Stress tests & COVID-19

In Paris we have spent our first week in confinement. Many retailers have had their first week of store closures and employees their first week of working from home. And a lot more firsts are set to come as the spread of COVID-19 turns the world on its head.

Companies are in crisis mode. Those that BW Confidential has talked to over the past few days have emphasized the need to protect cash flow. They have told us they will probably invest more in digital content to reach consumers and remain visible, as well as in e-commerce to help offset lost sales from store closures. Many are also contemplating staff layoffs. In addition, they are looking at how to organize manufacturing and supply chain – gauging consumer demand in this environment is tricky – there needs to be enough stock to cater to a potential spike in e-commerce sales and to fulfil an eventual rebound, whenever that may happen (although if manufacturing is forced to shutdown, brands won’t have product to sell). However, the reality is that many brands and retailers will be laden with product they cannot get rid of, which will also likely see a rash of promotions and discounts.

While caught up in managing the extremely fast-changing crisis, some are also examining areas where there could be potential benefits. As companies axe jobs, there could be a new talent pool for competitors to tap into; as brands make cuts in advertising and marketing , they potentially leave a void that others will be eager to fill (probably at less expense, as these costs are likely to fall), and as smaller brands struggle to survive, bigger players may swoop in to acquire them at a more interesting price than just two weeks ago.

In addition, most are trying to figure out what trajectory this crisis may take. One obvious place to look is China. As Europe and parts of the US shuts down, China is getting back to work. Some 89% of the country’s key infrastructure projects had re-started as of March 20, according to the National Development and Reform Commission. However, whether the rest of the world will get back to normal in the next two to three months is still a big unknown.

At BW Confidential, we are asking you for your views on these issues so we can assess the real impact on the market and how industry players are dealing with them. Last week we sent out our COVID-19 International Beauty Survey to have your feedback on the current challenges. We received an overwhelming response and plan to bring you the key findings of the survey very soon. In the meantime, we ask you to keep in touch with us with your thoughts and opinions on the market.

 

79e60c933e4e2868cf34dc62334d2efdqqqqqqq