What Will Your Revenues Be Next Month? $1 Million? $1,000?

Business leaders face another knotty problem: How to gauge customer demand as COVID-19 lockdowns lift.

Usually, when businesses decide the volume of products that they want to produce, they have a slew of data to study. Last month’s sales, seasonality, the buying patterns of big customers, even changes in government regulations can be useful guides.

But such things don’t seem very relevant now and likely still won't be when the economies of the world get back to business as the coronavirus pandemic fades. "No one knows how the demand will be restarted or the supply," says Yannick Binvel, president of Korn Ferry's Global Industrial Market practice.

Still, leaders will need to make some projection of future demand for their products or services to figure out how many goods to make, many employees to bring back, how much to spend on marketing, or even whether to change business strategies entirely. Depending on the industry involved, the way those forecasts get made will be quite different.

Retail businesses aren't expecting a booming summer trade for non-essential goods but are hoping for a pickup later in the year, says Craig Rowley, a senior leader in Korn Ferry's global consumer practice. Currently, consumer buying is largely focused on the basics, such as food and shelter, rather than electronic gadgets. "Right now, people will be buying for their needs, not their wants," he says. "What people are hoping for is healthy a fall buying season," he says. 

The result will be a dent in sales at most retailers, at least for a while. Executives are expecting trade to be down around 20-30%, Rowley says. "If they were previously doing $1 billion a month, they are now thinking $700-800 million," he says. From those estimates, retail bosses will try to gauge how much stuff to buy to put on the shelves. "It'll be an educated guess," he says.

For instance, retailers may be cautious about stocking up on business attire when people may continue to work from home long after the lockdown lifts. The last thing companies want after a time where no one can buy anything is to stock the shelves with clothing that people don’t need. "It's as much as a defensive issue as it is a good business issue," he says.

Electricity suppliers are stuck with a different challenge. Power companies don't hold electricity inventory, but they must be ready to provide it when it's needed. Currently, demand is down because fewer factories are operating and offices are closed, says Iain Manson, Korn Ferry's head of Korn Ferry’s Energy practice for Europe, Middle East and Africa. Some of that reduction was offset with more people working from home. 

But what happens to the power business when the lockdown ends? The massive challenge is to predict demand and to ensure that there is enough supply for everyone who needs it, Manson says. Surges and dips in demand are common for electricity. During the U.K.'s football FA cup final, electricity use traditionally jumps during the half-time break as viewers typically grab a hot drink. In the U.S., hot weather induces surges in the use of air-conditioning. "They study it all the time," he says.

But those are things that we know about from the past. This time, there are few if any precedents, Manson says. "The challenge is that this is a set of exceptional events," he says. Likely the reopening of the economy will occur in stages with some industries restarting before others. To make that transition smooth, power companies and the government will need to work closely, Manson says. That way, when heavy industry, such as the automakers restart, the electricity generators can be ready. "The people running the power grid will need to be ahead of the curve," he says.