PARIS — As companies scramble to deal with an unprecedented global health and economic crisis, the coronavirus outbreak is proving a reputational minefield for players in the fashion and retail sectors.
Brands navigating what is being billed as the worst financial challenge since the Great Depression face different rules of engagement than during previous such recessions.
Adidas, Sports Direct, Printemps and Target Corp. are just some of the companies that have apologized in recent weeks for blunders linked to their handling of the COVID-19 outbreak. Meanwhile, Amazon had to temporarily close its warehouses in France over worker safety concerns, although the company insists it has done nothing wrong.
In Germany, Adidas was forced to backtrack after drawing widespread criticism over its plans to take advantage of the country’s new eviction freeze to stop paying April rents. In an open letter, the sporting goods giant, whose net income was 1.91 billion euros last year, said it had paid April rents after all.
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“We made a mistake and we lost a lot of trust by doing so,” Adidas said. “It might take some time to win that trust back. But we will do everything to make that happen.”
The cases illustrate the dangers facing apparel firms in particular, said Tim Danaher, a partner at strategic advisory firm Brunswick in London, specialized in the retail, consumer goods and real estate sectors.
“Now more than ever, doing the right thing really matters for companies in the fashion and retail sector,” he said. “It matters for all companies, but for brands that consumers are familiar with and trust, there are certain expectations that come with that.”
In an evolution from the last major economic downturn in 2008, companies now face intense scrutiny on social media, where bad buzz can quickly go viral. Governments and regulators are also watching to make sure companies with healthy balance sheets don’t gobble up emergency aid designed to shore up more fragile firms.
“The reputational damage can be big, so now is the time for companies to think very carefully about how their actions will be received and realize that the normal rules don’t apply,” said Danaher.
Experts agree on a few key rules.
DON’T BE GUIDED BY FEAR
Melissa Agnes, founder and chief executive officer of the Crisis Ready Institute, said the biggest pitfall for companies is reacting from a place of fear.
“One of my favorite rules is: ‘People above process and bottom line, always,'” she said. “It’s where you put your priorities and how you demonstrate that in both your actions and your communications. Crisis management is always taking the right actions and simultaneously communicating effectively.”
That’s a rule that doesn’t apply just to billionaires like Jeff Bezos and Bernard Arnault, she noted.
“If you have more ability, more capability, more resources, more flexibility, then you’re in a blessed position and absolutely, be an example and lead with foresight and compassion. That being said, it’s not all on one man,” Agnes said.
“Every business is a leader for somebody, whether that’s their employees, whether that’s their community, whether that’s their client,” she added. “That’s how we’re going to get through this together, is if every company does take responsibility and hold themselves accountable to some form of positive impact leadership.”
DEFINE YOUR PURPOSE AND VALUES
Herve Carresse, director of development and senior consultant at Nitidis, a Paris-based crisis management firm, said it was crucial for firms to be clear from the start on their purpose and values.
“Crisis communication is a tool to support a strategy that really needs to be defined ahead of time,” he said. “Communication must always be based on objectives, because if you don’t have clear targets, then it’s basically hot air.”
Companies should focus on two major goals: guaranteeing business continuity, by adapting the company’s operations and protecting its staff and partners, and preserving its reputation, by avoiding hasty decisions that could cause long-lasting damage.
“This situation presents both dangers and opportunities. During this period, it’s important to take every measure to limit the effects of the crisis and above all, to prepare for the end of the lockdown,” he said, noting that companies might use the lessons learned to adopt new management modes or implement efficiency gains.
He pointed to Sébastien Bazin, ceo of hotel group Accor, as an exemplary leader. The executive said recently that even as two-thirds of its 5,000 hotels worldwide were shut down, Accor was cutting its dividend by 25 percent and using the 70 million euros to help employees and partners in distress.
“There are two things that need to be looked at right now: how are you going to sustain yourself? And the second, what do you want to be proud of when all of this is said and done? That’s when you need to be careful not to have those knee-jerk reactions based on fear,” Agnes concurred.
“It’s finding that balance and making sure you’re surrounding yourself with the right people, with the right experts, to help you have that clarity of mind when you’re emotional in a situation,” she added.
