3 Steps to Survive the Coronapocalypse

Photo Credit: @Krizde

Stay Calm; Don’t Panic 🙂

If you work at or run a retail brand right now, your work environment is probably like a scene from one of the apocalyptic movies.  Even it is orderly, there is probably a palpable sense of anxiety and dread.

Hopefully, your brand has already finalized a business continuity plan that addresses what and how to operate in a government-mandated work from home environment.  

I am writing this note from NYC which is one step away from lockdown, and the brands I work with have all instituted a remote work policy for headquarter employees.

Like the stock market, a month ago retailers were enjoying record levels, but in the past week, we’ve gone from peak to trough due to the global coronavirus (COVID-19).  The best brands have embraced these trying times and responded in turn.

I’ve had the benefit of living, working and managing through several economic shocks and after 20+ years, my consulting firm has adopted a crisis playbook for brands, manufacturers, consumer products companies and retailers. 

Consider this free consulting (feeding the karmic bank), so here are 3 broad and simple steps I would highly recommend you and your teams make in the next week (if you haven’t already):

1. ACT

Depending on your brand’s size, geographic reach, location, channel strategy and level of bravery, your initial response to this pandemic will likely fall along the following spectrum:

  1. Close Stores:  The brands we love, admire and stan were models for #flattenthecurve.  Global brands like Apple and Patagonia were among the first to announce they were closing the majority, if not all of their stores out of an abundance of caution.  And they are paying store employees throughout the temporary closure.  Yes, traffic was likely down dramatically in affected areas in the US, Europe, and ROW, but the financial impact of closing the entire chain of stores will hurt.  Of course, this was absolutely the right thing to do, and those brands seized the opportunity to make a statement that others will follow.  Not only for their customers, but also for the employees of those brands who are literally on the front line of the virus.  Bravo to the unflinching early movers!
  2. Limit Hours:  Another approach in this declining footfall environment, is to reduce hours so stores can record some revenue, while lowering employee exposure and store labor expense.  Canadian retailer Lululemon was one of the first to announce limited hours on Friday 3/13, but by Monday 3/15 they had reversed their position.  Many department, convenience and grocery stores continue to operate on regular or limited hours, undoubtedly to cover the overhead of their large footprint and massive employee bases.  However, Nordstrom announced just yesterday that they are changing their policy, and will join the heroic brands by closing for 2 weeks.  

Retailers Announcing Their Coronavirus Policies on 3/16

List of notable retail brands as of 3/16/20 that set the tone with their immediate announcements of COVID-19 policies for stores; These standards were quickly adopted by many other retailers.

Whether your brand decides to close stores or limit hours, if you are in hot spots such as NYC,  Seattle or San Francisco, the government may decide for you by ordering all non-essential retail to close.  Whatever your position, just be prepared for what inevitably will be coming your way.

2. Plan

Once you’ve addressed the 5 alarm ‘brick and mortar’ fire, and you grasp that the retail sky is falling, it’s time to focus on defense.  To ensure your company is an on-going concern, you must get a handle on your expenses, inventory, supply chain and cash on your balance sheet.  Cash flow is king in retail, and yesterday was the ideal time to prioritize revenue-generating expenditures while delaying or cutting non-essential spend.

Ideally, like the gallant, cash-rich brands who will pay employees while they are closed, you should want to do the same.  Building out weekly cash flow models and creating best and worst-case scenarios will help you assess your debt, lease and mortgage payments, cash flow, and funding availability.

Keep in mind, restaurants with their laser thin margins are typically NOT in a position to pay employees while closed.  So absent receiving government assistance, many of our beloved bars, clubs and restaurants will likely close their doors for good.  Tom Colicchio, celebrity chef and restauranteur, predicted 75% of those restaurants will never re-open!

In short, please make the hard decisions now, before you are faced to make the hardest decision – filing for bankruptcy.

Top of mind for me and my omnichannel clients is figuring out how the online channel can prosper in this new stay-at-home paradigm.  Diverting talent and resources away from closed brick and mortar stores and into the online, fulfillment and logistics areas seems a prudent and wise choice.

Amazon recently announced plans to hire 100,000 people in warehousing and delivery to capitalize on this trend.  In these unprecedented times, what are you doing to turn lemons into lemonade?

3. LEAD

I find it interesting that disasters tend to be catalysts for unearthing heroes.  I encourage you to not shrink in fear, but to step forward with your ideas.

In business school, my favorite case was from a Moral Leader class (yes, ethics and business school do mix).  The protagonist was CEO James Burke and we examined his actions during the Tylenol product recall saga.  So few industry titans we studied exhibited the empathetic and compassionate leadership of Burke, and I am encouraged to see many executives adopt a similar approach by putting store and corporate employees first.

