The latest COVID-19 restrictions have sent around 12 million Australians into lockdowns and dealt another devastating blow to the country’s hospitality industry.
Data from the 28,000 venues that use ordering, payments and data insights platform Ordermentum shows Melbourne suffered a 70% decrease in gross merchandise volumes in the CBD and a 25% drop overall during its recent lockdown, leading to $1.2 million in gross value lost. And Sydney could be looking at similar, if not greater losses, during its current lockdown.
However, restaurants, pubs, bars and cafés are adapting to cope with the constant uncertainty. They are getting smarter about how they handle these lockdowns, ordering in smaller quantities and more frequently to avoid having significant inventory that may go to waste.
While businesses are better equipped to managed lockdowns, this latest outbreak will still have an ongoing and lasting impact for suppliers across regional NSW, who are seeing a drop in demand for their goods and services.
Ordermentum CEO Adam Theobald (above) said: “The new lockdowns in Sydney and across Australia are crushing for coffee shops, cafes, restaurants and pubs. Not only have they been forced to close for weeks again, but the ripple effect is expected to last much longer as workers and employers will be reluctant to return to the city, even after restrictions are lifted.”
Theobald said it was crushing that businesses in Sydney were only given a few hours notice before being forced to close at 6pm on a Saturday night, the biggest night of the week for many venues.
“I walked around Balmain on June 26 and I could hear the pubs closing up at 6pm,” he said. “The operators looked dejected as they started to pack up, it was absolutely gut-wrenching and I really felt for them.
“Some are able to use their goods for takeaway, which is great. But many have no takeaway trade and literally have to throw out thousands of perishable goods.”
Across the board, venues faced an urgent battle to manage both staffing levels and inventories for the initial two-week lockdown.
“Managing staff, and trying to share the limited hours fairly has been one of the biggest challenges – many of the suburban cafes struggled on the weekend with big crowds for takeaway,” Theobald said. “Three venues we spoke to were run off their feet trying to keep up with demand, on limited staff.
“Trying to predict volumes is the hardest, and managing operating costs overall is also difficult. We saw the staff rallying together to come up with new takeaway menus and offers. The owner of Pilgrims told me breakfast is the trickiest for his cafe, as not as many people get takeaway, so he’s coming up with new meals to entice them.”
Extended lockdown for Sydney?
While many parts of Australia have reopened, Greater Sydney remains in lockdown, with fears it will extend beyond July 9.
Theobald said he hopes for good news on Friday, but said it’s good to see both customers and operators becoming more adept at changing their behaviour during such times.
“Venues have learnt to adjust their wholesale supply and many have re-configured their store to be set up for take away during lockdown periods,” he said.
“During the first lockdown in March 2020, we saw a volume drop of 50% across the network and Australia. This continued for three weeks until volumes began to steadily increase to 80% of pre-lockdown levels, keeping in mind this was before the initial restrictions were relaxed.
“Then, in the most recent Melbourne lockdown, we saw a drop of only 25% in volumes and a quick recovery. As you might expect, we saw the most significant drop in the Melbourne CBD with a 70% loss. Although, on a more positive note, it only took around two weeks from the relaxation of restrictions for volumes to be mostly back to normal levels.”
Theobald said he was hoping to see a similar recovery for hospitality businesses in Sydney once restrictions have eased, but is expecting a slightly harder hit as Sydney relies on more CBD trade and fortunately, we are less accustomed to lockdowns.
The move to digitisation
Among the tactics he’s seen businesses use to minimise losses include a huge shift in the way they manage their payments.
“Looking at the payment data and analysing invoices, we expected to see a lag in payment, however, the data shows that time to payment after invoicing is actually decreasing,” Theobold said.
“With better ways of managing invoicing and payment, suppliers can control their cashflow, their payment terms, and easily shift to upfront payment if needed, which actually helps venues manage their cashflow.
“And there is definitely an overall shift of digitisation for all areas of the business, from online menus and ordering, QR codes and checking in, and wholesale ordering. We are seeing hospitality take up digitisation at a much faster rate.
“Ultimately, since experiencing multiple lockdowns since March 2020, venues and suppliers are becoming increasingly better at managing change quickly and efficiently. We are definitely hearing less noise around order cancellations and management, and stores know to revert to takeaway. At this stage, the pivot was known to them and they knew how to act and quickly.”
As for how platforms such as Ordermentum are helping businesses to work smarter during these uncertain times, Theobold said having all orders and payments digitised in the one place offers greater transparency and visibility over overall business performance – from the cost of goods, profit and loss, and cashflow.
“The insights we can gather from the data are helping suppliers to make better decisions and stay on the front foot,” he said.
“Whether knowing what products are performing and not performing, or looking at your customers ordering behaviours and being able to predict that someone might churn – you can see opportunities and act quickly.
“One of the better benefits is that having a seamless, digitised ordering process means you have time to build relationships with your customers, and focus on the product and the people – which ironically has been one of the main barriers to adopting technology! We design the products to take away and automate things that can be automated. So you don’t have to chase cash, spend hours reconciling invoices, chasing proof of delivery, and fixing ordering errors. The hours saved by digitising this process is huge, and can’t be overlooked.
“Even the smaller benefits like having all your supplier contacts in one place are huge. Especially in lockdown. If your chef quits, or barista leaves, sometimes they walk out with all the supplier contacts and relationships. By centralising your orders and keeping a history, you don’t lose this.”
How consumer behaviour is changing
The impact of COVID-19 and snap lockdowns has led to significant changes in the way hospitality does business. The digitisation has been significant, with a shift to electronic payment, QR code check in and digital menus accessible via your personal device.
“We have also seen a significant shift to volume in suburbs as people are in lockdown and working flexibly from home when restrictions have lifted,” Theobold said.
“The main positive difference this time, compared to past lockdowns, is that the venues are better equipped to adapt to the change and they jumped to action. From analysing order data, after the lockdowns in Melbourne, we still saw an immediate drop in revenue which affects the entire supply chain – not just the venues and their staff. But each subsequent lockdown we see the revenue jump back more quickly. Hospitality is adapting faster each lockdown and becoming more agile as a whole.
“Limiting waste is another key focus for suppliers and venues. They are adapting either by ordering more frequently in smaller batches, or switching to sustainable packaging. Sustainability on a financial, social, and economic scale is hugely important.
“We have also noticed that caffeine is essential!”
However, Theobold said he remains concerned that many businesses won’t recover if lockdowns continue.
“We have already seen a large number of hospitality venues unable to reopen, while other businesses are just getting back on their feet when another lockdown hits,” he said. “While the most recent lockdown has hit businesses hard, especially since the removal of JobKeeper, watching the agility of the hospitality industry as businesses recover from lockdowns has been amazing.
“But it’s important to note that while it’s fantastic to see so many businesses adapting and recovering throughout repeat lockdowns, it doesn’t take away from how hard it is day by day to survive and make business viable.”
Pictured main: Pilgrims, 127 Macpherson St, Bronte NSW.