In February, as Hong Kong began to feel the grip of its first wave of coronavirus infections, Albert Chen, 33, and his father, Tim, sat down to discuss the dire state of the business of outdoor furniture for their families as the pandemic escalated. hold on.
“It was really scary. Sales are down about 50% from the previous year, ”Albert Chen told Al Jazeera.
“We were thinking of different ways to survive in this economy and dad suggested that we buy mask making machines in Taiwan, where we are from, install them in Hong Kong and have [them] managed by our staff here.
At the time, demand for protective equipment was high in the face of a global shortage. The prices of the machines his father wanted to buy were about twice as high as usual.
“I remember my first reaction was” “Are you crazy?” “
Chen says he assumed COVID-19 would be similar to the SARS outbreak that swept across southern China in 2003, causing just a fraction of the global infections and deaths from the latest pandemic, and ending in a matter of seconds. month.
“Why would you invest all that money?” Chen asked his father. “I was worried about it. I said, ‘What if COVID ends soon? What are you going to do?'”
His father ignored Chen’s protests, and a month after Tim Chen decided to go into mask manufacturing, the World Health Organization (WHO) declared COVID-19 a pandemic. The disease was spreading rapidly throughout Asia and the world, undermining entire industries and throwing the global economy into turmoil.
COVID lockdowns to contain the local epidemic have dealt a devastating blow to businesses in Hong Kong, which had already been brought to their knees by six months of anti-government protests. That, added to the effects of the trade war between the United States and China, pushed Hong Kong into its first recession in a decade. The economy contracted 3.5% in the third quarter from a year earlier, its fifth consecutive contraction.
There are more than 340,000 small and medium-sized enterprises (SMEs) in Hong Kong, employing a total of 1.2 million people, or about 45 percent of the total private sector workforce in Hong Kong, according to the reports. official statistics.
According to the Hong Kong Department of Commerce and Industry (TID): “[SMEs] the vitality and performance of businesses are of crucial importance for the development of our economy. “
TID chief information officer Vivien Chen told Al Jazeera that it is difficult to measure the effect of the pandemic on SMEs in Hong Kong because it is still ongoing,
But, she said, it is clear that “Hong Kong’s economy has been hit hard by social unrest, the pandemic, and international political situations.” In fact, total retail sales in the first 10 months of 2020 are down 27% from the same period last year.
To help businesses “cope with the pressure of the economic downturn and ease their burden,” the government has allocated more than HK $ 300 billion ($ 38.7 billion) in four rounds of funds and contingency plans, the fourth having been approved on December 21.
Some mid-sized companies, like Albert and his father, were able to weather the storm and stay afloat by radically changing their business models.
For the Chens, that meant turning their 22-year-old outdoor furniture business into a mask-making company, MaskLab, employing around 20 full-time staff and another 60-70 part-time.
They were able to capitalize on a key advantage: “We were already familiar with fabrics like non-woven polypropylene, which are used not only in outdoor furniture but also in masks, because both have to be water resistant. So it was cheaper and faster for us to have access to these fabrics compared to our competitors because we had existing supply chains, ”explains Chen.
Seize the moment
As coronavirus cases began to increase in March, countries around the world suffered from a dire lack of protective gear. WHO chief Tedros Adhanom Ghebreyesus described the “chronic global shortage of personal protective equipment” as “one of the most pressing threats to our collective ability to save lives”.
Chen said, “Every day we got calls from traders and government buyers scrambling for masks. This is how we started. Our first large orders went to Italy, UK and USA. “
But as the government’s wholesale and mass contracts began to dry up, mask prices began to stabilize. Chen pivoted again, this time selling direct to consumers: “We quickly discovered that, especially in Hong Kong where people wear masks every day, they were actively looking for colors.”
At the end of March, Chen signed the lease for a former clothing warehouse, cleaned it up, and turned it into a workshop to produce masks his team can say “proudly made in Hong Kong.”
On July 6, MaskLab’s new multi-colored respirators, with shaded shades of pink and blue, sold out online in 10 minutes: “It was then that we realized we had successfully adapted to the products. “
In early December, Chen opened his fourth store in one of Hong Kong’s most desirable locations on Queen’s Road Central, across from a sportswear store and near the posh Landmark Mall.
The face mask industry in Hong Kong is very competitive, with over 100 companies scrapping it for a market that is unlikely to be around forever; demand will likely drop once the pandemic is over. To anticipate a potential expiration date, Chen signed a lease for just six months for his newly opened store in Central.
Short-term planning is something Chen said businesses in Hong Kong had to learn, not only through COVID-19, but also because of the anti-government protests that brought the city to a halt in 2019.
“The reason we were able to open all of these stores is that the demand for retail space is low. I never thought that in a million years there would be so many empty stores in Hong Kong. The lesson is this: never say never. “
Chen says he’s also learned the importance of preparing for rapid changes in the business environment.
“You can make things run smoothly and in a minute it can suddenly stop. You have to be nimble so that when something goes wrong you can always pivot. If you have too much overhead, you can’t change the way you operate fast enough. In business now, every week and every day counts. “
Make virtual events
That’s a sentiment shared by Davena Mok, director of A-Vibe, a Hong Kong-based public relations and digital events consultancy that employs eight people, including herself.
“All of our customers – in the retail, hospitality and events industries – have canceled so much, whether due to suddenly reduced or drastically reduced budgets, or decisions about safety and security. risk prevention, ”Mok said.
“Rather than having stability and working on six or 12 month contracts like in the past, we focus on a monthly level, which equates to daily or weekly reviews and adjustments over the past 18 months. “
Mok said his company saw a significant 95% drop in its events and press schedule. For the events that took place, the team edited them to be online rather than physical.
In one case, a pop-up store had to be turned into an online store promotion, and an appearance with a UK-based designer was moved to an Instagram Live social media chat. A two-week international speaker festival has been transformed into a digital program.
Mok said the company succeeded through 2020 without staff cuts or losses by remaining “flexible and adaptable.”
For A-Vibe, that means giving staff more options for working from home, reducing office space and being up to date with innovative technology solutions.
This thinking outside the box will be crucial as Hong Kong faces a new round of restrictions amid a further rise in coronavirus infections.
The local government predicts that as the local epidemic “spreads widely and rapidly, the business environment for retail could deteriorate again in the short term.”
For Hong Kong businesses, this prolonged pressure will prove to be the ultimate test, as many try to change the way they operate in order to survive.
This article is part of Al Jazeera Digital’s ongoing series that features small businesses around the world that have survived market disruptions from COVID-19 as well as economic challenges unique to their country. Click to learn more about small businesses in Tehran, Beirut, Bombay, the central English town of Wigston in the UK and Islamabad.