COVID-19 and the Retail Industry

In order to reopen, retailers are also faced with the logistical challenges of bringing back furloughed employees and resuming operations at malls across the country.

While the supply side can be managed by retailers that identify alternative supplies and production sites, changes in demand are harder to influence as customer sentiment is difficult to affect. In order to reopen, retailers are also faced with the logistical challenges of bringing back furloughed employees and resuming operations at malls across the country. And, once the stores are open, it is still uncertain how quickly customers will reembrace in-store shopping.

Within the retail industry, food and non-food retailers are facing different challenges due to the roles they play in consumers’ lives. Food retailers have experienced a spike in demand despite supply chain disruptions, complexities in store operations (e.g., how often and how to clean stores), and staffing issues. Non-food retailers have borne the brunt of the shock, as demand and liquidity continue to plummet.

Key focus areas

• Update financial models to reflect new ‘normal’ from revenue (e.g., store traffic, category mix, average unit retail, and basket size are likely to change) and cost sides (stores, distribution centers (DC), fulfillment, vendor managed inventory)
• Focus on cash: delay accounts payable and collect unpaid accounts receivable, draw down lines of credit, file for the Paycheck Protection Program (if applicable), renegotiate debt and lease terms, monitor performance versus covenants, and investigate asset-based credit options
• Renegotiate leases and lease exits with landlords; incorporate impacts of negotiated lease changes, such as modifications or rent concessions
• Elevate the importance of e-commerce organizationally and through distinct forecasting; assess opportunities to enhance e-commerce business to offset brick and mortar downturn
• Analyze inventory levels throughout supply chain and assess further order cuts; decide on actions for excess inventory (e.g., take markdowns, sell to off-price retail, hold in DCs until next relevant season)
• Optimize, postpone, and reduce IT spend leveraging existing tools and platforms, shutting down non-critical, low-usage tools and accelerating migration to cloud technologies