Watch: UAE's SMEs, startups come to terms with taking on full impact of COVID-19
Survival isn't only about saving on costs or re-working credit facilities with banks
Dubai: COVID-19 wasn’t all about its impact on businesses and sectors.
The pandemic months created opportunities for UAE businesses that went online to sell groceries and everyday needs. It boosted prospects for ‘cloud kitchen’ operators as more residents and restaurants started using them for their servings. There were those industrial units that immediately pivoted towards making face masks, sanitizers and all sorts of anti-COVID-19 requirements.
But what about small or midsized businesses in the UAE that do not fall into any of these categories? How did those startups that launched just ahead of the pandemic fare? Was the Year of COVID-19 only about ensuring the survival of the business and keeping costs down to a minimum?
‘Gulf News’ spoke to a random selection of business owners to get their feel of how’s it like to get through a COVID-19 impact.
Never going out of style
Nothing says ‘Old Economy’ like a bespoke men’s tailoring business. New trends sweep in every now and then, customer profiles change – but there’s always a certain timelessness to heading to the store and going over the measurements and the fits.
That’s what disappeared when the pandemic showed up. For Gary Sweeney, Brand and Style Director at Ascots & Chapel, it meant having to factor in that potential clients were getting into work-form-home mode rather than thinking about what their next suit should be.
“But we still got those calls – a lot, actually - from clients who wanted style guidance on what they should be wearing during their Zoom meetings,” said Sweeney. “They didn’t want to be seen in a three-piece suit at home – but that didn’t mean it was all about dressing down.
“What the lockdowns and WFH (work-form-home) did was accelerate further the evolution of professional dress codes and what people are comfortable wearing.”
Most important, the orders were still happening – “Clients were requesting sports jackets with shirts and chinos they can wear at home and still look perfectly acceptable as a professional at work,” Sweeney said.
Ascots & Chapels operates three boutiques in the UAE, two in Dubai and one in Abu Dhabi. Further expansion plans have been pushed to the end of this year or early next. But Sweeney is clear he’s not shutting down existing locations.
And he’s not too taken up with trying to get his more of his business done online. “There were many tailoring firms that went down this tech-heavy route,” he said. “But we remain true to our roots.
“Creating a bespoke suit and having a tailor measure you and trying it out over the course of your visits and then reach the final product is not something that can be done online. There will always be a market for us from customers who wants these experiences.
Focus on costs
Once the likely impact of the pandemic became clear, businesses made the immediate decision to cut costs wherever they could. Seeking rent waivers or deferments from their landlords was an immediate priority, and so was working closely with their banks to rework their credit situation.
“Many startups had to revise their ongoing loan or overdraft arrangements,” said John Varghese, Managing Partner of HLB HAMT, a consultancy. “They had to opt for low-cost loans from private firms or seek borrowers that promised less interest, while compared to high-cost loans.
“Banks in UAE had come up with relief packages to grant temporary relief to customers, to ease their financial burden. The Central Bank had recommended banks to offer these benefits to clients:
• Additional financing at reduced rates;
• Working capital relief;
• New credit lines;
• Rescheduling of loans; and
• Reduced fees and commissions."
Add new ways
Bringing down costs or seeking delayed payments is only part of the equation. Businesses had to ensure they were operationally secure… or as secure as could be possible in this environment.
Hira Industries built its operations as a supplier to the construction sector, among others. But it was during the pandemic that it decided to get into a new production line that was completely different to whatever it had been making.
What it came up with were floatable accessories targeted for leisure or exercise activity.
“The products are made from foam - since we were already manufacturing foam insulation products, it was easy for us to venture,” said Umesh Unni, General Manager of Hira Industries. “We did research and found that there are no local manufacturers who provide these types of products.
“We took the opportunity and came up with these aqua-fun products for kids… and adults.”
These are made at its facility in Ras Al Khaimah. “Our plants are running at full capacity - the new product line is a part of our innovation drive to promote ‘Made in UAE’ products,” said Unni.
Consolidate and recover
Outside of travel and tourism related businesses, it would be no exaggeration to say that the F&B space was among the hardest hit by COVID-19. The dine-in business vanished once the lockdowns went into effect, while they still had to pay rents on these locations. At best, they got rent deferrals, and in rare instances, full-scale rent waiver or reduced rates.
Even then, hard decisions still needed to be done. “With the lockdown, we had to close our Dubai Parks & Resorts location - once the theme parks closed, we had no option,” said Hricha Saraf, Partner at Bol Gappa. “And literally, with no sales in the initial [lockdown] period, every day we thought about closing our Karama location as well. Survival was the key.”
That’s when Saraf decided to double down on opportunities for delivery orders. “Our outlets always focused on dining options and delivery was never the focus as it didn't go well with our food concept,” she said. “We had to start looking at ways to activate delivery.
