A great new piece on the Robin Report examines the ways that various companies have coped with the upheaval and uncertainty of the pandemic. Three of the companies highlighted are AAPN members; Target, Nordstrom and PVH. And while they all took different approaches, they are, as you'll read, using innovation and agility to achieve the best possible outcomes in a very strange time.
Pandemic Planning Is No Panacea
therobinreport.com: By Shelley E. Kohan | June 14, 2020
Business continuity planning alone is not enough to survive a global pandemic. There is no amount of planning that could have prepared retailers for what has transpired over the past several months. This is especially true for retailers and brands which distribute exclusively in the U.S. where a significant percentage of revenue was abruptly cut off when stores closed. The coronavirus enveloped the country in one quick, fell swoop, especially disrupting retailers which began the year on a strong footing, building on solid performances from 2019. Ironically, many retailers have been listing pandemics in their annual reports for years as possible risks to earnings. Since this is the case, why weren’t they more prepared for this event?
A global pandemic such as coronavirus brings numerous uncertainties. Covid-19 impacted the world on three simultaneous fronts — people, environments and economies – which made it very complex for companies to respond in timely and effective ways. There is no pandemic playbook for quick and decisive solutions, however they do rely heavily on strong, visionary leadership. Preparing theoretically for what might unfold and reacting to what actually happens can be quite different. Retailers had to learn on the fly, then respond and react accordingly since market factors changed daily; adaptability and resilience were key.
And while many retailers were caught off guard by the pandemic, there is one thing that’s true about the industry: It’s full of bright, innovative and resilient people who can rise to the challenge. For example, Nordstrom, Target, PVH and Macy’s include the serious potential for this type of disruption in their annual reports. When they were actually hit with the reality of the 2020 pandemic, their successful strategies varied greatly.
Three Case Studies: (AAPN members) Target, Nordstrom and PVH
Target is an essential retailer and was quick to adapt to the changing environment, CDC safety practices and government mandates. Ironically, ten years ago the company did not believe in a digital strategy, yet this channel helped the company significantly when coronavirus hit the U.S. market where 100 percent of its stores are located. For Target, named a 2020 Robin Report Retail Radical, developing curbside pickup last year was instrumental in providing customers access to products. Approximately 40 percent of the 5 million customers who used drive-up in Q1 2020 were new to Target and they adapted quickly to the format. The digital infrastructure put in place over the past few years allowed the company to increase online sales by 140 percent for Q1, according to its annual report. Part of the success for Target during the pandemic was having employees with enough agility to make changes to product mix based on customer demand. Although Target couldn’t have anticipated the surge in demand over the past six weeks, stores, distribution centers and their suppliers rose to the occasion and pivoted quickly and repeatedly to keep products in stock.
Nordstrom, a heritage brand with all of its stores in the U.S. and a nonessential retailer, had a different approach. The company kept stores closed for the duration of the shutdown and relied on its digital online business to help fulfill customer orders. The company had already rolled out a successful buy-online/pick-up-in-store model and was quick to transform to curbside pickup. The challenge with Nordstrom as principally a fashion business was the lack of inventory movement once stores closed. The company was very quick to react to inventory levels, canceling many orders and working with suppliers to minimize shipment of goods. For Nordstrom Rack, receipts were canceled to take better advantage of the influx of goods from the full-line stores. By putting off receipts into stores in April and May, Nordstrom could bring in new goods in June as stores reopen offering current seasonal merchandise. The company also moved its traditional July anniversary sale to August, which would allow for better product curation and a higher chance of more customers shopping in-store.
PVH has a more complex business model including wholesale, retail, DTC, licensing and franchising. It also has a highly dispersed distribution model where 57 percent of the revenue is outside the U.S. market. PVH was able to learn real-time as the pandemic swept through various countries. Stores in China closed early but revenue from other countries where stores were still open eased the burden. Learnings from the China market were applied to other markets as they closed. As the pandemic rolled out across the world, when the U.S. closed stores, China reopened. The company quickly canceled non-critical Capex projects, made decisions about inventory holdings including pack-and-hold and worked with partners to delay fall inventory orders. PVH’s philosophy facing such uncertainty in the retail environment was to have less inventory upfront and replenish it later if the business warranted. This smart strategy avoided holding an abundance of inventory that was likely to lead to a pile of markdowns and merchandise that could not be moved. Read More