This is the moment.
That sinking feeling that the world is falling apart is still lingering — and disturbingly more credible than ever. But much of what could be done to stem the losses of the coronavirus shutdown has been done.
With stores closed, many workers have been furloughed, capital spending has been axed, orders have been canceled, rent deferred and extra financing has been secured or is in the works (if possible at all).
That’s the mad-dash scramble for cash that has defined the last month for fashion.
But for the better-positioned companies that can do anything beyond just struggle to survive, it’s time to think about the future.
Chief executive officers stand atop companies that have closed their day-to-day businesses. With the hatches battened down, they are now becoming consumed with one overriding business imperative — coming out stronger.
Call it a c-suite rallying cry to come back from the coronavirus.
“When we come out of hibernation and when we’re able to reopen doors, we don’t want to just restart the business, we want to reset the business,” said Chip Bergh, ceo of Levi Strauss & Co., in an interview with WWD last week.
“We’re going to see competitors potentially go out of business. There are going to be great retail opportunities. Talent is going to be available during this period of time as the job market gets decimated, we’re going to be all over that,” the ceo said.
Executives at other companies, including Tommy Hilfiger-owner PVH Corp., Vans parent VF Corp. and elsewhere are thinking along the same lines.
VF, one of the strongest companies in the industry, has been marshaling its resources for the challenges, not just of today, but down the line.
Last week, the company drew down the remaining $1 billion in its unsecured revolving credit facility, giving it $2.4 billion in cash on hand. The company had already taken $1 billion from the facility just 15 days earlier (giving it enough money to fund its working capital through September).
That could tee up VF for some big deal acquisitions as the landscape changes or just leave it stronger when business starts again.
“Throughout VF’s storied 120-year history, we’ve weathered many storms, and each time we’ve emerged as a stronger company with a renewed sense of focus and determination,” said Steve Rendle, VF’s chairman, president and ceo. “The full breadth of actions we’re taking in response to the COVID-19 situation are intended to not only address the challenges of today, but also to position our brands and businesses to thrive in the years ahead as we build on VF’s proud legacy.”
It might seem like a stretch to be going on offense with the world hidden away, but ceo’s usually get to the corner office by being can-do, optimistic types who are ready, even eager, to take on big problems — whether they’re ultimately successful is another topic.
And COVID-19 is about as big a problem the current ceo set has ever seen.
To actually come out stronger, companies are looking to solidify relationships with customers online now, prepare a tactical response for when stores reopen and then be ready for maybe six years worth of industry consolidation in six months (certainly VF and PVH — two of fashion’s top consolidators — and maybe even Levi’s are looking to see what they can buy in the immediate future).
Every step along the way, there’s opportunity for companies to change for the better.
Data, for instance, was already an area where retailers and brands were looking to build and now they’re looking to get more sophisticated and fast.
Inna Kuznetsova, interim ceo of analytical intelligence firm 1010data, said retailers wanting to win when consumers start to come back to stores need not just a plan, but a Plan A, Plan B, Plan C and so on to be able to react in real time.
“Embrace the unknown,” said Kuznetsova, advising an approach that comes with “flexibility and agility of planning.”
“The [consumer] buying behaviors are changing as we speak,” she said. “They’re changing preferences for flavors or preferences for store brands versus known brands. We don’t even know which of those will stick and which of those will go away. It’s important to assume there will be unknowns and the only way to mitigate the unknown is to have the data. We’re in uncharted waters.”
Data can also give a nuanced read on the world that could be even more important as retail opens back up.
Kuznetsova advised state-by-state planning for the comeback that takes into account how different regions recovered after prior shocks, like the financial crisis or Hurricane Katrina.
“If you start looking at averages, you might miss a lot of insights,” she said.
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This is also an unusual moment given the the near complete stop in the brick-and-mortar business — which still represented the lion’s share of shopping before COVID-19. Usually, companies have to make course corrections while the whole enterprise is barrelling forward.
“Retailers are getting a little bit of a pause to stop and look at things and rebalance,” said consultant David Bassuk, global co-head of retail at AlixPartners. “Since product isn’t coming in right now, they really have a chance to rethink and reshape the assortment to drive margin and to really come out stronger from a product perspective.”
The next phase starts when retail reopens, companies all try to play to their advantages and apply their new strategies to grab whatever dollars consumers are willing to put into fashion.
“The word of the year is going to be agility,” Bassuk said. “When we resume, it’s going to be a different day and all these companies that are planning for this are going to look a little bit different than we think.”
While there are always a few retailers on the edge — at risk of bankruptcy or takeover — many expect the shutdown to lead to a supercharged season of corporate changes.
“There has to be 50 percent too much retail space and that’s going to create a whole different wave of consolidation and acquisition opportunities,” Bassuk said. “There will be a new retail landscape that comes out of this.”
With COVID-19, the long-running structural change in fashion — which has been fueled by new consumer attitudes and the rise of e-commerce and social media — has gone from talk of market share winners and losers to companies that survive and companies that don’t.
“The days of mediocre retail are over,” said consultant Greg Portell, lead partner in Kearney’s consumer practice. “You have a lot of clutter in the retail sector… Part of that is based on how the retailers have positioned themselves, they’ve gone after the middle market, middle America, middle-income consumer. Some of them are going to slide down the path of unlikely recovery. Others are going to play their cards right.”
To build a winning hand, retailers have to not just get their merchandise back in line with the season, they have to get their associates ready for the kind of corporate life and death competition that’s coming.
“How do you get your staff back up to speed?” Portell said. “You’re going to have folks who have been out of the workforce for four, six, eight weeks. You need to put them back into the store environment where they’re probably concerned for their safety.”
Portell said retailers are going to have to be more flexible in how they use their stores given that demand will ebb and flow with some people wanting to simply pick up their orders and go.
New ideas could take hold.
Store associates could man call centers in the back if traffic slows. Already, many stores have grown used to shipping goods from the sales floor to fulfill e-commerce orders.
Ultimately, it could be that much of the change at retail comes in outlook, with COVID-19 forcing a kind of cognitive revolution that’s been coming for some time.
Portell advised retailers to “think about the consumer as the node of commerce” instead of focusing on the store channel or the e-commerce channel.
“Channels don’t exist, people exist,” he said. “And they move from place to place and they buy for different reasons from place to place.”
Coming out of COVID-19 stronger will be hard, but not impossible.
“It absolutely is possible,” Portell said. “It will take enormous leadership. It will take bold moves. This isn’t a time to be incremental. Business books will be written about the next six months.”
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