Retailers are laying off staff as they shut their stores, and ordering others to work from home to stop the spread of the Covid-19 coronavirus
The spread of coronavirus has rapidly increased over the past week, and with it the restrictions on the public. Last night, the government ordered the closure of all non-essential stores, including those selling clothing – prompting fears about the future of the fashion retail industry.
Before that, the high street was already shutting down, as the public began to heed advice to avoid unnecessary social gatherings and to work from home where possible, resulting in a steep drop in footfall. John Lewis, Primark, H&M, Arcadia Group, New Look and River Island were among the retailers who voluntarily closed their UK doors ahead of the enforced closure this week.
Helen Dickinson, chief executive of the British Retail Consortium, said: “Retailers understand the need for government to act quickly and decisively to protect public health and combat coronavirus.
“The safety of customers and staff is paramount, which is why retailers have responded swiftly and positively to evolving government guidance on social distancing and other hygiene matters. Indeed, many retailers had gone further and already closed shops temporarily.”
Earlier today, JD Sports said: “In a typical week, at this time of the year, we would expect the stores which are closed to contribute substantially all of the group’s physical store sales.
“While our trading websites continue to accept and fulfil orders and, whilst we have seen a resilient performance to date in most territories, this represents a comparatively small mitigation in terms of overall profit contribution.”
Retailers are therefore looking at ways to cut costs. In addition to the business rates breaks for small businesses announced in the spring Budget, the UK government last week announced a package to help businesses, including a holiday on business rates for all retailers and £330bn of government-backed loans and guarantees.
The government also announced business grants to cover 80% of wages up to £2,500 a month for employees not working because of coronavirus, coinciding with more stringent social distancing measures to curb the ongoing crisis at the end of last week.
But some have siad this is not enough.
Next chief executive, Lord Wolfson, told Drapers this week that people are already being laid off in “quite large numbers and more will come”.
He said: “Anything the government can do to underpin income support for those who can’t work, either through isolation or their shops or factories being closed, will make an enormous difference to the speed at which we recover from this pandemic.”
This week, Drapers revealed that Philip Day’s Edinburgh Woollen Mill (EWM) Group has made more than 100 redundancies across the business.
More than 100 employees across the head office and business functions, including those who had received job offers at the company, were let go. The company has also introduced a temporary ban on further recruitment.
EWM Group, which employs 25,000 people, has also reduced hours for remaining staff and warned that it could reduce salaries by up to 50% in the coming weeks.
And after it halted all current and future production, retailer New Look offered its 13,000-strong workforce the option of unpaid voluntary leave, voluntary reduced hours or the chance to use their holiday allowance for the foreseeable future.
Arcadia Group, which closed all of its stores on the 20 March, including Topshop, Topman and Miss Selfridge, said: “All store staff remain employees during this time and will be paid their normal pay for March plus any outstanding overtime payments, after which we will review this situation and will be keeping our store teams updated.”
The CEO of another high street retailer said balancing the needs of staff with that of the business was difficult: “We sit on an enormous salary bill of a couple of million pounds a month and you cannot sustain that if there is no revenue coming in.
“That is the hardest thing because when every industry is affected – normally if our industry has a bit of a challenge you can displace people and they can go somewhere else [to another industry] – but there is nothing.
“Nobody in the current climate is going to sign up for voluntary redundancy or unpaid leave. Why should they? That’s the really hard thing.”
However, others have committed to retaining their staff throughout this difficult period. Retailers including Selfridges and Calvin Klein have confirmed they will continue to pay their employees for contracted hours throughout the closure.
A spokeswoman for Selfridges said: “We are not closing all of our operations, and will be focusing on our digital and social platforms to engage with our customers during this time.”
Other retailers are scaling back store operations and staff as much as possible.
“We’re working on ridiculously light numbers in stores,” said the managing director of a high street retailer before the lockdown announcement yesterday. ”If there was an incident, we’re not equipped to deal with it. We’ve set the bar lower than it’s ever been set before [in terms of security] because we’ve got no footfall.”
Marks & Spencer, which announced a profit warning this week as a result of coronavirus, has closed 31 stores that only sell clothing and homewares.
It is transferring 4,600 members of staff from its clothing, home and cafe teams to support the demand across its food business.
The retailer said clothing and home sales have seen “substantial decline” since the crisis began, and that profits for the current quarter were likely to be either at the bottom end of the forecast of £440m-£460m, or potentially lower if trading in clothing and home continued to be hit.
“There will be a substantial impact on clothing and home revenue at the very least in the first three to four months of the next financial year,” the company added.
”Although it is possible that this may ease as we get into summer trading, margins are likely to be severely impacted by the surplus of unsold seasonal stock and probable clearance activity in the marketplace.
“We are therefore taking all possible steps to defer supply. However, a very large part of our core business is less seasonal year-round essential product, and this should provide some scope for carrying forward stock. At this stage, we are not assuming a return to normal trading in the autumn.”
The bestselling items in Primark this week were pyjamas and tracksuit bottoms
High street supplier
Suppliers too are feeling the effects of the virus.
“The last three weeks have been desperation,” said one high street supplier, whose staff are all now working from home. “Retailers have said, ’What can you get us?’ because of the China situation – but now it’s, ’We don’t even need that.’”
He says online businesses are also affected, even though they do not need to contend with rates, rent or social distancing affecting stores.
“I think it’s changing people’s view of what they need. Do they really need clothing right now? The bestselling items in Primark this week were pyjamas and tracksuit bottoms,” he said.
Keep calm and carry on
If staff continue to work from home or are on lockdown for a long period, there will be consequences across the whole retail supply chain in the future as well.
Head of wholesale at a brand sold mainly in independents said: “One large concern is the impact it might have later in the year for us, as all our autumn season work is done in spring. For now, we are just keeping calm and carrying on.”
One former high street CEO said: “A lot of things can be done remotely but range building will be virtually impossible, I suspect, unless you have high-quality photographs of everything. So it will be challenging and will cause delays to shipments down the line.
“With the drop-off in trade as well, retailers will be concentrating on cash, which will have an impact on buying decisions going forward. I think it’s going to be difficult and you can easily see how errors could happen.”
“In the fashion industry, brands are not as advanced in using tech as they could be,” said the co-founder of supply chain software company Supply Compass, Flora Davidson.
“This is because there are limited tools which specifically cater to the designing and production process. Systems are disjointed and slow, and there is no single version of truth in the design-to-delivery process – something which will only be exacerbated by teams having to work separately from home.”
However, another high street supplier said that although the impact across retail would be great, this crisis would not be “terminal” for the high street.
“People still like to shop. If you look at the high streets [after this crisis], they’ll still be pretty busy.”
The spread of coronavirus is unprecedented. No business could have planned for such a crisis to happen, yet all are dealing with its consequences now.
Retailers have some tough decisions to make over the coming days and weeks over staff issues and future stock planning.
While restrictions are in place for stores, retailers need clearer advice on how to continue online operations effectively when under lockdown to really enable businesses to weather the storm.