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Coronavirus Blog: Insights from Our Analysts

Coresight Research’s Coronavirus Blog features insights from our global research analysts on the impact of the outbreak on retailers and consumers in the US, Europe and Asia, and provides free research and data on the coronavirus crisis. Check back regularly for updates.

You can also view our Coronavirus Insight reports, which provide deeper coverage on the retail impact, and our Coronavirus Tracker, which brings together key data including timelines, event cancellations and temporary store closures.

March 31, 2020
Macy’s, Kohl’s, The Gap and Ascena Among First to Furlough Employees Due to Coronavirus: They Will Not Be the Last

News: Department stores Macy’s and Kohl’s and specialty retailers Ascena and Gap have all announced employee furloughs due to coronavirus-driven store closures. While e-commerce represents between 24.4% and 31% of these retailers’ revenues, online revenues alone will not sustain operations of these multi-billion dollar retail operations. The table below shows select major retailers that announced furloughs on March 30, 2020.

  • While Macy’s did not announce the exact number of employees furloughed, the company reported that it had lost the majority of its business due to store closures across its bannersMacy’s had 776 stores in its portfolio at the end of the 4Q19: 551 Macy’s, 53 Bloomingdale’s and 172 Bluemercury store locations. The company reported it was moving to the absolute minimum workforce needed to maintain basic operations. Management expects fewer furloughs in Macy’s digital businessas digital will support distribution and call centers to serve customers through online channels. 
  • Kohl’s announced it will temporarily furlough store and store distribution center associates, as well as some corporate office associates whose work has been significantly reduced by the store closures. 
  • Ascena implemented a furlough program across its business, including all store associates and close to half of its corporate associates. 
  • The Gap will furlough most store teams in the US and Canada, pausing pay but continuing to offer applicable benefits until stores are able to reopen, reducing its headcount across its corporate functions around the world. In addition, the entire Gap Inc. leadership team and the board of directors will take a temporary pay cut. 

Coresight Research Insight: In our Coronavirus Retail Robustness Index, we evaluate the retailers best able to weather the coronavirus pandemic. Based on this information, we predict today’s announcements are only the beginning of many more to some in retail. We further predict a new estimate of permanent store closures of 15,000 in the year 2020, up from our previous estimate of 8,000. Even market leaders are struggling as foot traffic disappears, and many are exercising all options including drawing lines of credit, cancelling orders, cutting spending—and even taking corporate pay cutsFor some mega-retailers such as Macy’s, the magnitude of the physical footprint and cost of the physical space (not to mention the lost revenue) means furloughs and store closures are inevitableThe only question is: How many store closures and employee furloughs will become permanent if the situation continues?

March 30, 2020
Worried US Shoppers Are Rapidly Cutting Back as Major Retailers Close Over 60,000 US Stores

In the space of just a week, US shoppers have become much more worried about the coronavirus outbreak: Our latest US consumer survey, undertaken on March 25, recorded a significant week-over-week uptick in the proportion of respondents that are extremely concerned about the pandemic. We also found that a much greater proportion of US consumers are reducing their purchases of discretionary categories than just one week earlier. The cutbacks in spending are reflective of shoppers battening down the hatches for the long haul: Over half of respondents in our March 25 survey thought the severe impact of the outbreak on everyday life in the US will last for three months or more.

Shopper cutbacks also mirror the shutdown of a huge tranche of US brick-and-mortar retail. As of Friday, March 27, we recorded almost 62,000 temporary store closures by major US retailers. Coresight Research estimates that discretionary retailers make up around three-quarters of brick-and-mortar stores, and the effects of a universal shutdown are likely to be profound and lasting—as we noted in our recent 2020 US Store Closures Outlook, we anticipate that some of the retailers that recently announced temporary store closures, including some well-known names, will never reopen their doors.

Find our rolling list of the major retailers that are closing stores in our Coronavirus Tracker—which we update every working day.

Coronavirus Temporary US Store Closures

March 27, 2020
Introducing Coresight Research’s Retail Robustness Index

Coresight Research recently introduced the Retail Robustness Index, a tool for evaluating how retailers are positioned to weather the current, unique retail environment caused by the coronavirus outbreak.

