COVID will change of Retail Business Models forever.
Retail business has been under threat for the past 20 years. First, ZARA integrated (counterintuitive), then Amazon attracted customers with an inventory-less low-margin model.
COVID has revealed a new vulnerability.
Brands business shifts inventory risk forward in the dist. chain towards the retailer. This strategy works if the inventory river keeps flowing.
Retail was an inventory turns and treasury game.
It was a rare retailer who provisioned inventory correctly, banking on banks for working capital credit to keep the cycle rotating.
For a retailer to restart now, how will the ‘old’ inventory be flushed? How will cash be generated? Where will the capital come for a biz ramp-up?
Brands need a new capability. To build system resilience to manage demand fluctuations. Going forward, dist. chains will be compressed with links removed.
Brands better build a Direct-to-Consumer ability with a Digital-first approach.
Many a CEO is thinking if only I had invested in digital demand creation and customer acquisition.
COVID is an opportunity to recraft business models. A time to be entrepreneurial, an opportunity to pivot, going back to the drawing board!
Needs guts to scale down to scale up.