Friday, March 29, 2024 | Ramadan 18, 1445 H
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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

Post-COVID-19 road to recovery

Post covid road to recovery
Post covid road to recovery
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For a prompt recovery from the COVID-19 crisis, businesses must gear up their activities. When the pandemic hit, the economy was in good shape globally. Everyone was happily spending and investing looking at a bright future. Then all of a sudden this scenario changed dramatically. Governments all over the world imposed a lockdown on people and the economy, which brought many sectors to an unforeseen hard stop. Finance continued to move to a certain extent. Today, after 3 months of stop, large companies have filed for bankruptcy, posing some question marks more on the management, than on the market itself.

For instance, the US large supplement distributor GNC recently filed for bankruptcy. Some pointed their fingers to COVID-19, but is it really the only culprit? GNC was heavily exposed in terms of real estate fixed costs.


A similar pathway was walked by Toys R Us and culminated with another bankruptcy a few years ago. Moreover, online sales boomed during COVID-19, and although it is true that GNC could have claimed that only a few in the world were allowed to work out, it is also true that GNC distributed other products that were not specifically targeted to fitness activities. For instance, vitamins and minerals were on GNC’s catalogue and nothing prevented these products from continuing being sold online during COVID-19. The company was founded in 1935 and it is hard to believe that 3 months of slower cash flow might have destroyed 85 years of history. It is far more likely to imagine a situation where GNC was heavily exposed to costs and long term commitments, paired with lack of innovation and the rise of cheaper unbranded competitors, that led to a sad ending for the company.


More surprising is the case of Wirecard, which is evolving these very days. A whopping sinkhole of $4 billion was found by EY while auditing the latest accounts. After hard pressuring the management to come up with an explanation, it was finally admitted that the money was gone, leaving at least 15 financial institutions with pennies on the dollar. Wirecard is one of the world’s leading payment processing firms, founded in Germany and extremely popular in Asia. If you have purchased a meal at McDonald’s and paid with your credit card, it is highly possible that the receipt that was given to you, had the Wirecard logo printed on it. Investigations are trying to find out how for 3 years in a row, Wirecard managed to hide at least $1 billion in cash.


Then there is the real economy - the one that is struggling to start again. Malaysia has just announced that despite 90 per cent of the population is back to work, the retail sector is still at 30 per cent compared to pre-COVID and hospitality is as low as 15 per cent. The road to recovery implies not only that all businesses resume activities as before, but working and promoting extra hard to gain back the willingness of consumers to start spending again.


[www.virgilli.com]


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