Malls to Re-open: Shoppers, Ready, Set, Queue!
When it comes to shopping I am not an expert. I'm in the section of the population with an idea of what I'd like to buy, going to the mall, zip-in and zip-out. So, I barely noticed it when the malls were shut down. Those in the retail sector, however, are suffering from the dramatic lack of foot fall that many believe might not be temporary.
Recently, I had the privilege of speaking with Rajiv Ramani, Group CFO of Luxasia (you can view the full interview transcript at https://medium.com/@EMASingapore/emasks-cfo-of-luxasia-4ef57b0a0a23). Luxasia is an omnichannel of physical retail, eCommerce and distributor for beauty and lifestyle brands in Asia Pacific. From the conversation, I am beginning to get a clearer view of the retail landscape.
Mega Malls, Mini Stores
The retail industry was already going through tough times before this COVID season. The internet made price comparison easy and eCommerce made it easy to buy from any location that offered the best price. Add to that the glut of physical retail space with retailers fighting for attention and a dropping foot fall count.
In the last few years, many malls are re-inventing themselves as lifestyle destinations. I heard there are now horse tracks in malls offering horseback rides, ski slopes in malls are already so 90s. But now with COVID and social distancing, I think this re-invention has to be re-invented soon.
Rajiv was sharing their beauty counters consultation will have to be re-considered. Before, their consultants will be testing products on potential clients: spritzing, brushing, and applying. All those now a no-no with social distancing. With potential need to control the number of shoppers at any given time, foot fall will drop further. Customer experience will also be a challenge with queuing becoming a given, firstly to get into the mall and then to get into each store.
Rajiv reckons omnichannel is here to stay, each channel has a role to play to direct consumers to finally part with their money. He is betting the physical store size to get smaller though.
PCC (Post Covid Consumer)
These past few weeks of being holed up at home has taught me something: I actually do not need a lot of material things that I possess. I had time to reflect on how I want to spend my resources in the future, be it time or money.
I was sharing with Rajiv the outcome of my internet search on articles written about how COVID is affecting consumer behaviour, the general themes include: responsible consumption, decline of conspicuous consumption, economic nationalism and conscious spending. Couple these with the global economic tsunami that is waiting to happen, retailers will have their hands full to stay afloat and relevant.
However, Rajiv is fairly confident that consumers are flexible and will settle down into a pattern again in the near future. He cited an example of discretionary spending that may not change: gifting. Even if social distancing persists, there are now means to buy gifts and have them delivered. The Chinese New Year is a big social event where we run around visiting three or more families or friends each day over a few consecutive days to wish each other well and give out red packets containing cash as gifts. Last year was the first time I saw electronic red packet, that is, the cash goes directly to your bank account as opposed to a physical red packet. I thought that’s very anti-tradition and was quite crossed that my son suggested it. Ironically, the electronic red packet may just be the only solution with the next Chinese New Year.
Simply put, humans are highly adaptable. Retailers just have to look for the next consumer pattern to cash in.
Balance Sh*t
I posed the question to Rajiv on what is important for a retailer to focus on to emerge stronger from this period and he pointed to the trinity of: Profit and Loss, Cash flow and Balance Sheet. He is a CFO after all!
Recently my son was talking about Toys R Us making a comeback. He fondly remembers the store as I made him believe that that is where we store all our toys and we can always come back and play when he wanted. I digress.
Toys R Us is only one in a list of retailers that have gone belly up or in the process of filing bankruptcy. Big name victims include Sears, Macy’s, Forever21, potentially JC Penney, Neiman Marcus; closer to home SaSa, Home Fix, DFS and the once booming Esprit fashion chain has just announced that they are closing down all stores outside China.
There are certainly many contributing factors to the demise of these institutions but in reading articles related to their downfall, I saw that several had been sold to Private Equity firms through leveraged buy-out. Basically this means the new entity has a huge liability sitting in their Balance Sheet, no matter how cheap the financing was, it is a liability. Bear in mind many of these same institutions are severely in need to transform and fix their issues and to go omnichannel, their required resource to fund these transformations were likely lacking because they were busy repaying the debts.
During this period, companies have to find ways to survive and to show up when the tide turns. Keeping an eye on P&L, Cash Flow and Balance Sheet certainly goes a long way to ensure resources are put to best use to react to the fast-changing landscape COVID presents.