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Part II: What retailers can learn from how the Chinese are fighting coronavirus

By Angela Gonzalez-Rodriguez

Mar 25, 2020

Business |ANALYSIS

New York – China was the first market severely affected by the novel coronavirus pandemic, offering a great example not only in terms of how to fight the virus outbreak but also regarding the many ways the retail industry has watered the crisis. From WeChat private groups to live-streaming shows, FashionUnited analyses how Chinese retailers are coping with the COVID-19.

Contactless delivery services, the most promising tactic

Contactless delivery services are some of the most promising tactics that department stores, shopping centres operators and brands have been trying in China to overcome the hit of the COVID-19. According to the results of the report, many of these online initiatives have delivered encouraging results. However, it will take time to build comprehensive functions, interesting and relevant content as well as synergies with users.

Data from Bain & Company shows that sales rapidly plummeted in discretionary categories such as apparel and luxury, as consumers avoided shopping malls and other key commercial centres. The impact also varied by consumption category, as analysed in detail in the Bain Brief “China's Consumer Industry Prepares for the Coronavirus Legacy.” Consumers hoarded necessities and key pantry and household items while reducing consumption of non essentials, such as beauty products, apparel, electronic items and luxury goods. Luxury retailers expected sales in mainland China during the lockdown period to decline 60 percent to 95 percent from a year earlier, according to Bain research.

Save cash to ensure business continuity during the pandemic peak

COVID-19 will undoubtedly have a big impact on the profit-and-loss statement of many retailers. But leadership teams should focus more on cash flow over the coming weeks—and ensure that this shift in emphasis is understood throughout the senior managerial ranks. One option is to divert a small team of high performers from daily duties to model cash-focused scenarios instead of P&L-based budgeting, until the situation has stabilised. Other effective tactics include updating key executives on the cash position and outlook on a daily basis.

The increased focus on cash can go hand in hand with measures to reinforce the balance sheet, including drawing down all existing credit lines, and stopping or postponing all nonessential capital spending. A variety of working capital enhancements are also possible, such as measures to accelerate cash conversion (through markdowns on slow movers, etc.). Hiring freezes were common at Chinese retailers in the early stages of the crisis and are likely to become more prevalent internationally as the pandemic progresses. If necessary, companies can also reduce their overhead costs by cancelling training that isn’t critical and paring marketing spending in certain areas.

Keep communicating in a style that is meaningful and loyal to your brand

Because of retail’s vital role in supporting society through crises such as the coronavirus outbreak, senior executives in the sector need to maintain open lines of communication with the authorities in each of their markets. Similarly, since retailers are a highly visible face of the crisis response, this can create deep customer loyalty when they keep supplies flowing against the odds.

“Even as affected retailers move to a more cash-focused approach to running their businesses, we think they’ll benefit from increased investment in internal and external communication, especially if it’s skewed to channels that are favored by customers and other stakeholders during periods of quarantine or self-isolation. That includes call centres, for both customers and suppliers, and social media, where resources will be needed to monitor and respond to misinformation—as well as performing the vital role of showing empathy,” point out from Bain & Company.

Photo:Botkier's WeChat site