Retail Recovery–Our Ship Could Sail In May

Watching the hospital ship USNS Comfort pass by the Statue of Liberty in New York Harbor was a proud moment for America. When the USNS Mercy pulled into the Port of Los Angeles, that too was a proud moment. On the other side of the world, in Guam, a different Naval event was taking place aboard the USS aircraft carrier Theodore Roosevelt. Captain Brett Crozier was relieved of his command for distributing a letter in support of crew members who were ill with coronavirus.

In the Navy, it is said that there are three ways to get things done: the right way, the wrong way, and the Navy way. To the average civilian, our much-appreciated assistance from the Navy was now about to set sail in the wrong direction. We thought that Comfort and Mercy would be onboarding patients and that the USS Theodore Roosevelt would be letting them off. As news of the events surfaced, everything seemed backwards. Comfort and Mercy weren’t allowing coronavirus patients on, and the Theodore Roosevelt wasn’t letting them off.

Fortunately, the situation has stabilized. Comfort is now taking coronavirus patients on board, and sailors in Guam are getting off. It’s just scary for us to visualize all the difficulties that are involved, as we try to get everyone to pull in the same direction at the same time.

For retail, we (thankfully) manage our own ship, and we understand that the future will take us through a process that includes several stages. One guideline that we can follow is a version of the same pattern experienced in personal loss. Understanding what stages we are going through – leads us through FIVE very different emotional plateaus which, when recognized, will help to get our ship sailing again. We categorize a timeline that starts with denial, moves to anger, then bargaining, depression, and finally to an acceptance that life will go on (albeit, not always in the same way).

Sorting through newsfeeds, it is easy to recognize significant national angst and despair floating throughout the retail community. Surviving the coronavirus challenge takes time and the end result probably won’t look like anything we initially imagine.

DENIAL of the coronavirus event was the first stage in categorizing this process. Denial was brought front and center by the Administration, and then rebroadcast by conservative media pundits. These broadcasters fanned the flames of political conspiracy and diminished the oncoming threat of the virus. This action, unfortunately, slowed our national response.

In the second stage, we arrived at ANGER, where people blamed others for our problems. Whether it was China’s delay to inform, or the individual states not managing their stockpiles, or the response system that appeared to be broken. America was angry.

Time marches on, and with stage one and stage two somewhat behind us, we arrived at where we are today – stage three: BARGAINING.

States are asking: can we get more hospital beds, can we get more PPE, can we get more N95 masks? New York’s Governor Andrew Cuomo highlighted the bargaining process by commenting about the difficulties involved with purchasing hospital equipment: “It’s like being on eBay with 50 other states bidding on a ventilator.” There was also bargaining on the federal level with the President negotiating. He weighed in on corporate rights before starting the Defense Production Act and he hesitated to issue a national lockdown on the basis of federalism. The President expressed interest to open the economy on Easter Sunday, but later negotiated for different date. All of this can be characterized as part of the process that we are going through – part of the learning curve as we deal with the crisis.

While we wait to re-open business, retail must continue to agressively bargain.

We are clearly in a new place, with 1 million of our retail partners furloughed and most fashion doors shuttered, times are tough. The federal government has issued a useful stimulus package that includes $349 billion in small business loans (with upwards of $250 billion to be potentially added to the base amount), $500 billion of larger loans, and a $15 billion as a tax incentive for retailers who have renovated. All things considered, this will be very helpful, but it may not yet be enough to save the day. Time will tell.

If a retailer was weak before coronavirus, they are weaker now. The immediate requirement is for every business to preserve cash and to obtain as much Federal financial assistance as you can get. The other element is that the fashion clock of seasonal business continues to tick, and off-season merchandise will require mark-downs, and new seasonal product still needs to be delivered. No consumer wants short sleeve shirts in the winter or heavy outerwear in the summer. If too much time gets in our way, we will lose customers, lose employees, and our supply chains will disintegrate. As we have learned, virus time is determined by science (not politics), and we don’t yet know when science will allow us back. However, we fully understand that time can be retail’s friend, and it can also be retail’s enemy.

Clearly, everyone in our industry needs to be realistic. It will take at least six months to recover from every six weeks that our fashion industry is closed. There are significant peaks and valleys with the timeline of this virus, and no general timeline fits for the geography of industry. The longer we are out, the more product will get cancelled, and the more time it will take to start-up again.

Many retail stores in America closed by March 20^th, and the way things are trending, it’s a good guess that we might re-open by mid-May. Of course, this will change based on the spread of the virus and the apex. However, assuming a May start, and a slow roll out from east coast to west coast, it is plausible that we will be in business by Memorial Day.

Many retailers have been forced to furlough employees. Unfortunately, this is part of the process to conserve cash. In addition, executives have taken significant pay cuts, and landlords have been asked to defer rent. Large retailers have tapped their credit lines to build additional cash for the long haul. These are painful (but appropriate) measures – all taken to preserve retail, as we continue to work towards the “big re-start.”

We understand that the beginning will not be fast and furious. It’s just hard to imagine that after weeks of donning face masks and maintaining social distance, that consumers will suddenly line up at stores for opening day. Retail is not going to be the same, and everybody knows it. Expenses will be cut, store density will be measured, and supply chains will need to be re-built.

China will emerge as the big retail winner in all this – for both the supply-side and demand side. China was the first to get hit by the virus and they are the first to recover. Their factories are operational, and the global supply chain is not. Countries like Cambodia, Myanmar, and Bangladesh have already been damaged by order cancellations and supply shortages. It will take much longer for the supply side to heal.

Finally, our five stages are now headed towards the last step called Acceptance.

Denial and Anger have passed. Bargaining remains in place. We hope that Depression will be short lived, and Acceptance will yield a new way for retail to prosper.

As we approach the month of May and look to the challenges ahead, our retail ship is getting ready to sail.

We are not Comfort and we are not Mercy.

We are more like Theodore Roosevelt who said:

“It is hard to fail, but it is worse to have never tried to succeed”

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