Finally, my suggestion is that YOU as an individual do whatever you can to ensure you take care of yourself.  Self-care during these stressful and unprecedented times will allow you to show up and present  your best self for your teams and family. 

If the images, stories, and experiences from China, Italy, France, and the U.K. have any bearing on our situation in the U.S., things will get worse before they get better

I have tremendous faith in this democracy we have created.  We have faced pandemics before, and we will emerge stronger and better. 

So please heed the warnings, wash your hands, and practice social distancing.  Personally, I’ve found a great group on Twitter who balance being informed with being entertained, and that’s the perfect prescription to sustain me through these trying times.

Be safe out there good people.

-Lockie

Bio

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Lockie Andrews is the CEO of Catalyst Consulting (www.catalystconsult.com), a boutique advisory firm to retail and consumer brands, digital, media and technology companies, as well as venture capital and private equity funds. Since January 2019, Lockie has also served as the Chief Digital Officer (CDO) of UNTUCKit, a digitally native brand located in New York City.

With 20+ years of general management experience, Lockie has assisted high growth companies (e.g. Nike, Lane Bryant, Limited Stores, ANINE BING, and various high growth startups) in diverse areas such as digital transformation, technology, analytics, digital marketing, revenue enhancement, and operational/financial improvement.

Lockie is a speaker, angel investor and sector lead for the HBS Alumni Angels of NYC, and the Co-VP of Programming for the HBS Club of New York.

Innovation Universal

Why Wal-Mart’s Acquisition of Jet.com Makes Perfect Sense

…and why other traditional enterprises must acquire innovation to stay relevant and competitive.

The retail sector is abuzz about the latest rumor Wal-Mart is acquiring or investing in Jet at a reported $3 billion valuation.

There are increasingly more examples of these “innovation acquisitions”. Incumbents view these money-losing innovators like they are fountains of youth.

Screen Shot 2016-08-05 at 11.36.31 AM

For years, I have been advising traditional retailers/brands to “pair up” with startups. Conditions are ideal for these marriages given the slowdown in venture capital funding and the state of cash-strapped startups.

No company wants to be Blockbuster in a Netflix world.  And well-funded traditional enterprises are feeding internal innovation by pouncing on wounded unicorns.

The strategic benefits to large companies from innovation acquisitions are obvious:

  • Fend off disruption by digital upstarts
  • Address changes in consumer preferences and shopping behaviors
  • Find new growth channels, products and customers
  • Acquire proven technologies and platforms

Of course, long term the preferred route is to transform traditional enterprises into lean innovation machines. However, from time to time, it makes sense to look outside for innovation.

There are three compelling reasons why incumbents like Wal-Mart should buy innovators like Jet:

REASON #1: Innovation is HARD

Building an innovative and entrepreneurial culture in large traditional enterprises is incredibly difficult.  Most innovation initiatives die under the rigid controls that fuel hierarchical organizations.

Even companies that succeed in creating innovative environments run the risk of having their efforts erased during the first downturn or management change.

REASON #2: Innovation is EXPENSIVE

Wal-Mart is undisputedly the heavyweight brick and mortar champ.  Unfortunately despite years of investing billions of dollars online, they have not kept pace with Amazon:

  • 2015 Online Sales were only $14 billion (3% of Total Revenue of $482 billion) as compared to Amazon.com’s $80 billion in Product Sales.
  • Last year, Amazon overtook Wal-Mart in market capitalization, and this year Amazon is 40% larger.
  • Growth on Walmart.com has slowed for six straight quarters.

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An acquisition of Jet is a risky and expensive bet, but it’s a small price to pay for long term growth.

REASON #3: Innovation fuels GROWTH

A recent Street.com article hypothesized potential deal synergies between Wal-Mart and Jet.  Assuming Street.com’s analysis is correct, the complementary nature of their customers and products could be a catalyst for Wal-Mart’s stock price.

Of course, integrating an acquisition target while realizing merger synergies is just as hard as transforming traditional enterprises.  The path of “acquiring versus building” innovation is fraught with risk, and will be an uphill battle for Wal-Mart.

That said, Wal-Mart is one of the few companies with the size and scale to compete with Amazon.

A potential acquisition of Jet.com COULD turn out to be a brilliant win-win for both companies.

And that win-win could be Amazon’s Achilles heel.

Pass the popcorn.

 

Lockie Andrews is the CEO and Managing Director of Catalyst Consulting, a boutique advisory firm to retail and consumer brands, digital, media and technology companies, as well as venture capital and private equity funds. With 20+ years of general management experience, Lockie has assisted high growth companies (e.g. Nike, Lane Bryant, Limited Stores, and various high growth startups) in diverse areas such as strategy, innovation, digital marketing, revenue enhancement, operational/financial improvement and M&A/capital raising. Lockie is also a sector lead for the HBS Alumni Angels of NYC.

 

Disruption Universal