COVID-19 Impact on American Retail
Access to cash is listed by most financial and retail analysts as being the key to survival through the pandemic period for retailers. Highly leveraged retailers will most likely not survive. While retailers JC Penny and Nieman Marcus are facing certain bankruptcy and may not survive the crisis caused by the coronavirus pandemic, others are set to emerge stronger long-term due to proactive changes being discussed and eventually made. Some retailers such as Home Depot, Walmart, Sam's Club, and Costco have said very little about their future tactics or changes. However, they have made several recent changes to company policies in addressing health concerns brought on by the virus, such as employees wearing face masks, shortened store hours, and limiting the amount of customers in a store at one time. In addition, these changes have been instituted almost universally by retailers. This report details the broad picture of future success and failure for retailers in general, focuses on laying the foundation of what specific retailers are doing to mitigate the effects the pandemic is yielding, as well as the proposed changes they will make in a post-Covid-19 world.
Predicted Change in Retail
Several common themes about how successful retailers should approach the current crisis include the extension, and quite possibly future dominance of e-commerce; having sufficient cash on hand; flexibility with supply chain and inventories; the adoption of tech such as AI bots, avatars, digital showrooms, and touchless point-of-sale; and an overhaul of customer service to include home delivery.
- E-commerce: Almost every blogger and industry expert reporting on the current retail situation agree on two things, the first one being the increased importance of e-commerce and online shopping.
- Cash: The second thing everyone is talking about is how cash is king. "Businesses with the best balance sheets will ride out this crisis best. Companies with too much debt will not make it out of the pandemic, a painful lesson in natural selection—one that should not be lost on any retailer. Expect executives to look at their cash positions much more closely going forward."
- 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. (S14)
- Inventory: Supply chains will record a glut of merchandise and inventory this coming season as most major retailers continue to cancel orders to adjust inventories as a result of decreased demand brought on by the stay-at-home orders. Successful retailers will maneuver delicately through their supply chains and remain as agile as possible with summer and fall inventories. It will take some time to adjust proper inventory levels as a new norm develops over the proceeding quarters.
- Adoption of Tech: As most successful retailers adapt their marketing techniques, the adoption of tech will become paramount. Improving customer experience with AI based chatbots and avatars are 2 such technologies. These will allow for targeting the correct customer ant the right time by managing their needs better and more expeditiously. "Live chat is essential to humanizing customers and minimizing their pain points, particularly because it enables real conversations at the time of need rather than later through email, particularly when they might be upset or looking to fix a problem."
- Other tech trends related to retail are detailed by IHL Group founder and President Greg Buzek. He expects the crisis to spur investments into omnichannel technologies and stated, "It is our view that the trends to optimize click and collect and delivery will double their previous investment as a result of people to avoid crowds for the next 90 days. He expects "significant increases in remote tools, moves to decentralize the supply chain and AI/[machine learning], Forecasting technologies, and Analytics."
- Customer Relationship Overhaul: "Using behavioral targeting, technologies can engage struggling or upset customers with proactive messaging before they become frustrated. Offering guidance before the customer has to seek help will ensure their browsing experience is seamless and completely comfortable. Successful brands retrained in-store staff for their online customer service team, given they are already well-educated on product information and creating a personal customer connection. This unified offline and online agent team reduced training times and let brick-and-mortar sales teams transition easily into online sales, with no need for mass labor cuts. “Online sales associates” receive specialized training in product knowledge and emotional intelligence to deliver bespoke customer support and clientele online. The idea is to spend more time with customers instead of less in order to foster real connections with customers. Brands that encourage customer connection online will be rewarded with increased brand loyalty and higher basket values."
- Home Delivery: "A recent online poll conducted by RIS provided a snapshot of what retailers are navigating during the coronavirus health crisis, as well as insight into the tech trends they see ahead. The poll, conducted on the RIS website April 2-6, was intended to take the pulse of its retail audience and their current experiences. As for which retail technology they expect to receive the greatest investment in the post-coronavirus environment, home delivery somewhat unsurprisingly won out, with 38% of retailers citing it as their No. 1 choice. Curbside pickup and contactless payment tied for second, with 22% each, while just a limited number of respondents cited automation in warehouses (6%), live streaming video shopping (2%), computer vision (2%) and robotics in stores (2%)."
