From Ovs to Conbipel, from Pittarosso to Gap: Covid brings large non-food chains to their knees. The intervention of Fabio Bolognini, co-founder of Workinvoice
The chains of large specialized distribution (GDS) are under strong pressure, especially as regards clothing.
Recent news on the quarterly results of GAP inc. (brands GAP, Old Navy, Banana Republic, Athleta) with a 43% drop in sales (not including April and May) and the quarterly loss of $ 932 million on sales of $ 2.1 billion sound the alarm for the whole sector , including Italian chains.
Confirming the seriousness of the situation, the actions taken by GAP Inc. to deal with its crisis are drastic: suspension of dividends, reduction of the investment plan by 50%, suspension of the payment of rents, extension of credit to independent distributors, activation of new $ 4 billion in bond and asset-backed loans. And what scares most is that similar recipes have not been enough for other retailers, such as Neiman Marcus, and JC Penney.
Unfortunately, this negative scenario is also destined to touch the Italian chains. From this part of the ocean, in fact, news has come that OVS Spa has requested a 100 million loan from Unicredit with a Sace guarantee. Istat data also confirm that the retail supply chain is experiencing an extremely important contraction in revenues and cash: 80% in the lockdown period, with a decrease for the whole 2020 of around 30-40%.
FINANCE BECOMES TEMPORARILY PRIORITY …
The pressure on the retailers' cash desk leads these companies to implement three specific interventions: 1) greater pressure on suppliers, 2) a new management of space rents, 3) the search for new finance. Faced with these slumps in sales and cash flows, any retailer must prepare an emergency response by relying on the ability to hold on for the first 6-9 months and then try to restore normal cashflow. Here, of course, the starting financial situation plays, as if to say that in the retail competition, someone starts out with an advantage and someone, on the contrary, is disadvantaged.
… BUT THE TRANSFORMATION OF RETAIL WILL NOT BE FINANCIAL
However, if finance in the immediate term can guarantee greater or lesser security and if a weak starting financial position can lead, on the anomalous wave of the pandemic, directly to the arrangement – as happened in the USA but also for Pittarosso, Scarpe & Scarpe and Conbipel in these days – finance will not determine the success formula of retail distribution.
This is for two linked reasons. First, consumer buying propensity has changed forever. An investigation by McKinsey that covers Italy also shows this effectively, in which the bars indicate that the% of people who do not consider going to the store or department store anymore exceeds the percentage of those who think they are by 7-20% go back to shopping as before.
Second, the changes to the distribution system are structural. Just to name a few: there is a new approach to seasonality. Hundreds of members of the fashion community have signed and are promoting with the 'Open Letter to the Fashion Industry' the idea of selling clothing products in the same season in which they will be used, breaking the tradition starting from the Autumn / Winter season 2020. It would be an epochal change – supported by strong reasons for environmental sustainability and consumer service – and it would be a revolution for producers and distributors.
Furthermore, mixed online / offline strategies are growing: online ordering and in-store picking options, being tested by some retailers, including Calzedonia itself (O2O online to offline service) or delivery via rider (Pinko with Glovo). These strategies are driven by the increasingly massive transition to digital channels, practically a must for everyone, which however involves marketing and communication methods with the community of much more complex customers.
Furthermore, dynamic stock management to indirect physical sales channels (including franchising) is becoming increasingly important. Having to fight with insufficient liquidity and significant drops in sales, retailers cannot buy the new garments too much and therefore determine an increase in the warehouse for the retailer. Many summer collections are likely to be held in stock for a year this year, to prevent them from being sold off on heavy sales. Finally, the development of new technologies for the sanitization of fabrics and garments both in the production phase and in the stores will also acquire an important role, in order to respond to the growing customer demand in terms of hygiene, but these practices will obviously increase costs.
Those who are best able to interpret consumer tastes and manage new marketing and sales methods will have a great opportunity to climb the rankings. Others, however, will see their weaknesses worsen. Also in this sector, the conclusion that can be drawn from a real bombardment of new market information and financial events is that each company must be analyzed with the utmost depth and knowledge of qualitative factors, without ever taking for granted that the past is a approximation of the future.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/mondo/ovs-conbipel-pittarosso-come-covid-spoglia-la-grande-distribuzione/?utm_source=rss&utm_medium=rss&utm_campaign=ovs-conbipel-pittarosso-come-covid-spoglia-la-grande-distribuzione on Sun, 14 Jun 2020 14:49:26 +0000.