In the time of coronavirus, quarantine, and two-metre gaps, every company will face difficulties. For challenger brands, growing fast but without the capital of their larger competition, these difficulties are amplified. In the UK, despite the unprecedented support from the government to businesses, a fifth of small and medium-sized businesses are unlikely to get the cash they need to survive. Despite this, there are challenger brands designed to take on the challenge of Covid-19, and strategies that others can undertake to mitigate the virus’ impact. 

Even before the global spread of coronavirus, it’s safe to say that it had been a tricky start to 2020 for many fast-growth challenger brands. The collapsed Harry’s acquisition, Brandless’ closure, the administration of Laundrapp, and Birchbox cutting 25% of their global workforce were signs of struggle from some leading lights among challenger brands. Add to this plight of a global pandemic, and you’d be forgiven for thinking that brands taking on legacy businesses with a sliver of the budget, would have their days numbered. 

Unfortunately, in many situations your perceptions would be spot on. Challenger brands already operating on shoestring budgets have seen sales plummet, forcing them to furlough staff, make people redundant or shut their doors entirely. However, there are rays of light for fast-growth brands, breaking through the covid cloud. 

Some businesses are designed to survive

There are a number of companies that, by luck or design (in most instances it’s luck), are fairly well equipped to weather the current storm better than most. Whether these are businesses selling products still required in a crisis, those helping people upskill, or whose work becomes even more important at these times, challenger brands will keep on challenging once coronavirus disappears. 

The bare necessities

We’ve all seen the photos of empty shelves, where everything from toilet roll, vegetables and cleaning supplies, used to lie, now stockpiled in the cupboards of jumpy shoppers. But there are other ways to get hold of these items. Companies like The Cheeky Panda have seen huge spikes in demand for their bamboo toilet roll subscription service, while frozen meal provider Mindful Chef saw sales jump 452% and wonky-shaped fruit and veg business Oddbox have raised £3m in funding only a couple of weeks ago. 

This isn’t to say all subscription services will thrive, and those whose products are deemed luxuries by consumers may be cut loose from monthly budgets. However, those that can offer regular access to items consumers feel they may have trouble accessing over the next few months, will be well placed to come out the other side of this crisis standing tall, with its customer base intact.

Take Oddbox as an example. For people trying to eat healthily, while limiting the amount they go to the supermarket, a fruit and veg delivery service is a perfect fit. What’s more, Oddbox doesn’t have the issue of competing for supply with supermarkets, at a time when demand for produce is soaring. As Oddbox takes the wonky fruit and veg rejected by supermarkets, it ensures it can still fulfil its subscribers’ orders, as well as take on a certain amount of orders from new customers. Extra sales will mean that they can increase profits, and begin to pay interest back on their investment sooner. 

Keeping yourself entertained

Remote education services are also going to see an uptick in demand. This won’t just be from parents of school-aged children looking to continue their education while schools are closed, but from workers without children at home, who will soon find out there’s only a finite amount of binge watching the human brain can take. 

Preply’s USD$10m round is a good example of a business gearing up to take advantage of adults having more time to learn a language, to expand their services across Europe and North America. While Preply connects users with language tutors online, services offering tutoring towards school-level qualifications, as well as those offering courses for adults around other areas of study, will see rises in popularity as adults find themselves looking to fill their, or the childrens’ time at home. 

But languages, history and economic theory courses aren’t everyone’s idea of time well spent. Most looking to learn something new will look to take up a practical skill - anything from knitting or painting to baking or DIY, or take the extra time at home to get fit. While brands in these areas may well see new customers coming to their sites, this will likely fail to cover the cost of customers foregoing non-essential products, although it may help mitigate the overall impact of the virus. There is, however, also an opportunity for brands in these areas, to offer online tutorials or workshops. While they may find it hard to justify charging for these tutorials, they could prove a valuable tool for customer engagement.

Digital innovation could accelerate 

Of categories being revolutionised by challenger brands, few are set for more change than the insurance industry. We spoke to Christian Wiens, CEO and founder of Getsafe, one business looking to disrupt the consumer insurance sector, who feels that coronavirus is set to accelerate the digital transformation of the sectors. 

"No startup has experienced anything like this, so the crisis will serve as a stress test for them. Some of them, especially insurtechs in a very early stage, might fail because they won’t have access to venture capital. For the others, coronavirus might be a catalyst that will accelerate digital transformation in the insurance industry. Insurtechs, with their strong technical infrastructure and their digital solutions, are in a leading position here. They don’t rely on physical distribution structures or paper-based processes. It is an opportunity for them to outpace their more analog competitors.

"Insurers - and particularly agents and brokers that have not adapted to digital structures - will have difficulties, especially the small and medium-sized companies. The crisis will set them back further than before.

"Traditional big players, on the other hand, will not go bankrupt overnight; and it will take time for insurtechs to gain a significant market share. But I believe they can compete with traditional insurance companies. Established companies don't just need a technological change, they need a change of mentality. In five years' time, the broker business will no longer be able to find new employees, in ten years' time, medium-sized insurers will face existential difficulties, and in 20 years' time, no one will have paper-based policies anymore. The coronavirus pandemic will massively accelerate the digital change."

Innovation for survival

Undoubtedly, the next few months are going to test many challenger brands like they’ve never been tested before, and some will unfortunately close permanently. For those that do not sell items deemed essential by consumers in this climate, innovation will be key to survival. This could be through online tutorials to increase engagement, a pivot to a product which will be in demand during quarantine, or an expansion in your delivery offerings to make it as easy as possible for customers to get their orders. Standing still, not innovating, and trying to wait it out is sure to put a business in more danger over the next few months. Fortunately, with some fantastic creative minds behind challenger brands, there is hope that the world’s most forward-thinking brands will continue to innovate, and come through this ordeal wounded, but crucially, still standing.