How retailers can manage and recover from COVID-19 - Strategy& Retail & Consumer Team April, 2020
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How retailers can manage and recover from COVID-19 Strategy& Retail & Consumer Team April, 2020
While Asia is moving towards recovery, the impact of the
COVID-19 crisis arrives in European and American retail
Current state of the COVID-19 crisis
Observations
Various scenarios • Similar patterns in most countries: Rapid
Italy for “beyond crisis” exponential growth followed by a slowdown
# new COVID-19 cases
due to effective countermeasures
South Korea • Impact for retailers materializes once
Germany countermeasures begin (mandatory or
voluntary, e.g. lockdown of stores/
China quarantine)
• European retail sector is just at the
beginning/ peak, while retailers in China
and South Korea move towards recovery
USA
COVID-19
outbreak
Retail recovery Time
Retail lockdown
(lockdown removed)
Short-term Mid-term
Strategy& 2
The crisis impacts retailers’ supply chains from different
angles
Supply chain impact from COVID-19
Increased hurdles to transport goods over long distances
Obstructed or internationally through border closures (long traffic
logistics jams) or shut down of logistics hubs (e.g. harbors,
airports)
Change in supplier reliability as a result of short-time
Constrained/ shut work, sick workforce, or factories being closed
down suppliers Entire supply chains broken due to country lockdowns,
missing raw materials, longer lead times, etc.
Change in customer demand with spikes for certain
Disrupted products (e.g. sanitizers & masks, long lasting staple
demand foods) and lack of demand for others (e.g. travel
accessories, fashion)
Strategy& 3
In addition, a sales decline can be observed across categories –
most evident in clothing, household goods and furniture
Sales impact from COVID-19 – China’s retail sales development
Retail sales per category, in % accumulated growth, as of February 2020
Total Retail Trade Online Retail
26%
10%
-14%
-18%
-20%
-33% -34%
Apparel & Home & Electronics Health & Food & Online Online
Footwear Furniture Beauty Grocery Apparel & Food &
Footwear Grocery
Strategy& Source: Chinese National Bureau of Statistics, Strategy& analysis 4
Indicative
Overall, the COVID-19 impact depends on the category focus and the
sales footprint of retailers
Sales impact from COVID-19 – Sales footprint and category focus
FOCUS OF THIS REPORT
Apparel & Home & Electronics Health Food &
Footwear Furniture & Beauty Grocery
“Store lockdown”
Mainly Brick and Mortar › Severe impact, with 70–100%
… face sharp sales decline due to lockdown
restrictions and/or missing consumer footfall reduction in sales
in non-grocery categories › Need for short-term measures
to ensure business continuity “Grocery panic”
› Change in
demand patterns
Omni-Channel › Risk of supply
… struggle with the rapid move towards the
online channel and need to ensure “eCommerce shift” chain disruptions
eCommerce operations are in “crisis mode” › Reduction in consumer demand, › Need to stabilize
and/or shift to online channel operations
› Need for eCommerce operations
eCommerce Pureplay in “crisis mode”
… can partly capture lost sales from brick and
mortar, but deal with atypical demand patterns
(e.g. sanitizer, health products)
Strategy& 5
Indicative
As we emerge from the crisis, COVID-19 will continue to boost
eCommerce as consumers will stay with the online channel
Sales impact from COVID-19 – Outlook on Germany’s E-commerce development
Online share per category, in % of total sales, 2017, 2020, 2023F
Apparel & Home & Health & Food &
Electronics
Footwear Furniture Beauty Grocery
Limited potential for Medium potential for more
“channel switchers”, as first time eCommerce
traditional store customers „channel switchers“, as
will postpone purchases consumers buy electronics
until after crisis and then necessities during crisis
Medium potential that
revert to their preferred Medium potential that High potential that many
consumers will continue to
apparel channels consumers will continue to first time customers of
buy furniture online after
they became used to it buy drugs, beauty and online grocery players will
during their #stayathome STRONGER personal care online, once make a habit of ordering
time they tried it out during the online, especially the older
STRONG crisis population – however, low
baseline of % online share
STRONGER
35% STRONGER
30% 30%
26% 25%
22% STRONGEST
11% 13%
8% 7% 8% 10%
1% 2% 2%
2017 2020 2023F 2017 2020 2023F 2017 2020 2023F 2017 2020 2023F 2017 2020 2023F
Strategy& Source: GlobalData, Strategy& analysis = Indicative additional online share due to changed buying behavior after Covid-19 crisis 6
While the crisis task force acts short-term, the management team
should think ahead to leverage potential opportunities
Recovery phases and key objectives
Short-term Mid-term Long-term
Retail Lockdown Retail
lockdown Removal recovery
1 Manage the crisis See appendix for details
Two key (Crisis task force)
objectives
for retailers 2 Leverage opportunities (Management team) Focus of the following pages
approx. 6–10 weeks approx. 6–12 months in approx. 9–12 months+
Rising daily infections, Slowing daily infections Covid-19 is under control
curfew & restrictions (vaccine, medication)
Stores reopen,
Stores closed reduced traffic Growth returns, consumers
behave differently than before
Consumers in shock Covid-19 and recession
affects consumer behavior
Supply chain disruptions
Strategy& 7
2 Leverage opportunities
Non-food retailers leverage opportunities from COVID-19 across four
areas
Possible key areas for action and exemplary levers GeneralGeneral
overview of levers– – might
overview
not all levers
not all
applicable
be applicable
to all retailers
Short-term Mid-term Long-term
Rebalance your
Adjust your assortment to Increase E2E supply chain
supply chain and 1 2 Broaden your supplier base 3
become recession-proof visibility and resilience
category mgmt.
