The retail industry has been one of the hardest hit by the global pandemic know as COVID-19. Retailers have lost significant revenue. The question for many retail executives is how to maintain business continuity and manage the reduction in cash flow while many fixed costs remain. The effects of a shutdown lasting into the summer may mean that stores that have shuttered their doors temporarily may in fact never reopen. This may mean a much smaller store base for many retail chains. Given the future of a smaller sized business, retailers are looking at key steps to improve cash flow or just as important to preserve cash. The key steps retailers are taking include changes in inventory management, furloughing some employees and potentially evaluating the use of their revolving credit facilities to bridge the cash gap until stores can reopen.
Detailed strategies are needed for how to profitably liquidate that inventory and improve retailers overall cash flow. Inventory is one of the largest assets that retailers manage with some of that inventory quickly becoming aged or even obsolete due to seasonality. Retailers need to look at key strategies like potentially pack and hold for next year on goods that are more basic or even seasonal basics that have a longer life or jobbers to liquidate truly aged inventory (with an eye to brand impacts).
On the human resources front, employees in stores are the brand ambassadors for retail organizations and the impact on these employees and their families is truly heartbreaking. Since the shut down began more than 1 million retail employees have been furloughed. Retailers that have furloughed store employees and some corporate staff like inventory allocators include: Macy’s, Gap, TJX Companies, Kohls, L Brands, JC Penny and Best Buy. While furloughs are easing the cash flow problem, most retailers are still covering some benefits to help employees with the transition, which is critical to keeping employees engaged for the day when stores are able to reopen. There are other options outside of furloughs that can also be entertained including leveraging the workforce in store to support fulfillment methods like buy online pickup in store and ship from store (where technology can support these processes). Once the shutdown begins to be lifted, what key HR process will be needed to ensure that returning employees are coming back to a safe work environment? New HR processes and operating procedures will be needed to ensure workers not only are safe, but feel safe as well. It will be critical to not only implement new procedures for cleaning and safety but to communicate not only what is happening but why. Human resources organizations for retailers are one of the most critical parts of the business continuity plans in a crisis of this scope and magnitude.
Many retailers were in a heavily leveraged position before COVID-19 began. These retailers may be hard pressed to access additional credit. For those that have a revolving credit facility, they will likely look to extend the terms and modify the covenants to increase flexibility. The longer the stores remain closed and revenue is limited to online sales the more important it is for retailers to maintain as much financial flexibility as possible.
There are still many unknowns for the industry today. When stores do begin to reopen, will social distancing disappear? Has consumer behavior changed permanently? Ecommerce was expected to represent 12.4% of retail sales in 2020 according to Statista Research, that number will likely increase significantly as a result of COVID-19. We think the changes retailers need to make now require implementing the processes and infrastructure that support a true unified commerce model. Likely retailers will come out of this with a larger ecommerce business but the need for fewer stores as consumers shift their purchase behavior to more online than prior to the pandemic. Now it is more important than ever for retailer to make the investments needed to set up the future business and operating models that will ensure strategic success and survival.
If there are other topics that you would like us to help with, please reach out to me directly or to our team at firstname.lastname@example.org or by contacting us at 801.660.2901. We hope you stay safe and healthy as we all work to “slow the spread” through social distancing.
The Ascent team is acutely aware that retailers are now striving to cope with unexpected and unprecedented disruptions across People, Process, and Technology in their businesses. One segment that has been hit particularly hard is the Fashion Retailer, who judiciously times merchandise arrivals with meeting seasonal consumer demand, then has an urgent need to transition out of product as the next season commences. These companies are now faced with unique challenges as a result of the impacts on their supply vs. demand by the COVID Pandemic.
A call to action for resuming "the new normal” within Fashion Retail business necessitates adoption of short-term steps, such as:
In order to emerge well-prepared for post-COVID growth in the evolving economy, retailers should look to refine future state processes, systems, and people, improving efficiencies in a fluid yet stable way. We hope you stay safe in your businesses and with your families, and we will be here to support you as you work to bring your supply chain into "the new normal". For more information, visit us at www.ascenterpsolutions.com.
Donna Lekites and Claudia Ferrell
Ascent Enterprise Solutions
Many organizations are currently running in a mode that is utilizing at least some, and in many cases, quite a number of the components of their Disaster Recovery / Business Continuity Plans. For Retailers, however, this time the typical DRP/BCP scenario has been flipped. The data center, cloud platforms and network are intact, but in most cases, the brick & mortar selling locations are closed or restricted to pick up only. The supply chain is disrupted. The network, online transactions, eCommerce/BOPIS fulfillment, and related security and performance issues, are primary concerns. Some of the DRP/BCP components implemented may have worked better than others, and now is a good time to identify the components that need to be updated in the plan, based on the lessons learned.
Internet and web site traffic is increasing for shoppers now buying online as stores are closed for shopping, which is placing higher demands on the platform to provide the throughput required. Having a cloud-based solution in a data center backed by GCP, Azure or AWS provides for efficient scalability. As the online channel begins to represent a larger share of the business, network performance management and security detection and response solutions are required to protect both the consumer and the business.
Efficient and responsive order management solutions will require a robust, low code / no code, reliable integration platform to implement process automation, identify inventory availability, process payments, provide order status visibility, and ensure end-to-end data integrity for online orders, whether shipped to the customer from the fulfillment center, drop shipped by the vendor or picked up at the store.
With important health and safety regulations around COVID-19 impacting the Retail industry, many Retailers are struggling wondering how to mitigate the impacts they are seeing to a limited supply chain, store closures, changes in consumer demand and behaviors, and furloughs and reductions in force. Many are concerned about business continuity, and are having to put strategies in place as quickly as possible. Some are turning to government loans to create cashflow for payroll. Others are doing their best to continue with limited channels and budget cuts. It’s both an uncertain and difficult time for most, and we are here to help with ideas and ways to generate revenue and not only stay viable during the crisis, but also have a strong infrastructure with the ‘new normal’ post-COVID-19.
We see both the confusion and the concern, and want to help. That's why we've offered free consultations through the month of April to help our friends in the industry get technology and processes in place immediately to see them through the crisis. Along with our offer of a free consultation, you’ll see our team at Ascent building out a series of thought leadership products over the next few weeks, including: