Pandemic Shook The Retail World - Know how? - Seeker's Thoughts

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Pandemic Shook The Retail World - Know how?



The global corona-virus pandemic has fundamentally changed life and business. Supply chains and related management practices are among the areas most affected by this global crisis. 


It was unimaginable that retail stores would be closed for weeks, factories would halt production, and workers would be left without a source of income.



The dimensions of the pandemic and the associated tragedies are enormous- and there will be lingering effects even after the health and humanitarian issues draw to a close.

One area within supply chain management that is being challenged and reconsidered is quality interventions- whether inspections or audits. 

In many areas, there are logical efforts to leverage technology to remotely engage with factories and consider both products and processes. In the absence of being able to meet in person, these changes could be leading to new and more effective and efficient ways of working.

During the pandemic, there are concerns that will not be able to access production facilities to perform quality interventions consistent with historical practices. Lock downs and travel bans can impact the ability to get to a facility and execute some audit or inspection efforts – which has accelerated development and acceptance of technology-facilitated remote interventions.

Supply chain disruptions

Concerns around the virus’s impact in the supply chain have been brewing for weeks as COVID-19 spread through china. Across retail, concerns have mounted. Sellers on Amazon’s market place are reportedly struggling to bring goods into the country.

According to the Berkeley Research Group report, the virus shut down factories and kept workers home. While also stalling travel, reducing both production and shipping of goods.

Chinese manufacturing indices hit their lowest point since the great recession, the result of manufacturing operations staying closed after the Lunar New year break to stem the spread of COVID-19.

Coronavirus to its list of risk factors to investors along with the possibility of work slowdown delays or shortage in production or shipment of products, increases in costs, or delays in revenue.

Moody's analysts stated – the apparel supply chain is potentially vulnerable as well as the outbreak intensified and slowed travel across china.

A worsening outbreak could materially disrupt the global apparel supply chain, which could hurt companies that are more reliant on China for sourcing, either directly or indirectly.


Covid-19 e-commerce industry impacts

In a recent analysis of retail and online brands, Digital Commerce 360 found that brands that pulled back on marketing spend during COVID-19 are now seeing their online sales struggle. Brands that stayed on course with their spending have seen online sales steady out after an initial dip.

Brands that aggressively pushed their spending are seeing unprecedented growth.

While looking at industry trends can be helpful in informing your strategy, it’s also important to look at how channels are performing within different categories. Wholesale and retail channels in general are under-performing during this time in any industry. During this time, retailers who were able to double down on their direct-to-consumer initiatives instead of leaning more on brick-and-mortar stores and wholesale have seen online sales growth.

Focusing on e-commerce and D2C in a way that allows for a mix of both retail and online sales is how most brands are finding success during the time of COVID-19.

These growths and declines have been happening while consumer discretionary spending has dropped over 50%. With consumers spending less on transportation, travel, restaurants, and childcare in light of coronavirus, and strong discounts and ad placements being placed near essential items being sold online, non-essential e-commerce has continued to fare well despite this dip.



Threats to luxury

The luxury market is responding much like the rest of the world when it comes to COVID-19 – but shutting things down and pulling back.

One of the biggest signs of the industry's response has been its reaction to various fashion weeks. A number of designers dropped out of Paris Fashion Week, including Chinese brands Shiatzy Chen, Calvin Luo, Masha Ma, Maison Mai, and Uma Wang. Additionally, LVMH Moët Hennessy Louis Vuitton canceled a reception for its 2020 LVMH Prize for Young Fashion Designers (although it did not formally give a reason for dropping the event, it occurred the same day that France reported its first death from the coronavirus).

For the first time in the company's history, Georgio Armani canceled its live show in Milan, although the fashion house did stream footage of models walking down the runway online. Also during Milan Fashion Week, Dolce & Gabbana announced that the company made a donation to private Italian university Humanitas University to support coronavirus research. Then, at the end of February, Seoul Fashion Week was called off.

Many luxury brands have also closed store locations in China, including Burberry, Tapestry, Capri, and LVMH, according to a report by Coresight Research. "The coronavirus outbreak is a threat to luxury brands and retailers as Chinese consumers have become the world's leading luxury spenders," the report stated. 

Indeed, the luxury market leans heavily on Chinese shoppers to propel it forward. In 2019, luxury goods saw a 20% growth in China for the second year in a row, according to a Bain & Company report. Additionally, luxury spending by Chinese shoppers accounts for 33% of the global market.

Luxury retailers can position themselves during this time, though, Above all, have stylists, personal shoppers and others who are on the front line with customers to stay in contact with them, sending notes, reminders, and private offers.



Hurting traffic to physical retailers

According to coresight research, With such uncertainty, many people are understandably hesitant about gathering in crowded public spaces, and that is hurting traffic to physical retailers, especially at malls.