Use markdowns and write- Integrate remote
4 offs to salvage revenue 6 marketing tactics
Boost your Harvest data of newly won
8 customer segments
online presence Leverage store resources
5 7 Scale your online shop
for the online channel
9 10 12
Ensure Re-align organization Transform operating model
Accelerate cost and cash
organizational containment
fitness 11
Implement continuous cost improvement
Digitize your business
14 processes
Prepare for
13 Assess the market for M&A or verticalization opportunities
tomorrow
15 Go asset-light
Strategy& 8
2 Leverage opportunities
Mitigate supply chain and operations risks, rebalance marketing and
shift sales to online
Key areas for action: Details (1/2)
Short-term Mid-term Long-term
Adjust your assortment to Broaden your Increase E2E supply chain
become recession-proof supplier base visibility and resilience
Cancel holiday and seasonal orders Multi source for all critical supplies, Assess your supply chain and logistical
(e.g. swimwear, suitcases), keep home incl. EU suppliers where possible as footprint to increase flexibility, resilience
Rebalance your products (BBQ, furniture). Carry back-up in case supply chain breaks and capabilities in the long run and
1 low price variants. Make packaging
2 (plus sustainability benefit). Integrate
3 accelerate the role of automation in the
supply chain & anti-contamination proof proactive risk management across the supply chain and in stores to facilitate
supply chain, e.g. identify liquidity risks resilience
category mgmt. to your suppliers and take corrective
Prioritization of baby, health & household, actions
beauty & personal care, grocery and pet
supplies categories with regards to inbound
shipments, stocking and fulfilment1) Amazon
Use markdowns and write- Integrate remote
offs to salvage revenue marketing tactics Harvest data of newly won
4 Promote and use markdowns now instead 6 Provide social interaction and gamification. customer segments
later to avoid excessive revenue decline. Embed shopping with content und Revitalize customer excellence and
Donate proceeds to relief efforts if affordable communities. Partner with influencers review customer data to fully nurture
customer base after crisis,
8 incl. increased share of "online-
Boost your online Leverage store resources converted" silver ager segment
presence Scale your online shop
for the online channel Adapt budgets to address a sustained
5 Ship from stores. Reallocate store staff 7 increased demand for eCommerce,
Delivery of free care packages to
as online sales assistants (e.g. via social incl. flexible fulfillment capacities
medical professionals to help Walmart captured more than half of the online orders of
channels) or for eCommerce fulfilment
them keep healthy2) Nuun “online grocery newbies”. Amazon and its Whole Foods
1) https://techcrunch.com/2020/03/17/amazon-limiting-shipments-to-certain-types-of-products-due-to-covid-19-pandemic
chain garnered only 14%3) Walmart
Strategy& 2) https://www.klaviyo.com/blog/communication-empathy-coronavirus-customer-marketing 9
3) https://www.digitalcommerce360.com/2020/03/19/coronavirus-is-changing-shoppers-relationship-with-grocery-retailers
2 Leverage opportunities
Accelerate restructuring to enable you to think ahead for your long-term
strategy
Key areas for action: Details (2/2)
Short-term Mid-term Long-term
Re-align organization Transform operating model
Accelerate cost and cash 10 Accelerate automation, GBS, 12 Overhaul operating model based
containment on differentiating capabilities in
outsourcing etc.
Consolidate efforts to achieve a order to reorganize for growth
9 leaner organization coming out of
Ensure the crisis. Assess the location and
profitability of your store network
organizational and accelerate the potential for Implement continuous cost improvement
fitness store closures 11 Implement processes to ensure a strong focus on controlling costs and
expenditures across the organisation – maintain organizational fitness
Digitize your business
processes
14 Ensure flexibility for future crisis-like
situations, e.g. ensure infrastructure
Assess the market for M&A or for home office
13 verticalization opportunities
Identify small players as potential M&A candidates while
Prepare for examining opportunities to verticalize your supply chain
tomorrow Go asset-light
Convert your business model to
15 asset-light, where possible (short-term
rent obligations, outsourcing, etc.)
Strategy& 10We are there to help you capture your opportunities
How we can help
Value Propositions References Retail & Consumer Thought leadership
Team and publications
We focus on five industry- We have vast experience in We have a global Retail & We have developed several
wide distinct Retail & value creation initiatives for Consumer practice with thought leadership
Consumer value leading, global retailers dedicated regional teams. publications, providing
propositions: and brands We promise our clients valuable insights for our
international teams clients
1. Direct-to-consumer
assembled to best meet their
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operations strategy strong functional capabilities
Fit for Growth*
and broad global reach
4. Target operating model
design
~ 6.900
5. Business-led IT consultants in
transformation retail globally
Strategy& * Fit for Growth is a registered service mark of PwC Strategy& Inc. in the United States 11In case of questions or feedback, do not hesitate to contact us
Stefan Eikelmann Reinhard Vocke Willibald Kofler
Senior Partner Partner Partner
Contact details
• Phone: +49 211 3890110 • Phone: +49 211 3890303 • Phone: +43 1 51822906
• Mobile: +49 170 2238110 • Mobile: +49 172 2022336 • Mobile: +43 664 5152906
• Email: stefan.eikelmann • Email: reinhard.vocke • Email: willibald.kofler
@strategyand.de.pwc.com @strategyand.de.pwc.com @strategyand.at.pwc.com
Strategy& 12Thank you strategyand.pwc.com © 2020 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see pwc.com/structure for further details. Disclaimer: This content is general information purposes only, and should not be used as a substitute for consultation with professional advisors.
For immediate crisis management support, please refer to the following
documents
Supporting documents (German)
Link: Business Recovery Services Link: COVID-19 crisis management
Rapid responses for crisis management Scenario planning, checklists, support options
Strategy& 14You can also read