- Remote Work: VHR, an international technical recruitment company, reported that "businesses are increasingly understanding the impact of personal autonomy on employee happiness, with flexible working policies found to improve productivity, retention and worker well-being. 62% of businesses worldwide currently offer a flexible working policy, and this has already been predicted to grow from 2020 and beyond. American Express, AT&T, Best Buy, British Telecom and Dow Chemical report that remote workers are 40% more productive."
Not Likely to Survive
- Some retail brands such as Nike, Coach and Levi’s have recently opted to invest in their own stores and e-commerce to sell directly to consumers. This has lead them to lessen support for department stores, which has made the retailers vulnerable.
- Vulnerable retailers highlighted by msn.com and Forbe's include Neiman Marcus, Macy’s, Family Dollar, Hallmark Gold Crown, Victoria’s Secret, JC Penney and The Gap.
- Among other retailers, Lord & Taylor is reported as seeking information regarding a possible filing for bankruptcy protection.
- Forbes writes, "The strong will get stronger, the marginal weaker, and the weak will die."
- “Everybody is canceling orders, so the goods aren’t going to be coming in for summer or fall,” BDO’s David Berliner stated. “It’s going to take quite a while to ramp the supply chain back up to get the goods over here. So that’s going to be another big factor separating the weak from the strong. The supply chain is going to hurt a lot of retailers on the backend.”
- Companies with strong balance sheets and who are responding to market needs will be successful, the survivors. The ones who only have balance sheets and don’t tune into the evolving needs of their customers will find that the coronavirus is the final nail that leads them to be unsuccessful.
- In addressing major retailer Macy's, Abraham Unger, an associate professor and the director of Urban Programs in the Department of Government and Politics at Wagner College asked and answered when addressing what coming out of the crisis might look like, “Big retail operations have high overheads and brands to maintain. Can a megastore like Macy’s, or even more so, Bloomingdale’s, ever fully return if it essentially becomes a TJ Maxx? Online operations only require a skeletal crew by comparison with an actual high-end retail location and all of its attendant costs, plus a lot more staff, so I’m not seeing these stores staying afloat to the same degree they are now. Many might rush outside to do their shopping for a literal breath of fresh air and old-fashioned human interaction at a real store once it’s possible again. But, by then, the big retailers like Macy’s, which need a lot of customers to keep their stores open, might have lost too much money to reopen in the way they once did.
- Co-founder and Partner at Triangle Capital LLC Richard Kestenbaum in addressing why Macy's may not survive explained in Forbe's, "The coronavirus shutdown ends and Macy’s reopens stores and hires back its people. Stores that were questionable at the time of the shutdown don’t reopen. But the inventory on hand is now old and out of season. To move it out, Macy’s cuts prices drastically, far more than usual. (A good explanation of the problem by Walter Loeb is in this article.) Eventually the products are sold, but it’s a turnoff to Macy’s most desirable customers, the ones that want new and fashionable merchandise. Macy’s presses its vendors for discounts, but many of them will be unable to withstand both that pressure and the costs of the shutdown, and they will vanish. Macy’s winds up moving a lot of goods to liquidators and discounters like Ross Stores, TJ Maxx, Burlington Coat and its own Backstage stores. Between the shutdown costs and the markdowns, Macy’s losses are staggering."
- In that same article Forbe's continues, "Macy’s put noble goals into its (recently released restructuring) plan, including strengthening customer relationships, curating quality fashion, accelerating digital growth, optimizing its store portfolio and resetting its cost base. All those things are great, but what they don’t talk about is what customers want. There’s no mention of the key terms that are motivating customers now, like healthful, artisanal, local, ethical or sustainable. Macy’s focuses on its own goals but doesn’t mention its customers’ goals. That’s the ultimate reason it keeps missing its targets. No amount of moving the pieces around will ever substitute for senior management focusing an organization laser-like on the values that customers are looking for. In a nutshell, that’s what Macy’s and other big, legacy retailers keep missing."