More than a quarter of U.S. respondents told Coresight that they're avoiding public areas at least somewhat, and 58% said they plan to if the outbreak worsens. Of those who have already altered their routines, more than 40% say they are "avoiding or limiting visits to shopping centers/malls" and more than 30% are avoiding stores in general.

Shopping centers and malls were the third most likely to be shunned, just behind public transportation and international travel. For those most likely to change their routines if reports get worse (and they have since the survey), avoiding malls becomes their top priority, with 74.6% expecting to limit their visits. Other shopping, like grocery shopping, is less vulnerable, "although over half of avoiders could steer clear of, or reduce their visits to, retail stores,

It isn't just traditional retail stores. Duty-free sales, conducted mostly in airports, are expected to take a hit, especially in the Asia-Pacific region. While Global Data previously forecast APAC duty-free sales to reach $43.4 billion this year, the firm has cut that by 19.1% to $35.2 billion, due to the COVID-19 crisis.


How retail around the world is beginning to re-emerge?

Global retail markets are beginning to reopen. The question remains whether consumers are ready to go back into the public.

With lockdown restrictions now being eased by some governments, small green shoots of recovery are beginning to emerge. Modern Retail and Glossy reporters took a (virtual) trip around the globe to see where shopping is beginning to restart and if shoppers are ready to spend money once again in the real world.

Brazil:
Despite intensified cries for the Brazilian economy to reopen, the country remains one of the most afflicted by a coronavirus.

Initially, Brazil’s response to coronavirus in mid-March was assertive, with cruises canceled and arriving travelers urged to go into quarantine. But since then, Brazil has lost two health ministers — one fired, the other resigned — and has at times struggled to lockdown at all. President Jair Bolsonaro has ordered the economy to reopen, but many local and statewide governments have defied these instructions. 

E-commerce penetration nationwide has naturally grown during this period, with digital sales increasing by 30% between mid-March and the end of April, according to Brazilian e-commerce association ABComm

However, this could slow as unemployment mounts and consumer confidence erodes due to the political crisis and growing death rate. The International Monetary Fund predicts Brazil’s economy will contract by 5.3% in 2020, while unemployment is expected to reach at least 17%.

Italy: Hit hard and forced to modernize

Italy, in addition to being a major economy, is also home to some of the biggest brands in fashion and luxury, including Gucci, Versace, and Bottega Veneta. It was also one of the hardest hit by a coronavirus and an early arbiter of what was to come for much of the rest of Europe and the U.S.

Consequently, Italy’s retail market has suffered, with retail sales down as much as 40% in some cases. The national lockdown lasted for 67 days, with stores beginning to reopen on May 18. But only about a third of Italy’s stores reopened, and those that did were left with huge stockpiles of unsold inventory and no tourism to support sales. Italy relies heavily on tourism, which can’t open back up until June 3 

Italy has begun offering inflation-linked retail bonds to investors as a way to jumpstart its suffering economy.



Australia

The population of 25 million. Despite a lack of government orders restricting retailers’ operations until well into April, many of the country’s brick and mortar shops chose to close their doors as a safety precaution. The country’s retail scene began to open as early as May 4, with high touch facilities like barbershops and nail salons expected to resume services by early June.

Still, the general lack of foot traffic due to Australians staying indoors this spring has hurt the bottom line for many businesses, especially those that failed to adapt quickly. Overall, retail sales were generally down during closures, according to the Australian Bureau of Statistics’ May report, which estimated them to have fallen a record 17.9% in April after an 8.5% spike in March. The same period also saw the nation’s unemployment rate increase a record one-month jump, from 5.2% to 6.2%.

Sweden: A voluntary shift to online
Despite the Swedish government’s widely reported soft approach to fighting the pandemic — restricting large gatherings, but keeping schools, stores, and restaurants open — locals’ shopping behavior has largely aligned with that of Americans. Likewise, efforts by Swedish retailers to ease the minds of in-store shoppers and establish improved e-commerce experiences haven’t been that unique.

Swedish health officials issued first warnings around the virus on March 11, which drove apparel sales down 57% for the remainder of the month. Total apparel sales, including e-commerce, fell by 39% in March year-over-year. Retail sales across the board saw its first drop since December 2018 in April. 

Malls, some global brands have temporarily closed stores based on recommendations from other countries, and overall, malls are seeing “a great lack of visitors.”

South Korea: Too soon for optimism
Praised as an exemplary model for flattening the Covid-19 curve — and without a full lockdown, no less — South Korea is not out of the woods yet. 

South Korea began reopening on May 6 but is reimplementing new closings due to a spike in new cases. The country’s health minister, Park Neung-hoo, announced on May 28 that museums, parks and art galleries will be closed again for two weeks beginning May 29, and is discouraging residents from going to restaurants or gathering in groups. Newly reopened schools have been closed again, while others have delayed reopening altogether. The country has also closed bars and nightclubs after a new spike in cases traced to nightlife.

