How Global Brands Are Managing Through the Crisis
The future of retail paints a bleak picture. As the Covid-19 pandemic wages on, retailers across the globe are scrambling to mitigate losses, after being hit with low sales, supply chain disruptions and enforced lockdowns. News of retail casualties has already surfaced, inducing yet more anxiety for struggling retailers.
But it is also during times of crisis when leaders emerge.
Despite the outbreak, Nike’s sales topped analysts’ estimates, and the company reported seeing a 36% increase in digital sales. In Greater China, digital sales rose by more than 30% – a strong indicator that Nike is beating the odds.
According to Omnilytics data, Nike saw a higher sell-out rate at 67% in the first three months of 2020, in comparison with last year’s 45% of the same period.
Luxury woman’s label Lafayette 148 is showing resilience through trying times. CEO and cofounder, Deirdre Quinn, shared that retailers (the brand distributes stock to department stores like Saks Fifth Avenue) have cancelled its Spring orders, leaving mounting merchandise that needs to be cleared.
“I’m going to have to take those units and get creative,” said Quinn.
From these success stories, come key strategies that brands and retailers can learn from.
For smaller brands, a common misconception is the belief that they cannot replicate global brands’ strategies. However, smaller brands should not hesitate to draw comparisons to the larger companies or benchmark product categories because it’s important to understand, first and foremost, the best strategies to put in place.
What are the strategies employed by Nike and Lafayette 148 that have allowed them to succeed in this downturn? We dissect the key lessons learnt and share important takeaways that are applicable to brands and retailers, big or small.
Dissecting Nike’s Playbook
The global sportswear titan executed three strategies that act as its crisis response plan. These are:
- Going full digital
- Adapting fast to market changes
- Sharing better discounts and constant newness
Going Full Digital: Play Inside, Play for The World
Nike has never been one to shy away from social movements, remaining true to its brand values. Its “Believe in Something” campaign with Colin Kaepernick and “Dream Crazier” ad for female empowerment are prime examples. Once again, Nike has stepped up for this outbreak.
“Play inside, play for the world” is Nike’s newest tagline posted to Instagram, urging its 105 million followers to practice social distancing.
These weren’t just hollow words – the sportswear brand practised what it preached too. When the situation in China worsened, 75% of its stores were temporarily closed, while the rest operated in reduced hours – and Nike quickly focused on its online operations. It applied the same unprecedented measures in the US and Canada too.
“At a time when people were confined to their homes, we moved swiftly to leverage our digital app ecosystem and Nike Expert Trainer network,” Chief Executive John Donahoe told analysts.
Nike also made the Nike Training Club (NTC) app free for its US consumers, and it saw a 100% increase in weekly active users. Similarly, there was an 80% spike in NTC workouts in China.
Its latest quarterly earnings revealed that the spike in usage translated to higher online sales – a 36% increase in digital sales.
Lululemon saw similarly glowing results with the same strategy. After launching a few key digital initiatives, such as free classes online, its digital sales surged by 40%.
Key takeaway: Digitisation is vital. It’s an imperative time for brands and retailers to capitalise on increased online spending as consumers are confined to their homes. Expand on e-commerce capabilities quickly.
But more importantly, pay deeper attention to how you speak to consumers. In trying times, consumers are looking towards value-driven brands.
Download our free report Fashion Retail & the Covid-19 Crisis!
Adapting Fast to Market Changes
For the first time in 22 consecutive quarters, Nike saw a 5% drop in sales after shuttering stores in China. Undeterred, the swoosh label swiftly moved online – and as shown above, the results were promising.
As the virus shifts west, the sportswear brand practised similar strategies in Japan and South Korea, and now, across Europe and the US. The learnings in China also allowed Nike to map out a pattern of three phases: the recovery period, the returning of consumer confidence and sales growth.
“With COVID-19 now spreading across Europe and the U.S., we are applying the same playbook,” Donahoe said.
Yet, the sportswear brand isn’t setting a blanket activation across different geographies – the playbooks merely act as guidance. Sam Campion, Nike’s CFO, shared that each country has its own strategy to address the outbreak.
To better support consumers during this period of time, Nike has also extended returns for consumers, adding an extra 30 days on top of its 30-days return period.
