NEW YORK, United States — As the coronavirus takes its toll on the global economy, businesses of all sizes, sectors and markets face an uncertain future. The fashion and retail industries in particular need to steer through changing consumer sentiment, shuttered stores and disruption to the usual cadences of seasonality.
To help fashion business leaders weather the current crisis and fallout that lies ahead, BoF Senior Correspondent Chantal Fernandez and Senior Editorial Associate Cathaleen Chen put together a detailed guide to protecting a business during coronavirus.
On Tuesday, March 24, as part of a series of BoF Live events, BoF Executive Editor Lauren Sherman joined Fernandez and Chen in a virtual discussion of their findings and advice for business leaders. Here are the key points they covered:
Employee Health Comes First
- First and foremost, businesses should make decisions with the welfare of their employees in mind. That means considering all aspects of operations, from the safety of delivery fulfillment workers to the impact of layoffs, furloughs, or unpaid time off.
- If your staff needs to work remotely, it’s important to provide more than just the tools they need to do their job. “Keeping tabs on team members is important socially and also in terms of mental health,” said Chen. “Employers should be mindful of the fact that everyone is coping differently.”
- Furthermore, said Chen, “Companies are going to realise that working from home is more convenient and productive than previously thought.”
Transparency Is the Best Policy
- Building a sense of community and direct relationships with customers have become a standard part of businesses, particularly smaller ones. Rather than pulling back on communications, it’s important to remind customers “what you stand for beyond a transaction,” said Fernandez.
- While it may be uncomfortable, it’s important to maintain that relationship through “honest, transparent and ongoing” updates about the decisions your company is making to navigate this crisis — whether that’s staff layoffs or the general health of the business, said Fernandez.
- But transparency doesn’t only apply to your relationship with your customers. “You really need to manage the expectations of your team and be honest,” said Fernandez. “Bring them into your decision-making and open up.”
Scenario Planning and Financial Forecasting
- The key question from businesses preparing for this crisis is “how long is it going to last?” said Chen. It’s difficult to answer and is contingent on factors such as the geography and local authorities of your business, but “assuming that the impact will be severe until September [is] a good place to start,” she continued.
- A popular model among businesses is preparing for three scenarios in the next three to six months: seeing a sustained impact from current sales losses, a better case scenario of sales rising 25 percent, or the worst-case scenario of sales getting worse over the period.
- However, even with contingency plans in place, it’s important to stay nimble: Fernandez spoke to one business whose worst-case scenario soon became their mid-level expectation for the months ahead.
- With revenue streams on the decline and remaining uncertain for the foreseeable future, it’s important to double down on all outgoing costs. As one chief executive said to Chen, you have to “assume every single fixed cost is a variable cost,” be that rent, research and development budgets or external contracts and retainers.
- There are also a lot of questions surrounding discount strategies, but it’s important to avoid discounting for now. “By fall, there will be a lot of excess inventory to get rid of because it’s a cash liability,” said Chen. As a result, there may be a shift in seasonality or the cadence of sales seasons by one or two months.
Managing Your External Stakeholders
- One CEO Chen interviewed described difficult cost-cutting decisions as “a band-aid to rip off now.” Chen continued, “The best case scenario is at the end of this you’ll have jobs for your employees to come back to.”
- However, said Fernandez, if it’s important to maintain relationships with your partners, establish an open human-to-human conversation “so that you can all survive together and give [each other] some slack.” One constructive approach could involve “talking to your retailer about staggering orders.”
- Some warehouses have already had to shut, so businesses should also prepare to take some services in-house (literally). “Even if you have a distribution that is up and running you need to plan for a situation where it’s not,” said Fernandez, citing the recent closure of warehouses in New York. “Take it home with you or send it home with employees,” which is also a helpful way to keep your staff on the payroll.
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