Retail Today: How to Manage COVID-19 Disruption and Make It to the Other Side
April 10, 2020DownloadsDownload Article
Shopping with friends or family is considered a potentially perilous excursion for many of us these days, yet it was a normal activity of daily life only a few short weeks ago. COVID-19 has stunned the U.S. economy and shuttered vast portions of the retail sector, with over 630,000 stores closed since March (Coresight estimates).
Retailers are familiar with business continuity plans — they are annual exercises for many retailers, given extreme weather events, distribution center closures and other local disasters. However, few, if any, retailers planned for a black swan event that would close the entire store fleet for weeks, if not months.
Essential vs. Non-Essential Businesses
The government’s designation of “essential” and “nonessential” businesses has exaggerated the divide between the “haves” and “have nots” in retailing. Although businesses classified as essential have been impacted by the pandemic, these retailers can still maintain store operations and preserve cash flow. A handful of essential retailers — notably supermarkets — are even managing to grow during this time of crisis.
The reality is starkly different for retailers deemed nonessential by government mandate. With over 90% of the U.S. population under stay-at-home orders, non-essential retailers have ceased store operations.
The Outlook for Non-Essential Retail
Even if eCommerce is still operating, the shuttering of retail store fronts has brought cash inflow for most non-essential retailers to a halt. It’s that “non-essential” subset of retail that we’ll focus on in this article.
Consumer (and employee) confidence has been, and will continue to be, shaken. Latest projections from Goldman Sachs estimate unemployment will top out at 32% and GDP will decline by a record 34% in 2Q20.1 In addition, some consumers (we estimate about 10% to 25%) will not return to their old ways — their shopping and lifestyle habits will be forever changed.
What savvy retailers are doing to stay healthy
As we look at the reaction from retailers to COVID-19, we expect to see smart retailers taking a series of actions over the short to medium term to conserve cash and structure their company for post-COVID-19 operations.
The immediate priority is to stabilize and protect the business. This will involve using online and digital platforms to stay in touch with consumers and generate income; creating a Minimum Viable Platform that aligns functional areas against a revised sales forecast; developing a liquidity platform from which to operate; evaluating and securing access to relief funding; and ensuring clear, consistent and continual stakeholder engagement. The immediate playbook is focused on stabilizing and protecting the business.
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