Key takeaway: Adapt fast. Brands that have a presence in different markets need to adapt fast, dependent on each country’s situation. Monitor performance closely and redistribute stock to stabilise inventory levels. The most pressing issue is likely a supply chain problem. Re-evaluate current supply levels and identify the affected links immediately.
For brands operating in a singular market, it’s still important to study how markets are reacting. When the coronavirus spread in China, retailers in other countries did not prepare contingency plans and are only now scrambling to react.
Better Discounts, Constant Newness
In times of crisis, brands need to be flexible with profit margins. Nike set a 25% off sitewide discount, with varying terms and conditions across different countries.
Omnilytics’s data also shows that in the months immediately following the Covid-19 outbreak globally, new discounts on Nike increased exponentially.
However, its new-in figures saw a spike as well, tripling in February 2020 compared to the prior months.
Our Visual Merchandising solution captured various newsletters that promoted new drops, such as Air Max 2090, Air Max 270 React and Adapt BB 2.0.
Consumer demand is diminished, but it isn’t gone. Having constant newness is still crucial to keep the momentum going.
Key takeaway: Whatever the situation is, refrain from price hikes. Now, more than ever, your relationship with consumers is increasingly important. Opt to run special promotions that tie in with the current situation instead. Nike released its 25% discount to widen accessibility for consumers to workout at home.
As for newness, it is still imperative – the key here is to adjust accordingly to market demands. Focus on selling core products, as well as items that are in higher demand, such as loungewear and activewear.
For more strategies, download our free report:
If you’re facing depleting inventory issues, hold off on selling seasonal items, such as accessories and party wear, and adjust your newness launch schedule strategically.
For premium womenswear brand Lafayette 148, its response is about adapting to consumer demands. The two core strategies are:
- Prioritising the Right Categories
- Managing Stock Effectively
Prioritising The Right Categories
As mentioned previously, there are certain categories that are performing better than others, especially loungewear and activewear. Amongst ultra-fast fashion brands like Asos, Boohoo and Missguided, comfortable outerwear and activewear has seen a spike in new-ins.
Lafayette 148 took it up a notch with its At-Home Edit, mirroring the current work-from-home landscape, incorporating comfortable yet elevated pieces.
Key Takeaway: Identify ways to stock up on core products that have transitional designs.
Undertake an assessment on the assortment of cancelled and next season’s orders before developing an operating roadmap.
If you’re planning for the next season, focus on a tighter assortment – Quinn recommends “shaving back” 20% trend-led SKUs – and add versatile designs.
Managing Stocks Effectively
Lafayette 148 has to clear stock on its own e-commerce and outlet store – due to retailers cancelling its Spring orders. This requires the brand to strategically plan its clearance, well before the next season arrives.
Omnilytics data shows that Lafayette 148 is effective in managing inventory with seasonality as all stocks are aged up to just 60 days.
In line with the current consumer demand, Knitwear and Sweats recorded the highest sell-out rate in the last 90 days at 17% – against the category average of 10%.
Key Takeaway: If you are selling through retailers, try to negotiate delivery delays or offer outright returnable items. Otherwise, you can set up an Outlet/Clearance page on your own website to encourage consumer spending. Work on diversifying your owned sales channels.
No matter big or small, the lessons here from Nike and Lafayette 148 are on speed and adaptability. Successful retailers that survive the pandemic will be those which reacted swiftly. Fashion retailers must innovate to become more resilient.
Your key takeaways:
- Move online quickly and expand on your e-commerce capabilities. Look into online marketplaces for a more expansive distribution strategy. Learn how to speak to consumers effectively during times of crisis.
- Monitor market movements. Adapt accordingly based on the situation – especially for more challenging complexities like supply chains. Re-evaluate current supply levels and identify the affected links immediately.
- Refrain from price hikes and opt for value-led promotions. Newness is still important, so focus on core products and hold off on selling seasonal items.
- If you’re planning for next season, focus on a tighter assortment (reduce 20% of trend-led SKUs) and add transitional designs.
- Set up an Outlet/Clearance page on your own websites to encourage consumer spending. Diversify your sales channels.
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