6one5 Retail Consulting Group's Bill Rooney offers advice on what retailers can do to ride out COVID-19.
This is new territory for everyone, as this is the first pandemic in a digital age where every piece of information is analysed and communicated through the news cycle and social media.
What we do know is because it spreads so easily, has a higher % mortality rate than say the flu and there is no cure, retail is in for a rough ride.
Here are five practical steps that I would recommend you consider today:
1. Hope for the best plan for the worst
Being a former accountant in the retail game, I would start by assuming my sales will decline by 10% /15%/20% over the next six months and redo my cashflows on this basis. These cash flows should also allow for disruptions in supply. These three scenarios will determine your strategy moving forward. So, for example, I may be left with too much stock - start planning today on what to do with that stock.
2. Communicate with staff
Why? Because they will be feeling fear and you want to support them. They can help identify where the company can save money and make money so listen to their ideas and finally you will need their support as you may need them to take their annual leave or work fewer hours so the company can survive.
3. Plan for the future
If we go into recession (and that is not guaranteed) most severe recessions last around two years, based on the last five global crashes. Research by McKinsey suggests that the most successful companies are the ones that anticipate the bottom of the downturn, then start “ratcheting it back up fast enough" when the recession is done. It is expected that a cure will be developed for coronavirus within 12 months, so this is why I suggest you anticipate six months dip and plan for recovery thereafter. It's a plan, and you need to start with a plan that can be monitored and changed as things evolve.
4. Invest in Growth
It might sound counter-intuitive, however during tough times invest in areas that are growing. For example, eCommerce is growing at a rate of 20% + per annum and in the USA represents 50% of total retail growth. Investing here as opposed to bricks and mortar will pay much higher dividends.
5. Invest in Productivity Improvement and let go of Underperforming Staff
Investing in productivity improvements comes with little or no net cost as you generate more output for the same resources.
Most retailers should be able to identify staff that are not performing.
This could take many forms such as unsuitable for the job role, the wrong attitude, underperform especially when under pressure, the role is replaceable by technology, resist change and so on.
Underperformance can cost more than their wage.
While times are quiet, it is the best time to make changes and improve productivity yet a lot of retailers through fear focus on cutting costs only and or focus on things outside their control - coronavirus, weather, bushfires, economy, going broke.
The old saying “When the going gets tough, the tough get going” applies to retail executives facing tough times.
The best CEO's and owners lead by example, rallying the business to get ready for better times and when things are quiet spend time to improve productivity, marketing, and to clean house.