Switching to survival mode
We just lost around 80% of our revenues.
And we are most likely not going to get it back anytime soon.
I have a small leather studio, shop and art gallery in Tallinn, Estonia. Besides designing and crafting sustainable products me and my team also organise workshops for both tourists and locals who want to make leather accessories with their own hands. In addition we hold different talk nights and training sessions. We are essentially an open studio — visitors of our shop can also see how our products are made.
As of last week, there is no open studio anymore. No shop and no gallery. There are no workshops and no tourists. All there is, is quarantine, empty streets and silence. And then there’s our little webstore that used to bring in a fifth of our income — and is now the sole lifeline for our entire business.
Just like tens of thousands of other companies around Europe, we held a crisis meeting a few days ago — and decided that we want to survive, against all odds. From conversations with friends and acquaintances, I’ve realised that many don’t entirely grasp the impact that the corona avalanche is having on small businesses—where fixed labor costs and rent make up most of the expenses—beyond the fact that the tourism sector will be shattered to pieces. That’s why I’ve decided to share our plan on how we’re going to overcome this menacing challenge. I’m hoping that some of you will find it useful—or can share their own learnings in return.
The first task after cutting costs is obvious — webstore sales have to increase multiple times in order to keep us afloat. And it’s supposed to take place in a situation where the economy is quickly going off the rails and making people gradually postpone — or entirely stop—such purchases.
How to push sales up quickly? You do a massive discount campaign. The only problem is that we don’t do that. If we ever do discounts, they are rather limited both in the extent of the price cut and in the variety of goods. And that’s how we will continue after coronavirus crisis. And yet — we dropped a whole 30% off on all purchases from our webstore. This is not a marketing campaign. This is getting into survival mode.
Last year, our studio shop accounted for 37% of the revenues. 13% came from resellers, workshops and business gifts made up approximately 27%. The reminder were orders coming in from the webstore and email. Sales during the summer are mostly covered by a steady stream of tourists. We thought we’d been clever having mitigated risks by differentiating our portfolio of activities. We thought it’ll make us more resilient against any and all crises.
Sales figures started showing signs of a freeze in the beginning of the week. The state of emergency announced by Estonian Government on Thursday night stopped sales almost completely. Being responsible for retaining the jobs of eight people (not including seasonal help and myself), we had several different scenarios on the table on Friday — the most extreme being letting everyone go.
In order to protect the health of the closest ones—and everyone around us—and to contribute towards keeping the infection growth levels low, we decided to close our doors to visitors. Had we decided to stay open, it wouldn’t have mattered—no one would have come anyway. This meant the entire open studio idea was instantly discontinued for the foreseeable future. We had only hours to come up with a business model which would enable us to find enough work and make ends meet for at least the next two months.
If we had closed the studio shop without pushing up the web sales, we’d be out of work pretty soon because:
- one won’t consider purchasing a leather bag while ensuring to have enough food and medicine — especially if the only option is to purchase it online without being able to touch the product (the feel of the material is an important characteristic of our products) and when they’re missing out on the authentic studio experience
- there’s no way to run workshops anymore — potentially spreading the virus isn’t too fun of a perspective—and gatherings like these are by now forbidden by law anyway
- we can’t rely on large business orders as those were closely related to the now dead and buried tourism industry. But what about business gifts? No more gifts — budgets for this are going to be cut across industries
- Resellers? Everyone is in an even worse situation than us — doors closed, revenues dropped by 100%.
We could’ve set the discount at 10% or 20% — in part also to reduce the awkwardness of having some customers pay a full price just a day before. But nothing else but an extraordinary measure would be enough. Nothing short of exceptional would motivate buyers to act.
Reducing the price by a third in the industry of hand crafted leather bags is a high risk move of course — costs are high, volumes are low, there’s not much of a buffer. There would most likely be no more money left in hand after paying rent and salaries. More likely, we’re going to run—hopefully temporarily—at a loss.
But this buys us time to make some inescapable changes like shifting sales personnel to work from home, setting up work in two shifts seven days a week (first one Mon–Wed, second Thu–Sat, Sundays alternate), taking out one’s vacation days, using contactless couriers for delivery, communicating with clients virtually (sending photos and videos to give them the feel of the material). And on top of that, as mentioned — closing the studio shop and cancelling all workshops, exhibitions and events.
I’d be deceiving myself by thinking to know what’s going to happen next. A lot will have to be decided on spot based on what the government decides, how our partners are doing, what our supporters are thinking and how the pandemic plays out. Every coming day, even every coming hour might change everything. We all have to adapt to the volatile situation. Some of us just need to do it faster and more creatively than others. Me and my team are all creatives so I believe we’ll come up with solutions to any obstacles the situation throws at us — a tricky situation will spur our creative thinking.
Some of the plans we might try out next on top of the initial changes that I listed above:
- giving online lectures about leather as material and how to repair leather bags at home
- selling DIY-kits (maybe accompanied by tools) and by that turning leather scraps into a product
- start a fundraising project for new designs.
We already offer an after-care service for our bags, provide repairs on the goods bought from us, promote second, third and fourth hand use of our products — and rent them. In addition we are reuse our bags to craft next cycle of products. We could widen the area and start offering an overall leather bag after-care and repairing service, though that can be tricky as most of the leather bags out there are hard to repair & care.
The goal of this article isn’t to complain. I want to share my experience. Everything is connected. Right now everybody has it tough but by supporting each other, we can make the landing somewhat softer for all of us and ensure that the economy wouldn’t be hit as hard. If our bag crafter doesn’t lose her job and the bakery in your building doesn’t go under, then you, who work in an industry which is perhaps less affected by what’s happening, will have it easier in the years to come and our joint burden will be lighter to bear.