The coronavirus pandemic represents not only a medical disaster of global proportions, but also a tough challenge for business. UNCTAD, the UN trade and development agency, estimates that COVID-19 may cost the global economy at least one trillion US dollars this year alone. Billions of jobs are at risk. Although politicians in some countries are attempting to cushion the blow somewhat through large-scale support programmes and emergency relief, it is still clear that 2020 and probably 2021 will be very tough years for many companies.
In addition to the travel, hospitality and hotel sectors, brick-and-mortar retailers around the world in particular are massively affected by the impact of the COVID-19 crisis. Sales take a major hit when a shop is closed, but the costs still mount up. This means that retailers with physical stores can end up in financial straits especially quickly – and few businesses can survive this for more than three weeks. Meanwhile, current policy announcements from French President Emmanuel Macron and others suggest that retailers will have to hold out for several more weeks yet – most stores in France will only be permitted to reopen in mid-May. Therefore, stationery retailers must especially focus now on ensuring that they stay financially flexible – and maintain their liquidity for as long as possible. These seven measures are designed to help them reduce costs and tap into new funds.
Several countries, including Germany, France, Spain, Portugal, Denmark and Italy, have announced emergency government assistance programmes for distressed businesses in their jurisdictions. The amounts available vary greatly from country to country, as do the eligibility criteria. In addition to aid at federal level, some individual regions are also supporting local businesses with their own funds – again, with widely varying requirements. Businesses must therefore look for information and carefully study the terms of the various programmes before applying. Information can usually be found on the websites of economic affairs ministries or can be obtained from local business associations and chambers of commerce.
Local tax authorities in many countries (including all EU states) can temporarily suspend the collection of income and corporation tax and VAT. This means that payment can be deferred on an interest-free basis in many countries. Expenses that would further stress the already precarious liquidity position of many companies are therefore postponed to a later date, at no additional cost. In addition, businesses in some countries can defer payment of social security contributions (covering health, nursing care, pension and unemployment insurance). However, it is important to bear in mind that deferred payments still need to be paid at some point in time.
Employees unable to work due to a shop closure still cost money. Retailers can reduce the impact by means of a short-time allowance. Most EU countries offer some sort of short-time allowance, and comparable schemes have also been introduced in the UK and US in response to the crisis. Under such schemes, employers pay employees far less or, in some cases, nothing at all, while the state covers part of the employees’ resulting income shortfall. Countries are hoping to thereby avoid mass layoffs due to coronavirus-related plant closures.
Many countries, as well as unions of states such as the European Union, are also trying to support their economies through cheap loans. The European Investment Bank, for example, has mobilised 10 billion euros to finance loans for SMEs issued by regional banks. In many European countries, states are giving guarantees on loans covering 80, 90 or even 100 per cent of the risk so that banks can extend credit to companies in precarious financial health as well. Such loans offered at the low interest rates currently available may help to keep companies solvent. However, the application process is slow and cumbersome, and government guarantees covering less than 100 per cent are often not sufficient to actually secure a loan. On top of this, all businesses must carefully consider whether they want to take on additional loans in the current climate.
Many ongoing expenses arise from rental agreements, whether for stores themselves, warehouses or even leased company cars. In a crisis, it makes sense to call each creditor personally and find out whether such costs might be deferred for the period of time while the store is closed. Many landlords are adopting an accommodating approach in the current situation, as they generally have an interest in retaining their commercial tenants – and not losing them due to insolvency.
Customers confined to their homes due to lockdown restrictions still want to shop. Amazon is not an especially good alternative for that at this time, as the e-commerce giant is currently prioritising shipments of essential items while products in other categories are only leaving Amazon warehouses after lengthy delays or not at all, as in the case of Italy and Spain. Local retailers that deliver goods to their customers directly from their own warehouse can therefore score brownie points. For this, they can either set up their own delivery service or join with other local retailers to form a mini-network. Many city marketing agencies have already launched online platforms where local retailers can offer their products and services. Local commerce marketplaces on which customers can place orders directly online are another alternative. However, the onboarding process for these platforms is not always as quick and easy as many retailers would like.
Other online marketplaces are specifically targeting brick-and-mortar retailers who are currently looking for alternative distribution channels. eBay, for example, has launched in many of its markets an assistance programme for retailers with physical stores who now want to start selling on the platform. In some countries, eBay gifts these retailers a premium shop for a limited time. In others, no selling fees are charged for a number of months. Other platforms such as Rakuten, CDiscount and Real are offering similar attractive deals. Retailers that have already been toying for some time with the idea of online retailing via marketplaces should carefully examine these offers now.
About the author:
Ingrid Lommer has been writing about online retail for around 15 years. She analyses the strategies of successful online retailers for specialist publications such as INTERNET WORLD Business and shopanbieter.de and keeps a watchful eye on both large and small online marketplaces.