In March 2019, a private equity firm announced that it had acquired CorePower Yoga, a popular fitness company with 200 studios in 23 states. The group defined CPY as “life-changing” and highlighted its “variety of yoga classes, convenient schedules and reciprocity across all its studios.” It noted, too, that the company came with an on-demand digital app for its customers, but the majority of the announcement appealed to the yoga studio’s in-person experience, writing that its “certified instructors take a typical yoga practice and crank it up to 11” in the space of “beautiful, spa-like studios … built to meet the highest standards of service and quality.”
Almost a year to the day of that announcement, in response to the global pandemic caused by Covid-19, CorePower Yoga closed all studios nationwide as members received notice that “monthly memberships have now been proactively frozen.” Soon after, CPY began directing customers to its on-demand app that hosts some 250 classes “along with meditation, lessons and more.” For, ahem, power users of the company’s studios — most surely are beautiful and spa-like — accessing classes via the app has helped assuage cabin fever over the last two months, if only for an hour each day. Elsewhere in the boutique-turned-chain fitness space, cross-fit studio Orangetheory Fitness has also begun offering at-home classes through its app (all of its 1,225 studios nationwide have closed); and, soon, spinning studio SoulCycle will do the same as it unveils a new at-home bike on the heels of closing upwards of 100 locations due to the pandemic.
The digital pivots by these companies are admittedly impressive. In a matter of days, they were forced to abandon just about everything that made them attractive to customers in the face of $30 per class price-tags: glitzy studios, dynamic instructors, peer motivation, all of which added up to a tribal-like spirit that put butts in the seats or on the mat. Now, with the world turned upside down and these selling points moot for the foreseeable future, a combination of digital sophistication, adept branding, and some luck have allowed these and other like-minded companies to hold on to customers and weather a storm that might stick around a while.
“With Covid-19, everything is moving online,” says Laura Hamel, a cybersecurity strategist and expert in product marketing. “People are referring to the ‘new normal’. Well, this is the new normal.” Hamel notes that people are no longer going to be “breaking down the (physical) doors” of retailers, that Cyber Tuesday will finally supplant Black Friday-type of shopping events.
Businesses of every shape and size could stand to take note. The transition from a physical presence to a digital one has been happening for some time, yes, but the coronavirus crisis may topple the wall for good, as companies will be pressured to translate their physical experience to a digital one. Sure, people will eventually return to the gym. They’ll still walk around shopping malls with no intent to buy and they may carry an affinity for the varying smells in hardware stores’ garden sections. But one way or another, these services and products need to be available within a few taps on a variety of screens as trends continue to show we’re less dependent on or interested in visiting brick and mortar stores. And these next months (years…?) will further push us in this direction, a watershed moment that will likely leave behind those unwilling or unable to double and triple down on the discipline of digital transformation. This crisis is going to force companies to take the leap and stick the landing, again and again.
‘Adapt or die’
Late in the 1990s, a dilemma was brewing that soon forced many organizations around the country to reevaluate how they did business. The issue at stake: the New York Yankees baseball team was too damn good because it was too damn rich. The Yankees steamrolled small-market (poorer) teams every year, and there was little to be done — money, as it does, talked, and these riches brought the best players to New York every year leaving other teams to search the lost and found pile.
Perhaps you’re familiar with this story, popularized by the book (and later motion picture) Moneyball. In it, we learned that to combat against the stacked odds, the Oakland Athletics began evaluating its team differently. Rather than try to outspend the Yankees, an increasingly futile tactic, the A’s began searching for players neglected by richer teams. “Adapt or die” was the mantra. They questioned traditional scouting that traded on outdated practices (i.e., he’s big and strong, so he must hit the ball far) and began applying new thinking born from statistics and strategy. Oakland built much of its roster — its product — this way, and from 2000-2004, it won the fourth-most games in the American League with a relatively paltry payroll. Today, after many other teams began adopting the same analytical approach, operating a Major League Baseball team without a robust stats department, one pioneered by the A’s, would be inconceivable.
The “adapt or die” rallying cry can be found throughout various industries. In 2008, at the height of the last financial crisis that turned the lights out on many companies, Domino’s Pizza was in the midst of reengineering its recipe for the first time in half a century. Good timing. By listening to customers through extensive research and development, the company was able to recalibrate its offerings at the same time online ordering began taking off. Instead of watching its 9,000 locations bend to financial pressures, the company’s reinvestment in itself— including a considerable retooling of its digital product — paid off, as its revenues have more than doubled in the last decade. And, wouldn’t you know it, Pizza Hut has recently begun trying something similar.
Attitudes have a way of never changing, then suddenly flipping overnight. Throughout the 2000s and even well into the last decade, cybersecurity was treated as something of an afterthought, a nice-to-have insurance policy for a rainy day that hopefully would never arrive. Then, as more and more big brands were hit with serious security breaches, companies that traded on the U.S. stock exchange and single-store coffeeshops alike began taking online security seriously, a no-brainer in the same lane as insurance and logo trademarking. (“Simply put, you don’t want to be the next headline,” says Hamel.)
