2020 has been an unprecedented year for Singapore and for the rest of the World. The coronavirus pandemic started in China in November 2019 and it was not long before the outbreak reached the shores of Singapore, with the first local case confirmed in late January 2020. The disease is highly contagious and a direct cure or vaccine has yet to be developed.
To combat the rampant spread of the virus, governments have enforced social distancing and closed workplaces in a bid to reduce contact between individuals. International travel also ground to a halt as countries around the world closed their borders. These actions have had frightful repercussions on various industries which involve travelling, such as the aviation industry and the hotel industry. The impact of COVID-19 on the corporate gifts industry, while not as severe as that on industries more closely related to travel such as the aviation industry, definitely cannot be written off as a passing shower. In fact, it is more appropriate to liken it to the Great Deluge. With large gatherings prohibited or severely restricted, many companies have cancelled events such as annual company dinners and reduced their level of non-essential business activity. Many companies have also cut costs to combat the fall in revenue caused by the pandemic so as to cushion the impact of falling profits on the business.
As such, the demand for corporate gifts has fallen drastically. Companies have consolidated their resources and cut down on funds that have previously been allocated to marketing. Producing corporate gifts as a way to market a brand is now seen as a luxury which many companies cannot afford to spend on, given the crisis and the fact that the end of the pandemic will not happen anytime in the near foreseeable future. One might argue that marketing and branding remains ever important, as brand awareness and brand recognition is key in drawing consumer demand once the pandemic is over. As such, companies should continue to invest in corporate gift items to raise brand awareness and draw attention to their brand. While this is a sound argument, the reality is that the fall in revenue suffered by most companies in the face of this pandemic cannot be ignored. Companies have to keep their running costs low in order to stay afloat and sustain themselves through this crisis. The necessity to maintain a healthy cash flow through suppression of operation cost leaves companies with no other alternative but to truly cut back on expenditure that does not directly play a role in generating revenue through the company’s primary business activity or profit generating mechanisms. This means that companies have indeed cut back on corporate gifts and advertising to a large extent.
With this, many corporate gift companies are facing dire straits. It is not uncommon for certain gift companies to register losses in the months after the Lunar New Year, as the cutback in expenditure kicked in. To worsen the matter, several companies have even rescinded orders that were placed previously, as the events for which the corporate gifts were to be given out had been cancelled or the budgets that had been previously allocated for the purchase had been cut.
How have companies reacted in the face of a steep fall in demand that shows little to no sign of uplift? In our next blog post, we will share some industry insights and some measures which corporate gift companies have taken to protect themselves and weather the storm.