The Retail Robustness Index evaluates five main criteria:

  1. How was the retailer’s financial health prior to the outbreak? This calculation is based on retailers’ publicly reported financials, such as its income statement, balance sheet, and the value of its stock. Many retailers have recently drawn on their credit lines in order to give them a cash supply to weather a temporary decline in sales.
  2. Does the retailer sell domestically or internationally? Retailers with geographical diversity in their sales could be better off than those who exclusively sell into a market that is shut down.
  3. Does the retailer sell only in physical stores, or does it sell partially or primarily online? If a retailer’s physical stores are closed, then that channel is unlikely to generate significant cash. If a retailer has an operating online business, it can possibly expand it, keeping vital communication open with consumers and also generating precious cash.
  4. What categories of products does the retailer sell? At present, consumers are more focused on acquiring the essentials and less on dressing well (especially since many are staying at home). Thus, product assortment can favor or challenge a retailer. Recent data show that sales of essentials have boomed, whereas sales of apparel and accessories have declined. Moreover, most grocery and drug stores have remained open, while most apparel stores are closed.
  5. Finally, management is an essential ingredient to withstanding the current environment. Retailers with seasoned management teams are more likely to know how to get things done efficiently at their companies and they have possibly lived through and other downturns before, versus a newly arrived CEO still learning the ropes.

Our Index calculates a Robustness Score based on a weighted average of these five factors and can be used to understand the factors that position retailers better to navigate the current retail environment.

March 24, 2020
10 Things Companies in India Are Doing Amid the Coronavirus Shutdown

With nearly all of India on shutdown due to the coronavirus outbreak, businesses in the country are responding by implementing innovative ways of working with customers and the larger community. Here are 10 of the innovative approaches we have seen from companies in the Indian market:

  1. WhatsApp orders and phone-in orders: Big Bazaar, one of India’s largest grocery store chains, does not have a website for online orders but has launched a doorstep delivery service amid the outbreak. Customers in select cities can place orders for home delivery by calling their local store or via WhatsApp messaging. Payment is accepted on delivery.Whatapp ordering in India
  2. Displaying stock levels on a shopping app: Grofers, an online-only grocery delivery firm, has increased transparency by displaying stock levels on its e-commerce app, in order to abate customer anxiety and reduce consumer hoarding behavior during the coronavirus.Displaying inventory in online shopping app
  3. Hygiene practices and screening: Most major firms in India—including Amazon, Big Bazaar, Flipkart and Grofers—have implemented in-store health and safety measures, such as screening employees by checking their temperature, making sure staff wear medical masks and providing hand wash and sanitizers to clean hands and disinfect trolleys, baskets, surfaces, toilets and shelves at regular intervals.
  4. Contactless food delivery: Food delivery firms Swiggy and Zomato are offering contactless delivery services, whereby parcels are dropped at the doorstep so that consumers do not need to interact with delivery persons.
  5. Educational technology startups offer free services: India has some 500 million people aged five to 24 years, according to the India Brand Equity Foundation. With schools and colleges closed, education technology startups are using the opportunity to reach more students by offering free access to apps and courses. BYJU’S – The Learning App, the brand name for educational technology and online tutoring firm , is offering free access to its app and some learning programs for students in grades 1 to 12 until the end of April. Platforms Toppr and Vendantu have also made some classes temporarily free.
  6. Gyms offer membership extensions and free online classes: Health and fitness startup CureFit is enabling customers to pause their memberships for 14 days for free and is offering free access to classes online. Similarly, Cult.fit has moved some of its classes online for existing members, and Fitternity (a Mumbai-based gyms, pools and fitness studios aggregator) is also working with experts to launch live workout classes.
  7. Remote medical consultations: Health startup Mfine is offering remote video medical consultations, and it has released a video to help educate and inform people about the symptoms of the coronavirus.
  8. Insurance: Insurance tech startup Digit Insurance is offering a fixed-benefit insurance policy for people up to the age of 75. The policy covers screening and treatment, even for patients whose results are negative. ICICI Lombard, a health insurance firm, is offering cover for those that test positive for the virus, as well as providing virtual health consultations and help with calling an ambulance, if necessary.
  9. Repurposing real estate and manufacturing plants: Mahindra Group, a conglomerate that operates in 11 sectors including aerospace, automotive and hospitality, has offered up its resorts to be used as temporary hospitals. The company has also announced that its plants will be used to manufacture ventilators. Reliance Industries, another conglomerate with interests in oil, healthcare, telecom, retail and other sectors, is offering free fuel for emergency-service vehicles and has set up a dedicated 100-bed facility at Seven Hills Hospital in Mumbai for coronavirus patients. With alcohol being a key component in hand sanitizers, the Indian subsidiary of British alcoholic beverage firm Diageo will use its facilities to produce 300,000 liters of hand sanitizer.
  10. Special funds and hackathons: Digital payments firm Paytm has announced funds of ₹5 crore (around $660,000) to help researchers and innovators find solutions to mitigate the expected shortage in clinical ventilators and other medical equipment necessary for those diagnosed with the coronavirus. Elsewhere, some 70 startups have worked together to develop an app that enables the government to track people that have tested positive for the virus and those on self-quarantine. Software firm Wingify has announced an online hackathon for innovators to develop health technologies to combat the pandemic. The firm said that 63 people have joined the hackathon, and one of the projects includes developing an app that tracks the availability of hospital resources to treat the virus, including beds.
March 20, 2020
15 Things US Retailers Must Do Now