- Macy's is a higher-end fashion and apparel retailer that relies on foot traffic, in-store visits. However, this has become less relevant due to the increase in online shopping. The coronavirus pandemic has exacerbated the problem just as spring and summer collections were being brought into Macy's stores. It is probable the retailer will have to sit on very large quantities of inventory, and adding to the issue is the all but non-existence of tourists to its flagship stores.
- While Neiman Marcus reported in Bloomberg this April, ""We are evaluating all courses of action to preserve our financial strength so that we may continue serving our customers and associates, and being a great partner to luxury brands globally", the retailer has what most analysts are calling an insurmountable debt load. "For levered players like Neiman, it puts them in a precarious position," Moody's Vice President Christina Boni said in an interview. "Even the best-run retailers are having to pivot."
- Neiman's debt its last year of reporting was almost equivalent to its revenues. After two leveraged buyouts since then, its debt load has only become worse. This is leading many in the industry to report that Neiman's is facing certain bankruptcy, as its debt is now rated 'junk'. "With stores temporarily closed and many employees furloughed, Neiman and other distressed retailers are stretching liquidity to keep the lights on. Meanwhile, upturned credit markets have made refinancing debt all the more difficult for overburdened retailers."
- On Sunday April 19th, Reuters reported, "Neiman Marcus Group Inc. is preparing to seek bankruptcy protection as soon as this week." The Financial Business Post states "The U.S. department store operator is in the final stages of negotiating a loan that would amount to hundreds of millions of dollars and help bankroll some of its operations during the process."
- "The department-store chain is carrying almost $5 billion in debt and has been forced to temporarily close all its stores and furlough most of its employees due to the pandemic", reported MarketWatch.
Poised to Succeed
- Initially, Best Buy CEO Corie Barry announced, "The situation we are all facing as a result of the COVID-19 pandemic is truly unprecedented. As we previously communicated, we made the decision for the health and safety of our customers and employees to shift our stores to a temporary enhanced curbside service-only model starting March 22. At that time, we also suspended all in-home delivery, installation and repairs. We have retained approximately 70% of our sales compared to last year since moving to our enhanced curbside service model despite the fact that all our domestic stores are closed to customer traffic, and approximately 40 of them, particularly in the Northeast, have been completely closed to all business for at least 10 days at our discretion.” Barry continued, “This is a testament to the strength of our multi-channel capabilities — as our domestic online sales are up over 250% and approximately 50% of these sales are from customers choosing to pick up their products at our stores since moving to our curbside service model.”
- Some additional steps Best Buy initially took included on Thursday, March 19, when Best Buy announced internally that work was going to be voluntary for two weeks and employees who decided to stay home would still be paid amid the coronavirus pandemic. The changes also applied to workers for Best Buy-owned Geek Squad, who received hazard pay if they decide to keep performing product installations inside customers' homes.
- The Richfield, MN, based company has also accessed its five-year revolving loan, and on March 19 tapped the entire $1.25 billion. It also suspended its share repurchase program as it has adjusted to stay-at-home orders affecting retail companies.
- It then transitioned into curbside pickup only at all of its retail locations, and e-commerce orders will be sent directly to consumers’ residences, but without in-home installations or repairs. The demand for home office equipment has escalated as more people are working from home resulting in an increase in Best Buy's products.
- As a result of the coronavirus crisis, Best Buy will put approximately 51,000 domestic hourly store staffers, with the inclusion of almost all part-time employees, on temporary leave starting April 19. "The electronics retailer is keeping about 82 percent of its full-time store and field staffers on its payroll, while furloughed staffers will keep their health benefits for at least three months", according to an announcement.
- Other remedies include Corie Barry, the company’s chief executive, forgoing half of her base salary, and members of the board of directors without half of their cash retainer fees. In addition, the company stated that executives who report directly to the CEO will take a 20 percent cut in base salary. These reductions will be effective through at least Sept. 1. Also, select corporate staffers are having voluntarily reduced workweeks and pay in addition to voluntary furloughs.
- "Best Buy said it made the decision in the early days of the health crisis that its staffers would not have to work if they did not feel comfortable doing so, and that they should remain in their residences if they don’t feel well, while still receiving pay. It also noted that all field and retail staffers whose hours were removed when the company moved to curbside service would be paid for their usually scheduled hours up to April 18. " However, as soon as April 21st, staff willing to do so can resume work inside customer's homes, according to a company email.
