crisis management

Retail and fashion companies are in crisis mode as the world waits in a near standstill against the coronavirus

Store closures have made real-life shopping expeditions a thing of the past, at least for now. And with a number of local lockdowns in place across the globe, some e-commerce operations — perhaps the only lifeline for some companies — have been forced to shut down as well. 

To make matters more complicated, most retailers had originally anticipated a two-week shutdown in an effort to slow the spread of COVID-19, the disease caused by the coronavirus. Now, the federal government is hinting at continued closures in certain parts of the country through April. (The lockdown in some parts of China lasted for two months. Italy has been in lockdown since March 11. Now, so are France, Spain and the U.K.) There’s no telling how long stores in the U.S. will remain closed. 

With inventory piling up, expenses mounting, potential layoffs looming on the horizon (U.S. unemployment claims skyrocketed past 3.3 million claims last week), and no word yet on when factories in India or mills in Italy will reopen, much less brick-and-mortar stores Stateside, the fashion industry is struggling to get any foothold it can.

problem solving

Companies will need to come up with action plans to recover from the coronavirus pandemic.  Shutterstock / Dusit

Consumers, meanwhile, are stuck at home and focused on the essentials, such as food and toiletries. Few are interested in shopping, much less for high-end fashion finds. Distracting them from the never-ending news cycle about COVID-19 and reducing fears will be key. 

“I see a lot of people speculating on the worse-case scenarios and I don’t think that’s helpful,” Daniel Binder, a partner at Columbus Consulting, a retail advisory firm, told WWD. 

Instead, expert retail consultants and crisis management firms say there are things retailers can do — and not do — to mitigate the damage.

“There is absolutely no way anyone can forecast when this is going to end,” Binder said. “So, intelligently, sitting down at a leadership level and looking where you think your numerator is going to be, in this case sales, and starting to understand the implications in such a colossal drop.

“It’s going to be about how to right-size sales with the reality of inventory and come up with structure strategies that bring that working capital down and partner with suppliers on driving payment terms and things like that to help mutually benefit cash,” Binder continued. “That is what’s going to sustain the retail model going forward.” 

Here, WWD rounded up a few tips for retailers and fashion brands to navigate a crisis.  

Safeguard Your Team and Decide on a Clear Leader 

Once the team is safe, Geoffrey Lurie, president and chief operating officer of Traub, a consulting and business development firm for retail and consumer companies, said it’s important to establish the chain of command in a crisis situation. 

“Somebody must take charge,” Lurie said. “And that person needs to be a leader with authority. The leader must be decisive. Sometimes you’re faced with having to make a decision and you don’t have all of the facts. But sitting back and waiting for all of the facts and doing an analysis can be a disaster.” 

The leader must also be prepared to amend the action plan at any given moment — sometimes on a day-to-day basis. 

Lurie added that practicing empathy with employees — even in times of high stress — is crucial. 

“These people are scared,” he said. “They don’t know if they’re going to lose their job. They don’t know if they’re going to be able to make ends meet. So, being able to put your arm around your people to give them a sense that someone is watching over them, that someone is there for them, to help, is a tremendous, tremendous benefit, even if it’s only psychological.”

Determine How Much Cash You Have on Hand

Next, the leader needs to take stock of the organization to determine its available cash and manage liquidity. 

“Cash management is absolutely king,” Lurie said. “What I recommend this leader to do is to develop a detailed, 13-week cash flow.”

That means take a detailed account of all incoming cash and outgoing cash under normal circumstances. Now, decide what has changed in the crisis. Which bills need to be paid immediately? Which ones can be extended? Are there projects that can be postponed or canceled altogether? Are there concessions coming in? Rank these in order of importance. 

“Essentially, what you need to do is take those payables and force feed those payables into those that you expect to get,” Lurie said. “Obviously, there’s going to be a shortfall. So you have to think about, ‘How am I going to do this?’ I’ve got to put together a plan that I’m going to take to my bank or my stakeholders and ask for assistance.

“As you can imagine, the banks have a lot of requests,” Lurie continued. “Those clients that walk in with a detailed-request of the things they need and what they need them for, are more likely to get help than those that just walk in and say, ‘I don’t know.’” 

Have Crisis Management Teams in Place

Different people throughout the organization will be called on during a crisis for different reasons. An entire team or section of the human resources department, for example, will be needed to navigate the new federal stimulus package and how to obtain benefits. 

“That in and of itself is a tremendous job,” Lurie said. “You have to understand what you can, what you can’t do; how you apply for these stimulus packages. What you have to do.”

