How Do Global Retailers Manage Business Uncertainty Amid Coronavirus?
The distinct rise of uncertainty in business continues to grow as global retailers feel the strain amid the coronavirus outbreak. Restaurants, theatres, and retailers are reporting losses since the rapid development of Covid-19 as the UK was forced to ban all non-essential contact.
Last year saw the iconic home and fashion brand, Laura Ashley be the first business to become victim to the coronavirus outbreak as it entered administration, followed by the collapse of Arcadia Group in November 2020.
Given the current economic climate, it seems likely that further business failures like this will continue to occur despite extended financial support from the UK government. Here we examine what issues businesses are facing amid the coronavirus chaos and what they can do to protect themselves.
The coronavirus effect on Laura Ashley
Laura Ashley has been operating since 1953, founded by husband and wife duo, Bernard and Laura Ashley. Known for its elegant, floral designs, the company had become synonymous with quintessential British style.
There were 150 Laura Ashley stores based in the UK with around 2,700 members of staff. The company announced that it was struggling last year with a GBP 14 million loss.
The company was in conversations with lenders and asked for a GBP 15 million loan in a bid to rescue the brand. This sadly fell through, leading them to appoint administrators during March 2020.
The company was eventually acquired by investment firm Gordon Brothers, as it was announced in October 2020 that the Laura Ashley products would become available within Next stores across the country.
However, Laura Ashley was just the start of economic woes within UK retail as coronavirus lockdowns prevented customers from visiting high street stores.
How is coronavirus affecting companies who manufacture abroad?
The Office for Budget Responsibility (OBR) warned MPs that some businesses will inevitably fail as a result of COVID-19. But what about UK businesses that rely on overseas manufacturing? China is obviously one of the biggest manufacturers and exporters in the world and, unsurprisingly, hit a record low since the coronavirus outbreak.
Factories struggled to find enough workers to produce goods since the spread of the virus and lead to low production rates. This then has a knock-on effect to the supply chain, impacting other businesses worldwide that are unable to fulfil orders.
What other issues will businesses face amid coronavirus uncertainty?
The coronavirus outbreak is a problem affecting both small and large businesses alike. The virus opened up a plethora of issues for global retailers, particularly in the travel industry. With many countries still on lockdown, closing borders and people being warned not to leave their homes if possible, airlines are having to cancel flights and suspend holidays. As a result, many airlines have been forced to make staff take unpaid leave or redundancies.
Fashion retailers, such as Laura Ashley, are extremely reliant on footfall into their shops but with people being advised to stay away from all but non-essential shopping, they, found trading conditions difficult. This also led to the closure of the likes of Topshop, Dorothy Perkins and Miss Selfridge and other businesses previously owned by Arcadia Group. The majority of these companies have since been taken over by online fashion giants ASOS and Boohoo.
But what about small businesses? The issue many smaller companies are facing is that they don’t have sufficient insurance to compensate for losses caused by coronavirus. Business interruption insurance tends to cover damage from disasters such as flooding and fires.
However, it doesn’t cover forced closure by authorities, meaning many businesses will not receive compensation. Cover for diseases is available as an extra on insurance policies, however, COVID-19 is not listed as a covered disease.
What other businesses are suffering due to coronavirus?
A number of large businesses have also suffered during the coronavirus pandemic, particularly in the hospitality industry. Most notably with the airline Flybe collapsing as demand for flights continues to dwindle as a result of travel restrictions. Restaurant chain Carluccio’s has also struggled, with the company reportedly on the verge of large-scale closures in 2020.
Bars and restaurants have struggled considerably during the coronavirus pandemic after Prime Minister Boris Johnson has repeatedly shut the hospitality sector, creating catastrophic consequences for businesses in the food and beverage service industries.
The entertainment industry has also suffered during the past year, with a number of cinema chains including Odeon, Cineworld and Picturehouse forced to close their doors in a bid to stop the spread of the virus, as Cineworld reports a GBP 2.2 billion loss for 2020.
What can businesses do to optimise their bottom line?
Naturally, company revenues for most retailers will be under pressure during this time of uncertainty. There are still ways, however, in which you can optimise your bottom line amidst the coronavirus crisis.
Try to ensure that your company is technologically prepared so that staff are able to work from home where possible. This way, the business can continue to operate but the risk of potential spread of the virus is significantly reduced.
Currency markets are frequently volatile during periods of uncertainty so it pays to manage FX risks as well as planning ahead. It’s important to ensure that transactions and future payments are adequately protected.
For global businesses involved in international trade and cross border activities, mitigating currency risk has to be a priority. Volatile exchange rates can put unnecessary added pressure on the financial health and competitiveness of international businesses, often restricting growth and damaging profit margins.
Be as transparent as you can with customers during this time of uncertainty. We’re at a time where the nation feels in the dark as it’s impossible to predict exactly what is around the corner. Customers will appreciate clarity and openness from businesses and are more likely to continue with your service going forward.