The likely collapse into administration of Laura Ashley is not solely the result of coronavirus. The pandemic was sadly the last nail in the coffin of a retailer that has struggled to appeal to shoppers for some time.
And Laura Ashley’s looming demise is unfortunately likely to be followed by other retailers in similarly dire straits.
Conditions for retailers were already harsh and coronavirus has made them brutal. Restrictions on everyday life reminiscent of wartime are hitting even the best businesses – there’s little WHSmith can do, for instance, when key trading locations such as airports lie deserted. There’s little that retailers operating on the continent can do when governments order lockdowns and store closures.
But those that have performed best over the last few years are the most strongly positioned to emerge on the other side and rebuild.
Among the attributes that will distinguish those that ultimately come through are cash, agility and customer focus.
Cold, hard cash will be king when it comes to sustaining businesses through these torrid conditions. It’s been a notable feature of updates, particularly from those retailers already taking a coronavirus hit, for net cash strength to be emphasised.
Primark owner ABF pointed to its “substantial cash liquidity, with some £800m of net cash at the half-year and significant undrawn bank facilities”. B&Q parent Kingfisher said it “has £1,025m in total liquidity immediately available”.
“Not all retailers have the same levers to pull. It’s no surprise that those who have been through the wars may be reliant on help from others in an hour of need”
Cost initiatives can be brought into play in these extraordinary times. Kingfisher said measures it is taking “include reducing operating expenditures, reducing stock and goods not for resale purchases, taking actions to optimise working capital, stopping all but essential capital expenditure, and making use of tax payment and other government relief measures”.
Not all retailers have the same levers to pull. It’s no surprise that those who have been through the wars may be reliant on help from others in an hour of need.
New Look, for instance, is understood to have written to landlords asking for a rent holiday of at least three months, while department store group Debenhams wants the same for five months.
To what extent landlords will be willing or able to help remains to be seen – some are in a parlous financial state themselves. For retailers without plenty of readies at hand, navigating coronavirus will be a daunting challenge.
Even for those with cash in the bank, agility and versatility will be key in enabling retailers to respond most effectively to the new demands created by the health emergency.
Customer focus
The big grocers, such as Morrisons, have already shown their prowess in that respect. The Bradford-based grocer is hiring 2,500 pickers and drivers and 1,000 distribution centre staff so that it can ramp up its online delivery options. Morrisons is adding more delivery slots, picking orders from more branches and introducing special food parcels to make ordering simple for customers.
Chief executive David Potts said in today’s final results statement that coronavirus brings “unprecedented challenges and uncertainty”, but he is doing his best and doing well.
An online presence on its own is unlikely to compensate for lost store sales, especially for retailers in discretionary categories. While food is essential, consumers worried about their financial as well as their physical health are unlikely to spend their forced home time shopping from the sofa.
Superdry said that it does not expect the sales slump from shops to be mitigated by ecommerce revenues, and pureplay womenswear specialist Sosandar expects performance in March to be “well below forecast”.
As at Morrisons, opportunity at present must be viewed through a customer lens, not in a myopic, opportunistic ‘what’s in it for me?’ way – just as Iceland, Sainsbury’s and other retailers have done through the introduction of dedicated shopping times for the elderly.
Seeing the effects of the pandemic through customers’ eyes, staying in tune with them and delivering their needs – core retail skills since Noah was a boy – will now come into their own as possibly never before.
“Once all of this is over, consumers are surely more likely to remember the retailers who made a positive difference to their lives”
As well as fulfilling expectations so far as possible on their fundamental proposition, consumer brands can ally themselves with customers through their good citizenship. Brewdog, for instance, has turned over one of its distilleries to the manufacture of hand sanitiser – and the product will be distributed free of charge.
Once all of this is over, consumers are surely more likely to remember the retailers who made a positive difference to their lives, and the best retailers will have demonstrated once again how they achieved their consumer resonance.
All retailers, whether they are under pressure or have heads well above water, will welcome the 12-month deferral of business rates unveiled as part of the government’s emergency financial programme.
All must take advantage of the extra breathing space that provides to do what they do best, do it with purpose and do it in new ways if they are to ride out this human and commercial catastrophe.
No comments yet