“It was extremely difficult initially. Plus, with discounts being offered by other restaurants, it made our delivery option even more difficult when we were just starting.
“The cashflow stabilised in the fourth quarter, with December being close to the earlier period.
However, since January, we are again witnessing lower dine-in customers which has again started to have an impact.”
The coming months will be crucial for the city’s F&B businesses, cutting across categories and the clientele they target. Delivery or takeaways will likely remain the main revenue generator, and keeping tight tabs on costs will be central to survival chances.
In this regard, moves made by the likes of Careem and noon to bring down delivery commissions for F&B businesses could be quite a help. More so, if other delivery-focussed entities weighed in with their own support.
Add an app
The two themes that businesses were hearing a lot of even before COVID-19 hit was ‘Go online’ and ‘Be digital’. That chatter only intensified after the virus arrival.
Leroy Dias is Managing Director of SteelCorr, which is into ancillary marine services. The company launched an app - Digital Paint Report - in 2019 and what it does is help vessel owners track the extent of corrosion that seeps in. (In other words, the app tells them when to take the vessel to the yards for a new paint job.)
“The launch of the app was something that was planned earlier; however, the pandemic made digitalisation a priority for most businesses,” said Dias. “This was particularly important since travel restrictions made it challenging to visit the ships that were sailing in different geographies.
“Our app helped to ease that challenge by enabling better ship-to-shore data sharing on a collaborative platform.
“During the pandemic, our team focused on adding value for customers who were forced to work even more remotely than previously. We added Artificial Intelligence to our app to identify and monitor corrosion and provide actionable insights. Our priority for 2021 is to enhance the AI capability and extend it to videos as well.”
The digital trip is picking up pace…
Store ‘em up
It was also a question of getting the timing right for Harish Tahiliani, Managing Director of Arab India Spices. His business had just commissioned giant food storage silos in Sharjah – 12 of them with a combined 52,000 tonnes of storage – when the pandemic struck.
“Initially, the plan was build these for our own needs and to lease out some of the capacities to other traders,” he said. “About six months after we started full operations, we felt it would be better to use these capacities for our own needs as the market for food stuffs was increasing by the day in the UAE.
“There was a phase during the pandemic - during the early stages - when we saw panic buying. However, swift action taken by the UAE government settled things down very quickly. I would say there was an increased need to use the new silo capacities - but for a short period of time.
“Currently, all the 12 silos are in use. Re-stocking is totally depended on consumption and done is phases. We do make it a point to see that a part of the capacities are re-stocked every 45–60 days.”
Survival of the fittest
Fitness- and wellness-focussed businesses were feeling the pain acutely after living with the COVID-19 reality became a part of everyday life. Where the focus had been on attracting more members to the facilities, now it’s about trying to reach out to them through screens. The intent? Keep getting the fitness message out – to ensure survival of the business.
“Post-COVID-19, I was forced to move to virtual classes as well as one-to-one PT sessions,” said Janine Roach, Founder of Grit Dxb. “In the virtual classes, we welcomed everyone who wanted to join in from home and offered body weight as well scaled up basic weights workouts.”
And at the facilities, “We’ve gone from a 37 capacity class down to 12,” Janine added. “But what is great to see is that our sense of community is intact and we have social media to thank for keeping us connected.
“We have over 60 people who are actively engaged and go the extra mile to book themselves into classes several times a week. With reduced capacity, these classes that are booked on the app can disappear in seconds.”
But when it comes to plotting the next steps for the business, it’s being approached with caution. “Naturally, there were delays in expansion into new locations due to delays with the projects - but also because we’re not too sure what the future holds. For now, it’s just trying to stay afloat.”
Secure a future
The pandemic has been particularly harsh on certain business categories. Because creating the right exposure was made even more difficult as consumers became more intent on getting through the day-to-day aspect of their lives than discovering what’s new in the retail space.
But for the three founders of The Marigold Story, an ethnic focussed fashion and accessories online retailer, there were benefits too. “We started at a time when travelling and moving around was restricted,” said Shama Dadarkar, co-founder. “This worked out as a perfect solution to reach a wider target audience.”
But changes still needed to be made. “The pandemic served us a reminder we would have to innovate our model to be agnostic of supply chain and delivery issues,” said Rupal Panjani, the other co-founder. “We realised that with disruptions, we had to increase our investments in inventory and diversify our product mix.
“Unlike traditional retail models that start offline or through distribution and then complemented by their e-commerce presence, we built an engaged customer base, which is now ready for us to engage offline. The ambition is to be stocked in at least five boutiques or departmental stores in 2021.”
Get over 2020, do the best with that’s possible in 2021. UAE’s SMEs and startups have their work cut out…