As the impacts of the coronavirus outbreak emerge and crystalize at a rapid pace, the Coresight Research team is changing how we cover this crisis. With this post, we launch our blog on the coronavirus crisis—allowing our analysts to offer their insights and analysis on the outbreak more immediately and in a bite-size format.

Our inaugural post runs down our 15 “must dos” for retailers in the US and other Western markets—and these include learnings from our coverage of the China market and how we saw retailers there responded to the coronavirus shutdown. Here are our 15 things that US retailers must do now:

  1. Over-communicate with customers and employees. Across all available channels, keep customers and staff informed, show empathy and be as responsive as demand allows.
  2. Figure out innovative approaches to product delivery. Online demand for groceries and other essentials is surging, and retailers can serve this with curbside pickup, pre-selected product bundles (e.g., of groceries) or other innovations.
  3. Rethink shipping/returns. In the immediate term, many online retailers are prioritizing staples over discretionary items and informing customers of potential delivery delays on discretionary items. Extend return periods until the crisis is over.
  4. Where employees are at risk, look at co-employing with other retailers and restaurants. In China, we saw staff from the foodservice industry redeployed to grocery retailers under partnerships between firms in these sectors.
  5. Renegotiate store leases to cut expenses. We expect stores to remain closed for several weeks—possibly months. For many impacted retailers, slashing fixed costs will be essential for survival.
  6. Think gross margin dollars not gross margin percentage: You count dollars and take them to the bank; you don’t take basis points to the bank. For discretionary products experiencing reduced interest, lower prices to move inventory and improve liquidity.
  7. Use the time as an opportunity to rethink marketing messages and channels. Retailers can segment and personalize messages, and test and learn digitally.
  8. Communicate (more) and sell via social media. Particularly for retailers whose stores are shuttered, social commerce offers opportunities to re-engage shoppers and maximize sales retention rates online.
  9. Livestream to drive sales online—this is particularly important for those retailers impacted by store closures. In China, we saw livestreaming become a more important sales channel during the shutdown. In the US, multichannel retailers must grasp opportunities such as this, so they are not left behind by digital-first rivals.
  10. Reconsider promotions and think about limited-time or limited-quantity offers to drive excitement and impulse sales.
  11. Focus on liquidity: Nobody yet knows how long this shutdown will last.
  12. Cut open orders and look at what really sells. Retailers must also remember the 80/20 rule, where 20% of SKUs can account for 80% (or at least a disproportionate share) of sales.
  13. Figure out how to capitalize on calendar events online, with Easter coming up in April and Mother’s Day in May (in the US). In China, we saw retailers leverage International Women’s Day on March 8 to increase their exposure and drive sales, with some beauty retailers experiencing sales growth of 200%.
  14. Flex your tech muscle: Integrate tech throughout your organization, to help action the items noted above.
  15. Finally: Be positive!  Collaborate!
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