The impact of coronavirus on retailers is unprecedented and alarming. To survive, retailers are using credit, cutting executive salaries and freezing dividends to shareholders. Businesses of all sizes are affected, with liquidity becoming the focus to survive this uncertain time.
What are online retailers doing in light of coronavirus?
According to Digital Commerce 360, smaller online retailers are trying to cut their expenses where they can – putting employees on furlough, and reducing their marketing efforts. Meanwhile, larger retailers have responded by taking/extending credit lines, issuing bonds, pausing shareholder dividends and cutting the salaries of their executives.
Companies that earn most of their profits through stores are turning their attention to online to boost sales, but for many this isn’t an effective solution. The pandemic is an event that’s hitting many businesses harder than the recession, and on a much wider scale too.
Discounts and delayed delivery
Online retailers are attempting to drive sales during the pandemic with regular discounts and offers. Many retailers, especially those deemed ‘non-essential’, have been mandated to close, putting many employees on furlough.
Trying to drive sales is an important strategy at this point, alongside negotiating reduced rents and trimming other expenses. But the issues with order fulfillment could further exasperate retailers’ problems later down the line.
Coronavirus causing a ‘55% decline in business’ for retailers
With department stores being forced to close, they become at real risk of insolvency. S&P Global Market Intelligence research suggests the odds of department stores defaulting on loans over the next year is 42.1%, a significant increase from the 7.4% forecast back in February.
Department stores are being forced to cut their prices, furlough their employees and find ways of raising capital to stay afloat. Operating on a skeleton staff, there are also order fulfillment risks that could lead to further problems for department stores looking to claw back some profit online.
The pandemic is hitting businesses of all sizes hard. Well-known retailers such as Macy’s, Nordstrom and JCPenney are all finding ways to stay afloat, trying to maximize sales while keeping operating costs low.
Online retailers taking drastic steps to survive
For online retailers, including large-scale operators such as Wayfair Inc and Duluth Trading Co, there is still a need to cut costs while in the grips of the pandemic. Large proportions of staff are furloughed, and the retailers are facing difficult negotiations with vendors, landlords, etc., to be able to reduce current operating costs. Order fulfillment is reduced, and businesses are increasing their credit lines to ensure higher levels of capital.
The coronavirus pandemic is far from over, with the effect on retailers set to continue. While many retailers are staying afloat now, there could be dark times ahead as businesses take steps to recover once normality resumes.