- "Starting as early as Tuesday, April 21, you will start seeing jobs on your boards as we're giving our customers the ability to select any one of the services we offer, including our doorstep delivery option," the email written by Damien Harmon, president of operations and services, addressed to in-home agents and their leaders, reads.
- CEO Barry said in the announcement, “The situation remains very fluid and there is still a great deal of uncertainty, particularly as it relates to [the] depth and duration of store closures and consumer confidence over time. We are taking the steps necessary to resume providing our customers [with] in-home services in the near future, keeping in mind our overriding priority on the safety of our employees and customers.”
- The company has adjusted to the pandemic and has decided to lower merchandise receipts to match demand with a focus on essential items; extend payment terms in partnership with key merchandising vendors ; reduce promotional and marketing spend aligned to a temporary operating model ; lower capital spend to focus on mandatory maintenance or high-value strategic areas ; and suspended 401(k) company matching program.
- Finally, Best Buy has defined a "dual goal to protect employees while serving customers who rely on the company for increasingly vital technology. The company has made clear that employees should only work when healthy, and that those who feel sick should stay at home, with pay. US stores have instituted 'contactless' curbside service or free doorstep delivery".
Bed, Bath & Beyond
- On March 23, 2020, Bed Bath & Beyond temporarily closed all its retail stores in the US and Canada, with the exceptions of buybuy BABY and Harmon Face Values ("Harmon") stores. Based on the latest guidance from federal, state and local government and health authorities, and in the interest of the health and safety of its customers and associates, Bed Bath & Beyond extended the temporary closure of its retail stores until at least May 2, 2020.
- At the same time it extended the temporary store closures, the company reported it would implement additional cost reductions, including a furlough of the majority of store associates and a portion of corporate associates until at least May 2, 2020.
- As statement by the retailer stated, "As previously announced, the Company is providing impacted store associates with applicable pay and benefits until April 3, 2020. Corporate associates who have been impacted by today's announcement will be provided with pay and benefits through April 18, 2020. During the period in which furloughed associates are not paid, the Company will pay 100% of the cost of healthcare premiums for all these associates who currently participate in the Company's health plan, until further notice. Furloughed associates will also be able to apply for unemployment benefits, if eligible. "
- Mark Tritton, President & CEO posted, "The health and safety of our customers and associates remain our number one priority, as we do what we can to slow the spread of COVID-19. To help our communities through this crisis, we continue to provide essential infant, personal and health care items in-store, while we serve the rest of our loyal customers online, in their homes. This is a time of unprecedented disruption to our industry. We do not make these decisions lightly but, while the vast majority of our stores remain closed, we must now balance our ability to provide jobs and financial support for our associates in the short, medium and long-term, as well as prioritizing investments that will strengthen our business. We are therefore making the difficult decision today to place many of our associate team members on temporary leave, while our stores remain temporarily closed. I want to thank all our associates for their service to the business and our loyal customers and we look forward to welcoming back all team members when our stores can safely re-open."
- In recognition of the sacrifices associates are making during the pandemic, the Bed, Bath & Beyond also temporarily reduced salaries by 30% across the executive team, including President and CEO, Mark Tritton. At the same time, the Chairman of the Board and all other independent directors will forgo 30% of their quarterly cash compensation.
- Another company statement made public stated, "To support plans to build long-term shareholder value, and further strengthen the Company's financial flexibility beyond its substantial cash position, Bed Bath & Beyond has taken or will take several further actions while managing this period of business disruption and uncertainty: Electing to draw down the remaining available funds ($236 million) from its revolving credit agreement, in an abundance of caution and as a proactive measure; Executing a substantial reduction in expenses, including managing to lower inventory levels and extending payment terms for goods and services; Prioritizing approximately $250 million in essential capital expenditures to drive strategic growth plans, including investments in digital and Buy Online Pick Up In Store (BOPIS); Deferring approximately $150 million of other planned capital expenditures; and Postponing, until further notice, its plans for share repurchases, dividends and debt reduction."
- CEO Tritton discussed the retailer's transition to e-commerce: "If there is a silver lining, I would say that given the monumental changes we've made to our business over the past four weeks, our ability to act decisively, partner up and move with speed and agility has been greatly enhanced."
