costs – for instance spend on
servicing channel partners has been reduced and spend on digital marketing
has increased.

24% respondents reported an increase in costs.
So what were the factors that contributed to increase in costs of doing business?
Here is what the qualitative data analysis reveals:
i. Spending on better broadband communication since all communication is online.
ii. Spend on cyber security tools
iii. Increased costs towards enablement of digital platforms
iv. Freight costs have by up-to 400%
v. Cartage costs have increased due to shortage of labour
vi. Costs of raw materials have increased
vii. Increased spending on COVID-19 specic employee health insurance
16% respondents reported reduction in costs.
Data analysis reveals that this was due to:
i. Lesser travel expenses
ii. Customer contact on by email or online platforms
iii. No events/demos: one respondent noted ‘a lot of savings on sampling’.
iv. Reduced spend on promotional offers

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