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Structural  reform is what’s needed to repair and reinvigorate retail, Pitcher Partners' Mark Harrison argues

The half a billion dollars in support for Victorian businesses made available in response to the return to Stage Three lockdowns is a quick response to a slow-burning problem.

The Andrews’ Government’s Business Support Fund will give a $5000 grant to 80,000 businesses affected by the new restrictions, there’s an extra $20 million to help CBD businesses experiencing ‘a large and sustained shock’ to their trading, some money will flow to the night-time economy via hospitality businesses, and there is also a bundle of money for mental health support and mentoring.

But for retailers who are seeing the sudden end to foot traffic or restrictions on opening, it will probably feel like a drop in the ocean.

Out of the stimulus we see two elements that might help — partially — but we also believe there is opportunity for governments to do more for sector-specific help.

The $5000 will not go far in paying bills for an established business, but it could buy a little bit of time. The mentoring package might help retailers with their planning, and give them some support that goes beyond what they have been able to do themselves.

But we can’t keep throwing money at the problem to fund expenditure; money has to be spent to produce structural change.

I think we need to look at tax reform, how we can change disposable income, how we address the costs of doing business and red tape.

We have an opportunity right now while we are disrupted to rethink things like corporate tax policy, consumption and income taxes and business transformation, including digital adoption — and stimulate the economy in the process.

So what now, though, if you are a fashion retailer staring at a minimum six-week closure, with JobKeeper ending not long after that?

Well in a perfect world retailers will have used the time JobKeeper has bought them to plan for what would and could happen once the stimulus ended.

They will have looked at the uptick in retail that happened at the end of the first lockdown, and used the time bought by government support to reposition.

Many of our clients saw the first lockdown as the right time to reset their business model and they have gone through the hard discussions and decision-making needed to survive.

That’s not a universal situation, though, and we also know of retailers who have been scrambling to manage the daily turmoil and have not had time to take a more strategic approach.

The advice for them is don’t wait any longer — do it now.

Work on your back office, and consider where you might have surplus labour that has crept in over time. Look at which stores are your best contributors, and whether your operating model is fit for purpose.

Look at your how you will further diversify your supply chains, because invariably some parts of the world won’t shake off the virus and will go through future waves that could be disruptive.

Look at your seasons and your market. Look for the product lines you can’t afford to carry any more.

Look at your debt versus equity position — can you afford to debt fund a whole season of stock? Many people who did that in the past 12 months won't easily survive.

Look at what you know about your customers and how genuine your connection is with them. The brands that will emerge strongest from the pandemic are those able to build relationships with customers, both through their bricks and mortar stores and online.

Identify where you can find flexibility and savings, whether it is reduced opening hours, or in the space you rent, or the staff you employ. If you have been putting off that difficult call to the landlord, make it today.

And if you haven’t already, look at how you build an online platform that will continue to trade even if the world grinds to a halt once again.

The best time to make these decisions was three months ago. The second best time is right now.

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