- In addition, Bed Bath & Beyond found success in quickly transitioning its business to a digital-only selling model since closing its stores on April 2. Many locations have become makeshift fulfillment centers, and the entire enterprise has reorganized around e-commerce. "Digital sales jumped 90% through the first two weeks in April, and executives highlighted standout sales categories including bread machines, coffee makers, and vacuum cleaners. A curbside pickup offering is available at most of its buybuy BABY stores, and management expects to add the functionality to the Bed Bath & Beyond locations as soon as they reopen for regular business."
- Bed Bath & Beyond rearranged all of its spending priorities in response to its new dramatically curtailed selling posture. While those moves mostly involved cuts such as furloughs, temporary salary reductions, and a pause on store remodels, the chain is still investing in growth. It plans to spend $250 million on high-impact strategic initiatives and is actively recruiting for key management positions. The fluid demand trends make cash a priority today. "Now is the time to stay liquid," Tritton said, "until we have more clarity on the global situation surrounding COVID-19."
- “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 recent interview with WWD. “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."
- "Despite operating in a supremely uncertain environment, Levi Strauss & Co. anticipates the strength of its brand coupled with its digital investments will carry it through the coronavirus health crisis. It also sees future opportunities within the challenged retail landscape as vacancies are expected to open up. The company is seeing early success with its recently launched Levi's brand mobile app with strong consumer acquisition and enrollment rates.", Chip Bergh, Levi’s president and CEO, said during the latest earnings call. In addition, the company plans to continue to scale and ramp up its loyalty program and app throughout the remainder of 2020.
- "Consumer engagement remains a priority for Levi’s as it seeks to remain top of mind during a period in which apparel purchasing is expected to take a backseat. It’s replicating digital strategies that proved to be successful in China during and after the area’s lock down, such as “do-it-yourself content” on its website for consumers to customize their Levi's products at home. "
- The company also launched a month-long virtual music festival on Instagram Live featuring such artists as Snoop Dogg and Brett Young — performing, of course, in their Levi's.
- The CEO stated that social media is helping propel brand awareness, giving the company something to build on post-crisis. “I'm very, very confident that whatever the shock is to the consumer and the economy, when the consumer does emerge from hibernation, they're going want to go back to the brands that they love and to the brands that they're comfortable with. And that's why I believe we're poised to win in this environment."
- Levi’s accelerated the rollout of new 3D technology used for sampling and design, enabling it to sell to merchants without physical samples. (S15)
- In a long statement by Levi's CEO, Burgh detailed, "Whether that’s taking back under-performing franchise businesses, or upgrading real-estate locations because of retail bankruptcies, or finding great talent in a decimated job market, the crisis gives us an opportunity to not just renew the business, but to reset it for the future. The organization’s goal is thus not only to survive by “playing defense” with digital marketing programs and online commerce at the heart of its strategy." He continued, “We will play to our strengths, leveraging the strength of the brand, our connection with our fans, and the digital capabilities and omnichannel capabilities that we’ve invested in over the last few years." “To be very clear, we are cutting back on A&P, but we’re being deliberate and strategic about actions that we can take to strengthen the relationship between the brand and the consumer. We’re continuing to invest during this period. We have not gone completely dark.”
- "Although Levi’s has substantially reduced its advertising and promotional (A&P) expenditure due to COVID-19, it is identifying appropriate ways to engage its target audience. As cases in point, Levi’s is holding a live concert series on Instagram, and has launched a new clothing range in partnership with gaming specialist Nintendo, based on the latter company’s iconic Super Mario franchise."
- "Tapestry Inc., which has been paying its workers despite store closures, says it will have to furlough most of its North American assistant managers and store associates if the company can't reopen its doors by May 30. Salary and benefits for these workers will be extended until that time. On April 25, the company will lay off 2,100 part-time workers across its three brands: Coach, Kate Spade and Stuart Weitzman. These workers will receive a one-time $1,000 payment. Tapestry is halving the salary for its Chief Executive Jide Zeitlin, and the compensation for its board. North American corporate employees will see their pay reduced from 5% to 20% depending on salary level with similar reductions in other parts of the world. Merit salary increases for fiscal 2021 have been eliminated and fiscal 2020 bonuses have been canceled. The company has also suspended its cash dividend and share repurchase programs. Further, staff reductions and other changes are anticipated in the coming months."