MIND PUBLIC PERCEPTION
Most companies will likely have to make some tough calls during this period, but how they handle those decisions says a lot about their culture.
Business leaders should think about how they can help mitigate those painful decisions with positive actions: for example, topping up the pay of furloughed workers, donating unsold inventories to people in need, or joining cross-industry initiatives to help their partners.
A case in point is paying suppliers. Early during France’s lockdown, Printemps was singled out by French Finance Minister Bruno Le Maire on Twitter after suspending all outstanding payments to suppliers. The Qatari-owned retailer was forced to backtrack, clarifying the measure was temporary.
Meanwhile, Primark recently agreed to pay an extra 370 million pounds to suppliers for product that was already in production and due for delivery by April 17, after initially canceling orders and refusing to pay for some goods already being manufactured.
“The smart people are thinking at the same time, ‘How can I do the right thing as a business to support the national effort in the countries that I operate from?’ So there are ways in which companies can mitigate the difficult decisions and try to use their scale and their influence for good,” said Danaher.
“I would say the thing to do is not just take, it’s to give back as well,” he added.
COMMUNICATE SOBERLY
The luxury industry has established itself as a global leader in the crisis by mobilizing vast resources to produce or supply emergency medical equipment, from masks and hand sanitizer gel to respirators and 3-D printers. Publicizing those initiatives is broadly seen as a positive for brands — but beware of hollow cause-based marketing.
“Companies shouldn’t see the positive things that they are doing in this crisis as p.r.,” warned Danaher. “The reason to communicate it is so that your stakeholders understand what you’re doing and those stakeholders can be very broad.”
Companies should be mindful that many of these stakeholders, including staff and suppliers, are likely feeling pain right now.
“Say what you need to say but don’t labor the point, don’t make a big deal of it,” he recommended. “Communicating on what you’re doing in a factual, measured way is appropriate, but this is not a time for gratuitous self-promotion and I think companies that will do that will regret it and it will backfire.”
Nacima Ourahmoune, associate professor of marketing at Kedge Business School in France, noted that multinationals are filling a void left by a decline in public trust in governments. She cited the strategy of sector leader LVMH Moët Hennessy Louis Vuitton, based on its long-standing culture of entrepreneurship.
“The international resources mobilized by the group are comparable to those of a state. Through its quick and agile strategic decision-making and mastery of its supply chain, the group marks minds and thus gains international visibility,” she said in a recent article.
While some may question the ulterior motives of companies mobilizing production facilities to make masks and other medical supplies, firms can weather criticism provided they remain true to their values, Agnes said.
“One of my formulas for responding to controversy is gathering the facts, making a decision in alignment with your values, and then communicating that in a very concise, short, emotionally intelligent way,” she said.
“If you made the right decision for your brand, in alignment with your values, then it doesn’t really matter if people disagree, because you’re doing what’s right by you and by your people,” she added.
How a company behaves during the crisis can even burnish a tattered reputation — up to a point, said Carresse.
“It’s difficult to paint yourself suddenly as a knight in shining armor during the crisis if you’ve been disparaged for years before that,” he noted. “But you can very well improve your reputation by stepping up to the plate and showing that you’re ready to sacrifice personal interest for the greater good.”
IMAGINE THE FUTURE
Finally, don’t just plan for immediate contingencies. Reputation management rests on four pillars, according to Carresse: maintaining the confidence of your stakeholders; reassuring your staff and partners; being empathetic, and projecting yourself into the future.
“You have to avoid getting bogged down in a technical approach to your business and have a more holistic vision,” he recommended.
Companies will need to manage the long-term aftershocks of the crisis, once government support measures are phased out, said Concetta Lanciaux, luxury goods consultant and former senior adviser to Bernard Arnault at LVMH.
“People don’t want to be treated like kings during the crisis and then find themselves unemployed afterward. You have to find a balance between the two, especially for small companies,” she said.
“Reputations are easy to build and easy to destroy. In the next few months, it will be just as important for the reputation of companies that their employees have jobs to return to,” she said.