What impact does the coronavirus have on businesses in Germany? As advisors of expansion strategies to Germany, we are also trying to understand the pandemic and its socioeconomic effects. More importantly, we figure out how to deal with them.
(Update 16.04.2020) By now, the Worldometer counts 130,434 of coronavirus cases, and 3,220 death cases in Germany. Compared to other countries such as China and Italy, the German Federal State is reluctant to implement strict quarantine measures, primarily to protect its economy, which is already being dragged into recession.
The German Government seems to deal with the pandemic in a quick, radical and alternative way: On April 6 Economy Minister Peter Altmaier unveiled a program aimed at fast-tracking loans to Germany’s Mittelstand, the backbone of Europe’s largest economy, with unlimited guarantees covering 100% of their credit risk.
According to an interviewee from Bloomberg: “The unexpected thing was how unbureaucratic it was,” he said. “The application form took me 10 minutes to fill out, and two days later I had money.”
CNN Business also remarked how Germany is firing its response to Coronavirus quicker than other countries in Europe: the economic rescue package worth up to €750 billion ($825 billion) that the German government is rolling out seems to be “the biggest launched anywhere in the world”.
As long as the lockdown continues and facilities remain closed, it is not possible to predict at what pace local economies will be able to recover from the recession. However, experts seem to admire the way that Germany is responding, shedding a positive light on its quick and effective response to save the economy.
More practically, in this article we examine how you as a business owner can make use of the German regulations to wave your way through the corona-period:
- Government aid for businesses during Coronavirus
- Cancellation of Trade Fairs due to Coronavirus
- Changes in Consumer Behaviour
1. Government aid for businesses during Coronavirus
On 9th of March the German Federal State promised aid to companies hit by collapsing demand as a result of the coronavirus epidemic. Up to half a trillion euros will be provided by the Ministry of Economics and Finance.
Government aid for small and medium-sized businesses:
Government Subsidy:
If sales are not forthcoming, the government helps with one-off subsidies so that entrepreneurs can pay rents and other costs: There are up to 9,000 euros for companies with up to five full-time employees. Companies with up to ten employees will receive up to 15,000 euros.
The government’s aim is not to replace lost sales, but to help the companies to be able to pay running costs. The application for the subsidies can be made through the state development banks since March 27th.
Fixed costs:
Anyone who is unable to pay credit instalments should receive a deferral of payment for at least three months
Paying Employers:
If companies are experiencing economic difficulties, they can send all or part of their staff on short-time working instead of dismissing them. And at the same time, they can apply for short-time work benefits at the Federal Employment Agency. The employment agency describes how to do this on its website. This program has received frequent praise: As the Organisation for Economic Co-operation and Development reported in 2009, it kept about half a million people employed during the global financial crisis.
Paying taxes:
Entrepreneurs can ask the tax office to defer tax claims if they represent a hardship for the company due to the crisis.
Legal facilitation:
The government temporarily suspends the obligation to file for bankruptcy, for example in the event of insolvency. The rights of creditors are restricted.
2. Cancellation of Trade Fairs due to Coronavirus
On 8th of March the Health Minister Jens Spahn announced the cancellation of public gatherings of more than 1000 people. A total of 230 fairs have been cancelled all over Europe. In Germany, trade fair organizers were reluctant, but will now have to succumb to the measures implemented by the government. It is not clear yet up until when the ban will last. The online newspaper Produktion has published a list of canceled and postponed trade fairs.
Who is responsible to bear the costs of such a cancellation?
Postponing the event:
In this case, the organiser does not have to bear any costs, as long as the event takes place on a further date.
Canceling the event:
In this case, the organizer must always pay damages to the exhibitor, who had costs due to the commissioning of a stand constructor, exhibition documents that can only be used for the exhibition, or even flight and hotel costs for employees.
“Höhere Gewalt” or Force Majeur:
It describes unexpected external circumstances which cannot be influenced and which prevent one party of the contract from fulfilling its obligations. Examples of such circumstances are natural disasters and terrorist attacks. In the current case, it could be that the local health authority does not approve an event due to corona danger.
In this case, the organiser does not have to reimburse the customer, neither stand fees nor ticket costs. Nonetheless, the exhibitor can then also invoke force majeur against hotels, airlines and other service providers such as a booth builder and does not have to pay full compensation.
Who can help you with legal difficulties?
AUMA, The Association of German Trade Fair Industry offers extensive information regarding legal issues. If you require help understanding the parameters, or in dealing with trade fair organisers, we are here to support you.
“Prudent action and solidarity in the event industry!”
AUMA supports the initiative of the Interest Community of the Event Industry (IGVW).
Read the joint statement here
3. Changes in Consumer Behaviour
A reliable forecast regarding consumption can only be made once experts can predict how long the protective measures to combat the Corona Virus will remain in place. It is clear that the pandemic is having an enormous impact on consumer sentiment in Germany.
On March 20th, Econsultancy published research about consumer habits. This may help to predict what is to come for those countries still grappling with the earlier stages of the pandemic, such as France, Germany, the UK and the US:
People are hesitating to spend excessively and being aware of primary needs, while e-commerce is boosting especially, such as grocery delivery apps, video conference apps such as zoom, and also online gaming.
Furthermore, Nielsen published an analysis showing the Corona-Effect on FMCG products in Germany: Apparently, Soups, canned sausages and UHT milk recorded enormous increases in sales.
4. What now? Stay human, stay focussed, work with what you got.
During the corona-pandemic we face difficult times ahead as businesses. It is important to not lose focus or be demoralized. As buildings collapse, new opportunities arise. Korn Ferry published an article with useful tips about what to focus on in order to effectively retain customers and step up your game as an organisation.
© De Groene Amsterdammer
Focus on Perspective:
Put in perspective what your role is during and after Corona, and communicate this to your audience. What expertise can you offer to clients and prospects as they reshape their businesses in response to COVID-19? Think about how you can help them and provide insights—not how you sell them something.
Reconfigure Sales Content:
Prepare for longer sales cycles as clients bring in additional criteria for spending or postpone decisions. Make sure that your content helps the decision-making process.
Grow and Mine Networks:
Now is the time to gain connections online by enhancing your social media presence. Find customer reviews, ask for video-testimonials, showcase successful collaborations and projects with previous clients. Build a solid trust-base that allows people to figure out that you are reliable without knowing you.
Rethink How you Spend your Time
The time that you used to spend on the train or in a plane can be usefully redirected into productive tasks, things that you normally tend to postpone. For example, you can rethink how you structure your work-process and how you are measuring its outcomes. Is the time you spend on certain tasks effectively growing your business?
Maximize Available Technologies:
How does your organization use engagement platforms, customer success platforms, social selling tools or lead scoring tools? This point relates to the previous two: What is at your disposal and how can you use to its best? How can you improve by adding new technological tools? For example, buffer is a great tool to organise your social media activity, and it’s for free!
I hope that this article gives you a heads-up on where to start if you lost focus within these hard and confusing times. It is the moment to realise your strengths and weaknesses and to make the most out of the learnings. Don’t forget that we are here to help. If you have questions or doubts, don’t hesitate to approach us!