- “With the passage of time, we are facing increasing pressure on the financial performance of the business, requiring us to make difficult decisions to ensure that Tapestry and its brands continue to thrive well into the future,” Jide Zeitlin, chairman and chief executive officer of Tapestry, said in a statement. “These decisions are balanced with numerous steps to moderate the impact of the current environment on our people.”
- He continued by saying that "Tapestry will continue to reduce operating expenses and capital spend. That includes such things as canceling or delaying new store openings, reducing inventory by canceling inventory receipts for late summer and early fall, limiting the use of third-party services, decreasing rent payments and leaning into the company’s digital businesses. In the meantime, the e-commerce sites for all three brands remain open. We have heightened safety precautions in our distribution centers and are maintaining remote working for our corporate employees in numerous global offices."
- "Coach parent company Tapestry announced April 20th that it has launched an initiative, in coordination with the National Health Institute's 3D Print Exchange and various 3D-printing companies, to manufacture medical equipment for health care workers dealing with the coronavirus pandemic by re-purposing its existing 3D-printing capabilities in New York. The company will print the disposable parts required for respirators, ventilators, test swabs and face shields. Resources will also be made available to create 3D-printed parts for R&D prototypes needed by engineers and specialists working on COVID-19 related development projects."
- Nordstrom took a number of measures early on in the crisis to cut costs and raise additional liquidity, including furloughing the majority of its workforce, suspending its quarterly dividend payment effective in its fiscal second quarter, drawing down $800 million on its revolving credit facility and halting share repurchases.
- Nordstrom CFO Anne Bramman said in a statement about the retailer’s recent debt offering: “These measures will provide Nordstrom with additional liquidity and flexibility not just for the short-term but over the longer term as we emerge from this unprecedented time.” Different than many other retailers, Nordstrom intends to close only a handful of stores, if any, each year. It also has a smaller quantity of locations: 380, including its off-price Nordstrom Rack business.
- In a filing with the Securities and Exchange Commission, the Seattle-based retailer said it expects its revenue for the quarter ending May 2 to be “adversely impacted in a significant manner by the virus. The company broke down the multifaceted ways that its business may be hurt, adding that if store closures continue for an extended period of time, its financial situation could become distressed.”
- The filing continued, "To encourage more visits and more spend in this evolving climate, the company has implemented its 'One Nordstrom' strategy whereby it brings together full-price, off-price, stores and digital channels to encourage more visits and more spend. If this strategy doesn’t pay off, Nordstrom says, it could fall short of expectations. Further, Nordstrom expects that the deterioration in the economic conditions in North America could dent discretionary spending, thus leading to fewer sales.
- A NASDAQ report detailed how "the fashion retailer had also taken several measures to survive such tough times. Apart from shuttering its outlets, it has suspended its quarterly cash dividend, starting the second quarter of fiscal 2020 and also put share buybacks on hold. It had drawn $800 million from its revolving credit facility. Apart from this, it has announced plans to cut down on operating expenses, capital expenditures and working capital to the tune of roughly $500 million, which will be incremental to its initial savings goal of $200-$250 million for fiscal 2020."
- “We’re going to open up, and that is going to probably be a gradual situation where you can regain customers’ confidence around safety,” said Nordstrom's CEO. “We need to ease into whatever that new normal is going to be and then we’ve got to be prepared and flexible to have our stores be responsive to what’s in the best interest of customers.” Rather than force an old way of thinking, retailers should use this time to strategize completely, he added. “If you started this business from scratch today, you would probably do it differently than some of these legacy practices,” he said. “What’s been inspiring to me and I’m sure for the others is that we all find ourselves in a situation where we have mutual problems to solve.”
- Many industry experts opine that when stores re-open, retailers should reassess and possibly abandon their tried-and-true methods. Long held metrics may no longer be measured by "the number of sales per square feet, discounts will likely work on a different schedule and brand discovery will be a larger part of the in-store experience."