As the world’s largest travel retail market, South Korean retail was hit especially hard by a lack of international visitors that began back when the coronavirus hit China earlier this year. South Korea’s largest beauty conglomerate Amorepacific reported a more than 19% decline in revenue in its home market for the first quarter, citing a loss of travel-related spending and decreased operation hours at beauty counters within travel retail shops and department stores.

Germany: Shoppers aren’t rushing back to stores
Germany was one of the first Western European countries to allow its retail stores to reopen, after shutting down in mid-March. First, the country allowed stores under 8,600 square feet to reopen in late April, provided they followed the cleaning and social distancing rules. Then, at the beginning of May, all shops were allowed to reopen. To date, Germany, whose population exceeds 83 million, has had 80,400 coronavirus cases — roughly a third of the number of cases reported by hard-hit Italy and Spain. 

But, as the trajectory of Germany has proven, getting all stores to reopen doesn’t mean that shoppers will come rushing back. A survey of more than 600 non-food retailers, conducted in mid-May by Handelsverband Deutschland, a German retail trade association, found that about a third are doing at most 50% the same amount of sales that they were doing last year. As such, the organization is calling for more economic assistance for retailers. 

Foot traffic has remained considerably lower compared to before the pandemic,” said Maxim Hofer, a research analyst at Euromonitor International based in Düsseldorf. “I think that’s mostly because of the measures that are still in place in terms of hygiene and distancing, but also because of economic uncertainty.” Each of Germany’s 16 states has set different rules about where exactly people are required to wear face masks in public, as well as what the fines are for people who don’t follow the rules. 

India: The worst is yet to come

With 1.3 billion residents, the impact of the coronavirus pandemic on India can be massive. 

The large population — which ranks second to China — combined with its smaller geographic region (it is the seventh-largest country by area) makes it difficult for Indians to socially distance. 

Despite Indian Prime Minister Narendra Modi instituting one of the strictest lockdowns globally on March 24, India had more than 169,000 cases of the virus, as of Friday, May 29, because government officials have loosened rules. Beyond cases in major cities like New Delhi, Mumbai, Chennai, and Ahmedabad, migrant workers in villages across northern India are becoming infected at an increasingly alarming rate.

Like the U.S., the country is worried about the economic implications of Covid-19. India has seen its GDP slow to about 3.1% for the fourth quarter (January to March), according to the Ministry of Statistics and Programme Implementation. This brings the yearly GDP down to 4.2 percent, an 11-year low.

Obviously, the hit on retail has been significant. According to the National Payments Corporation of India, overall retail payment volume (or payment tractions) declined by 21% in April compared to February, and overall retail sales declined by 57% in March compared to the month prior.



Satish Meena, senior forecast analyst at Forrester India said, “We expect consumers to clearly differentiate between essentials, like grocery, personal hygiene and home cleaning, versus non-essential spendings, like phones, electronics, and fashion appliances.”

Meena is using China, which saw a 21% decline in retail sales between January and February, and only 3% growth in e-commerce sales, as a marker for India’s future. “The reason for their growth was driven by online grocery. We expect this to play out in India differently, as less than 10% of the Indian online retail market is made up of grocery and personal care products.”

The beauty and fashion segments have been hit especially hard, as beauty and fashion stores are found in malls in larger cities, said Vishnu Vardhan, Euromonitor International consultant. 

“A big chunk of beauty and fashion stores are present in tier-one cities (larger cities like Bangalore, Chennai, Delhi, and Hyderabad), which have a high number of Covid [-19] cases and are classified as red zones. With home seclusion becoming an integral part of consumers’ lives, sales of beauty and fashion categories are getting impacted at least in the short term,.


The United Kingdom: A slow response leading to a prolonged shutdown
The U.K. was one of the slowest European countries to take drastic measures in response to the coronavirus. It first locked down on March 24, more than a week after other neighboring countries like Germany, France, and Spain. This was due to what experts would describe later as critical missteps; the country didn’t get adequate supplies into the country to deal with the virus’s spread, waited to announce a formal shutdown, and tested fewer people initially compared to European counterparts.



The Office of National Statistics reported that the U.K.’s total number of goods sold dropped by over 18% in April. While e-commerce saw a big boost — over 30% of retail sales were online that month — many industries saw total collapse. The clothing store Primark, for example, said its sales dropped to nothing after reporting £650m the month prior. 

This week, the U.K. will officially begin to reopen, but for many retailers the damage is already done. While bigger companies have built out robust online channels, demand remains down the tubes. “Retail sales have plummeted enormously for discretionary products.






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