Just as brick-and-mortar shut down, a McKinsey report says fashion companies will position themselves for recovery as the COVID-19 pandemic is fading. However, in order to achieve these goals, companies must first protect their employees, control cash, analyze in-year inventory positions and assess the supply chain, strengthen digital initiatives, and sustain customer relations.
Following such recommendations will help small-cash businesses reduce pandemic risks. Even businesses conducting a repositioning study will optimize prospects for the second half of 2020. It will also encourage companies to reshape their environments and take strategic steps for the longer term.
Lead with compassion and protect your people
In order to ensure market continuity, McKinsey recommends that clothing and fashion firms will move immediately, mitigate downsizes for the latter half of 2020, and take ahead of improvements in the business model that will need to come out of this disruption. While prioritizing their health and safety they should also interact regularly and openly with employees. Protecting consumers should be another concern, whether it’s stringent in-store grooming standards or modern online order processing and distribution procedures.
Setting up a cash control tower
Companies should create a cash control tower which includes representation from both the procurement and sales teams. They will take a closer look at spending and find places where cash outflow cuts could occur. They can also look at government services to find ways, possibly on a state-by-state basis, to boost cash shortages through public initiatives.
Review in-year inventory position and assess the supply chain
Reviewing inventories can help businesses reassess their supply chain, help define stocks in each category and determine what needs to be done next to maximize the profit margin and freeing up working capital. Companies will start with spring / summer inventories and test for delays in late summer, fall or the next calendar year.
McKinsey also warned that companies should take into account the impact on the supply chain when making inventory restock decisions, such as upstream manufacturers who are already under pressure by decreasing unit volume in certain categories and channels.
Some things they should concentrate on are: reasons for conversion, basket-building and repurchase. Digital marketing will help to keep communication going and to improve online sales. This can also help in offering a justification for consumers to visit local stores when they reopen.
McKinsey also offers advice to businesses to keep the dialogue going in a manner that is true to the company and resonates with the client base. It could range from communications about how a company helps its warehouse workers stay healthy to frank conversations about how a new pair of shoes in a time of chaos can bring comfort and joy.
Medium-term actions for 2020
The recommendation requires companies to track the sales data and check it with suppliers and vendors. Together, everyone will work on Fall and Holiday merchandising plans, as well as the spring of next year. As they plan for the second half, they will make cautious store-by-store decisions about reopening the store network, both for employee and customer safety and confidence.
McKinsey recommends deciding if those stores will reopen in a different capacity, such as moving to a more value-oriented market category and using the location to clear out excess inventory, or maybe not reopening at all. The investment firm anticipates region-by-region store reopenings. And if rehiring is required, it may also include a gradual ramp up of staff as well as compliance with local requirements in connection with cleaning practices and store density.
Furthermore, consumer behavior and tastes could have shifted during the shutdowns, and that means businesses will think about reopening with a new business model based on customer experience and styling. That may require resets to floor space to assist with online order collection in-store.
In the second half, one way to start growth is by connecting with brand loyalists. Tailor-made advertising, early access to drops of new items, or limited editions can cut through the noise. And if customers are in a different financial position, thorough segmentation of customers and targeted promotions that offer real value could be crucial to maintaining such loyalists.
Organizations should be more focused on robust supply chains rather than low-cost ones, given the effects of the initial outbreak in Wuhan, China, and the subsequent input and plant shutdown problems as the pandemic started to spread globally. This may turn into pursuing on-shoring or almost-shoring possibilities.
Since the outset of the pandemic crisis, many businesses are searching for various go-forward options based on their own financial power. A clear-eyed analysis of the portfolio will help decide how to best execute to capture demand and explore opportunities for acquiring new products or consolidating properties. This will help drive alliances and improvements in the company that will go forward, as well as what not to do.