The same goes for other teams set up across the organization to help assist employees, customers and ensure continued operations wherever possible. 

Have a Short-term Plan — Not a Long-term One  

In a crisis situation, companies should be focusing on the here-and-now — not playing the long game. 

“You need to focus on the short-term strategies to enhance cash, to keep the business viable,” Lurie said. “A marketing program for a Labor Day sale, I wouldn’t worry about it today. I wouldn’t worry about a Christmas promotion either. Strategic in today’s terms is tomorrow and next week and a week after. Not months and months in advance.” 

On the flip side, companies can get creative about ways to generate cash and save in the short term. 

Gelmart International, an intimate apparel supplier with manufacturing facilities in several companies around the world, is actually shifting operations back to China for the foreseeable future. “China has recovered the fastest [from the coronavirus] and the raw materials are already there,” said Yossi Nasser, chief executive officer of Gelmart. 

The company is investing long term in a faster, more flexible supply chain. But for now, Nasser said, “The important factor is being able to respond quickly and effectively to changing consumer habits, driven by macro factors.”

Stay Connected to Customers

Many retail companies and brands have loyal customer bases. Even in a state of panic, it behooves companies and brands to maintain those relationships. 

“It’s critically important that brands stay connected with their customers and the brand relationship through all of this,” Binder said. “In a crisis, what’s critically important is continuing the communication with your customer so that your customer knows what’s going on; where your priorities are; how you’re going to continue to engage with the customer.”

Some retailers are using technology to stay connected to customers from a distance. Nike and Lululemon are two companies offering digital, at-home workout sessions for free. Rebecca Minkoff is hosting an Instagram “Happy Hours” with various designers and personalities to connect shoppers during the black out. 

“That’s engaging the customer with the DNA of the brand under a very extraordinary set of circumstances that doesn’t marginalize the brand image at all,” Binder said. 

Lurie added that it’s not a bad idea to let regular customers know you’re still there when the crisis is over. 

“If I were a retailer, and I saw us coming out the other end of the tunnel, I would contact my customers and give them something to look at in my stores,” he said. That could be in the form of in-store events, promotions or other activities. 

Focus on Existing Business

The experts agree: focus on existing business. Now is not the time to be branching out or trying to acquire new customers. That includes trying to sell current customers things they’ve never bought before. Same goes for introducing new brands or products during this time.

“Launching a new product or trying to find a new customer who’s never shopped with you before, in these circumstances, is wasting your time,” Lurie said. “The chances are they’re not in experimental mode today.”

Instead, he recommended online shops use data gathered from previous orders to target shoppers. Send out e-mails. Use social media or the company’s web site to show shoppers previous orders they’ve placed.

“Offer them something to encourage them to buy something [more] from your web site,” Lurie said.  

But Don’t Point Out the Obvious 

Pitching luxury loungewear or work-from-home attire that is intended to help people is probably not the most tactful course right now. And it might even hurt the brand image.

“I don’t think pointing out the obvious right now is necessarily what the customer wants to hear,” Binder said. “This is just an extraordinary period of time that people have not gone through before. And certainly, staying home is not something most people are used to. I don’t think, frankly, that there’s anything anecdotal about this situation.” 

Same goes for “teasing customers with ridiculous offers,” Binder said, like 75 percent off or more. This may seem like a quick fix. But it could cause lasting harm to the brand image. 

Understand That No Matter What There Will Be Lasting Changes

In the case of the current pandemic, Binder said it will likely cause lasting changes to consumer behavior. For example, it will take some time for people to feel comfortable again in large groups. That could directly impact how they shop and spend their money. 

“Helping the consumer understand that buildings are safe again, that it’s safe to go back outside again takes time,” he said. “It does not happen overnight.” 

Formulate a Recovery Plan

The last step — and possibly the hardest — will be to create a recovery plan. While it may seem incomprehensible now, it can actually be an opportunity for companies to optimize their current operating models, Binder said. 

“Clearly, what we look like coming out of December and when we recover, whenever that is, will be different,” he said. “The next phase, which is going to be harder, is going to be about coming to the realization of what’s next and getting a strategy around your new operating model post-recovery. 

“There have been a lot of examples of poor productive operating models, poor productive retail models, poor productive locations. [Companies can] reset those operating models so that when they come out of this, the organization is healthier and generating more productivity. This is one of those opportunities, as tough as this is, where a retailer or a brand can drive significant volume transformation that can yield great results when this is all over.”

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Marco Bizzarri on Possible Post-Coronavirus Scenarios, Supporting Creativity

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