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Will technology vendors create innovative proposals for businesses to realize the COVID opportunity?

Date: 19/09/2020   l   Category: Retail

Will retailers close 70-80% of physical stores if they can't ride the 4-year COVID recovery?

Will technology vendors create innovative proposals for businesses to realize the COVID opportunity?

Sharing a back-of-the-napkin analysis for a retailer. Assume 100 stores. Over the past 5 years, footfall has declined by 25%.

Pre-COVID, 20% of stores, gave 80% of sales and profits.

Opportunity - malls will give sweet rent deals.

The 'sunk cost' fallacy that stores are old assets will not hold. Inventory will ruin the business. If stores are retained, inventory (required for shop fill + back up) will dramatically reduce the ROC with expected foot traffic declines. A 5% decline in foot traffic decreases Return on Capital (invested) by 15%. And a 10% decline takes it down by 33%.

Retaining 100 stores with negligible rent will still degrade the company.

Do malls now have an opportunity to go to brands directly? All brands will desire Direct to Consumer strategies.

The survivors will be companies who realize that digital retail isn't omnichannel!

This is where tech vendors come in. Can they be as innovative in proposal making as they are innovative in tech?

Tech investments cannot be CAPEX. Capital dried up!!