In times of uncertainty and crises, realigning priorities is often the only way to survive and later thrive. The A’s couldn’t beat rich teams on the field so they beat them in the front office. Had Domino’s rested on its doughy laurels, we might be talking about the company in the past tense right now. Had Target and Yahoo’s networks never been breached, perhaps “password” would still have been everyone’s password, opening the door for a cataclysmic security breach threatening lives and livelihoods. (This, of course, could still happen, but it appears we’re better prepared now than even a few years ago.)
Indeed, things happen slowly then all at once. Sound familiar?
The customer decides
Small businesses and decades-old brands alike are facing similar headwinds in this new world. Some are adapting better than others. Many department stores may not survive the pandemic; Neiman Marcus, for one, is reportedly nearing bankruptcy, perhaps next in line after retailer J. Crew announced on Monday that it would seek Chapter 11. And it’d be mildly shocking if most big chain movie theatres were still around after the virus is under control. On the flipside: while Nike can’t sell its shoes at retail outlets for at least the next several months, the shoemaker’s already strong digital presence (its 2019 Q2 sales online rose 38 percent) saw use of its app jump 80 percent in China during February, at the time the height of the country’s pandemic. Additionally, the company has begun offering free workouts on its Nike Training Club app (normally $15 per month) to users around the world. Said Heidi O’Neill, Nike’s president of Consumer and Marketplace division, on CNBC last month: “One of the biggest shifts we’ve made is dialing up the strength of our digital ecosystem.”
And those shifts are directly correlated to working back from where the consumer is and what she is expecting. And right now the customer is online and she’s expecting a great experience, whether that means signing up for a monthly delivery from a local winery, touring apartments on the other side of the country, or browsing new kicks.
“The writing’s been on the wall for 15 years,” says Ted Gushue, a London-based consultant and founder of ERG Media. “Direct-to-consumer has been the trend because then you control the margin entirely. And if you can preserve that margin as you transfer away from a distributorship model into a direct to consumer model, you’ve just added 20 percent to your margin with exactly the same work.”
It’s not only direct-to-customers sales that are changing; business to business is also seeing a rise in the demand for digital platforms to better match the current landscape. The real estate industry, for one, stands out. Along with the economy, property sales have stalled as agents can show far fewer listings and buyers seem to be taking a wait-and-see approach. But, unlike, say, airline or car rental businesses that depend entirely on in-person use, available real estate can still be viewed online: virtual tours and photo galleries can still make an impact and keep conversations going. A leader in this space has been RE/MAX (note: RE/MAX is a Pendo customer). Last August, the company rolled out a new digital platform to assist the buyer-agent-seller relationship, streamlining, in its words, “the work of agents from lead generation to post-close nurturing and beyond.” At launch, the digital rollout featured agent-centered products to go along with a new customer-facing website and mobile app. RE/MAX’s new customer relationship management tool helps the company’s agents communicate with clients across all parts of the process. This provides practical value on a few fronts. For one, RE/MAX is better positioned to compete against digital-first companies like Zillow and Redfin, driving loyalty for member-agents in a transient industry by focusing on user experience. And secondly, it helps RE/MAX update its image from a familiar company that’s been around for nearly 50 years to one that leverages those decades of experience with technology fit for current times.
Looking for digital change — perhaps literally — elsewhere in the pandemic? Businesses across the country, sensitive and wary of exchanging paper money, have been making a full switch to credit card and online-only purchases in a move that will perhaps kill off cash for good. Companies like Square, Venmo, and PayPal are all positioned to capitalize on this moment by leveraging mobile apps that provide ways for businesses to charge for services. Harvard economist Kenneth Rogoff told Politico that the Covid-19 crisis “is absolutely going to drive people to prefer credit and debit to cash.”
Next week, next month, next year
The pandemic won’t last a decade. But even after just a few months that will likely turn into a year or more, we’re starting to see how the world will shift. Online-only universities graduate students without paying a dime for air conditioning or the cleaning of big lecture halls. After hundreds of colleges have seen their students able to complete assignments and turn in papers remotely this spring, might they start to cut back on the number of in-person classes? If Nike’s digital sales continue to increase, what will be the justification for paying rent on five floors in Soho or Midtown? There may still be the need for corporate offices and space for the sales teams to welcome clients and potential partners. But the actual selling of the product? Online-only, pal.
It’s above my paygrade to say if this new world that awaits us will be better. Nostalgia, after all, is a powerful drug, and maybe once this is over we’ll run back out to big electronics stores and chain restaurants and experiential marketing will boom once more.
But something tells me those old habits are going to die rather easily.
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