- “We’re going to have to be flexible because it’s impossible to predict exactly what that new normal is going to be like. What we envision once we start opening stores is that we’ll take a learning approach, a really humble approach, of being responsible to customers,” said the Nordstrom CEO. “[We want to] allow that experience, what a store is, to evolve in a way that’s relevant.”
- Industry reports state Nike's 3rd quarter numbers didn't reflect the greater impact of coronavirus closures on stores outside China, since the fiscal third quarter only ran until the end of February. "Those declines are yet to come, and it'll be essential for Nike to replace at least some of those store-based retail sales through its direct channel in order to hold up as well as possible. Donahoe said during the quarterly conference call following the release of earnings results that Nike's efforts to connect with customers via its e-commerce app led to a more-than-30% growth rate digitally in China and helped the company offset the impact of store closures. That model could work well throughout the rest of the world in the fiscal fourth quarter. "
- Motley Fool claimed, "Admittedly, Nike can't be sure exactly how the situation will play out in other parts of the globe. The company's positive experiences in China, Japan, and South Korea will guide its strategic vision for handling markets in Europe and the Americas, but (CEO) Donahoe wouldn't speculate on a time frame for containment-based store closures."
- "After the new coronavirus confined Chinese shoppers to their homes, Nike quickly shifted focus to connecting with them digitally, and not just by pushing products on them. It continued its messaging to shoppers and engaged them with apps such as Nike Training Club, which offers members at-home workouts." Nike's new CEO Donahoe said the company "saw a spike in sign ups and engagement, with weekly active users jumping 80% across all the company’s activity apps compared to the start of the quarter."
- “One of the real advantages of Nike being a scaled global company is that we can extract learning and insights from each of our markets,” Chief Executive Officer John Donahoe said on a conference call. “And we’re looking at things through the lens of four phases.”
- "Donahoe said the company saw similar patterns in Japan and Korea, too, and broke down Nike’s transition through the crisis into four phases: Containment, when stores are closed and e-commerce is top priority ; Recovery, as stores begin to reopen ; Normalization, where foot traffic rises ; and Return to growth, as business is back to pre-coronavirus levels."
- “Nike is operating from a position of strength with respect to brand (demand remains strong), product (strong pipeline/healthy sell-through pre-coronavirus), digital (driving greater separation), and people/talent (Nike maintaining pay),” Baird analysts, led by Jonathan Komp, wrote.
- Meanwhile, Raymond James analysts say coronavirus is encouraging a shift in consumers to more digital activity, and Nike, which has invested in its digital capabilities, is prepared for the change. “We agree with Nike that COVID-19 is accelerating the change in the consumer to shop, interact and train more digitally,” analysts said. “Still, Nike’s new message ‘Play Inside, Play for the World,’ could help drive a new health craze in the interim.”
- Forbe's reports the luxury segment in particular, March and April are the peak months for full-price selling, making them disproportionately critical to profitability and cash flow. Luxury retailers that derive a meaningful percentage of their sales from both domestic and international tourists, well that isn’t coming back in the foreseeable future. In all these circumstances, there is effectively no pent-up demand to capture down the road.
- To deal with the crisis the pandemic has caused, many luxury brands are now "busy producing entertainment for their confined audiences, ranging from fitness classes to sexual wellness podcasts, that trend will only gather steam. There’s an extraordinary opportunity for brands to explore more broadly their aura beyond products,” Patrizio Miceli, head of creative agency Al Dente said.
- Luxury retailer Sak's states, "There are a lot of things we can do differently now that would have otherwise taken us a lot of time to correct. We want to be the leaders in luxury with how we market to the customer, with what our product flow is like, and with what we sell to people as we come out of this.”
- The retailer proposes a change by luxury stores to move the timeline of in-store product closer to season. Basically, the product cycle would align closer to the demand of consumers by altering the arrival of goods in-store. "So a fall cashmere turtleneck could be introduced in September instead of June; boots arrive close to cold months, and sandals arrive around spring." Talks have been in the works with 20 of Sak's vendors including Brunello Cucinelli, Burberry, Proenza Schouler and Stella McCartney. “It’s a matter of what we can do now, through this health crisis, to accelerate the transformation of Saks Fifth Avenue,” Marc Metrick, the president of Saks, told WWD in an interview.