Two things that may become more important post-COVID-19

I am trying to be a bit optimistic, so I wanted to look forward and assume that the crisis will be acute, not chronic, and at some point, we will get out of it.

I wanted to look specifically at what corporate behaviors might change. There are two things that I feel certain companies will do/know post-COVID:

Data mining: There is a lot of online ordering right now. And that means lots of data on customers and what they are buying. Vietnam is still in the very early stage of ecommerce, at less than $5bn, but growing to $20bn plus.

Generally, online ordering provides better data for companies than retail ordering, at least according to my experience in grocery. And I assume that most stores in Vietnam haven’t been mining lots of customer data now.

All of this online ordering will allow companies to target customers much more directly and, hopefully, profitably. For example, if I go into a grocery store right now that doesn’t have a preferred shopping program, a store can learn these things from my purchases:

Average ticket size for the average customer. And they can look at days and times, which might be helpful. Like, if customers that buy a lot come in early on Saturdays, have more cashiers, or whatever. Pretty basic.
They can see what items go with what. Could be obvious, like chips with salsa, or beer with peanuts; or it could be quite interesting, say chicken with orange juice (or any random thing).

Now that everyone is ordering online (at least in some areas), these stores can personalize things so much more. Say I sometimes buy mangoes. When there is a special on mangoes, the store can email me to tell me and ask if I want some. And they can do this for more and more customers. And the opposite - if I buy milk no matter the price, they can stop marketing milk to me. Coupons could be super targeted to people.

And it doesn’t matter if I don’t order online in the future. The stores will still have my email and phone number, plus they could implement a preferred shopper program through this.

But it is going to be hard to set all of this up, especially for smaller stores. The technology investment is prohibitive, and so I can see larger chains standing out even more. They already get better prices and probably have some customer data, but now they will have a lot more data. They should be able to more easily target each customer. Small store will be hard-pressed to do this, unless their point-of-sale (POS) is extremely sophisticated and does most of the hefty lifting for them.

Source: Company data, Vietecon.com, Vietstock

More cash, less debt: In the US, everyone talks about the depression and how it affected the generation that went through it for decades after the recovered. Grandparents saved their pennies and were basically miserly.

Companies may follow a similar path, in that they (and their investors) will want to see more cushion. Now, I think it is very unlikely that even the best company would have enough cash to get through 3 months of revenue or even a month or two of a 80% decline in sales, like we are seeing now.

But they could start to take on the personal finance rule of at least 3 months of cash for essential payable (however they calculate those - rent? insurance? essential payroll? taxes?). Plus, because higher leverage increases the risk of bankruptcy, we could see companies look to pay down debt.

I want to look at this in more detail, but it seems like there are a few companies that have high deb/equity and high-ish servicing of that debt. (These charts are from this post I did back in late October.) VHM and NVL stand out, as they would since they are real estate (notorious for lots of debt). MSN doesn’t look great here either. Or SBT and GEX.

More on this next week. Enjoy the weekend.

VietEcon

Two things that may become more important post-COVID-19

VietEcon