CCAA filings present opportunity for retail transformations: Efros
What would have been a booming summer season for Bateman's Bicycle Company in Toronto, Ont. is now set to look much different than usual as the pandemic continues to challenge retailers across the country.
The bike shop's general manager, Mike Spagnola, said only one of the retailer's three stores, all in Toronto, is currently open for service to the city's cyclists, many of whom are anxious to get back on their bikes.
"People are bringing out their bikes from storage that they haven’t ridden in two years because there's nothing else to do," Spagnola said in a phone interview with BNN Bloomberg Tuesday. But, he added, a reduction in the number of employees and strict sanitization measures have slowed down the shop's ability to deliver.
Customers are not allowed inside the shop. Instead, they are asked to wait outside the storefront. They are also advised to make online appointments.
Spagnola said he is worried that by the time the shop can actually service all of its potential customers, the busy months between April and July will be over.
Bateman’s is one of thousands of retailers in Canada reopening after weeks of being forced to shut their doors. Ontario remains in a state of emergency until June 30. But retail stores, except those in enclosed malls, have been allowed to reopen under the province's phase-one plan.
Those that have reopened have had to take measures like placing social distancing signs and markers, providing personal protective equipment (PPE) for employees, adopting contactless payment and installing plexiglass at cash registers.
But how new protocols are shaping up varies widely between businesses.
Beauty-products giant Sephora Inc., owned by LVMH Moet Hennessy Louis Vuitton SE, said it is temporarily suspending the use of product testers and services, and will provide only prepackaged samples that vary from store to store.
Meanwhile, clothing retailer Aritzia Inc. said it is steaming all apparel customers try on but do not purchase. It will also employ on-call nurses available on standby for all locations.
Lululemon Athletica Inc. said it will encourage physical distancing in fitting rooms by alternating empty and occupied stalls. The athleisure giant is also putting its hemming services on hold.
Sporting Life, owned by Fairfax Financial Holdings Ltd., said it has closed its fitting rooms, and will not allow customers to try on shoes for the time being. The company will also quarantine any returns or exchanges in storage for 72 hours as an added safety precaution.
Such measures could cause supply chain disruptions, Farla Efros, president of HRC Retail Advisory, said in a phone interview with BNN Bloomberg Wednesday. She said extended return policies can be a disadvantage for companies since the longer a customer holds onto a product, the less likely the store is to resell it at the full price.
"They are stuck with odds and ends that will impact their markdowns and their inventories," Efros said.
For other businesses, lowered occupancy limits could impact overall foot traffic.
IKEA Canada said it will allow only groups of no more than two people into its stores. It has also advised customers to refrain from touching furniture they do not intend to buy.
Mastermind Toys, for its part, said it is ramping up curbside pickup and temporarily suspending all returns or exchanges. One location in Vaughan, Ont. is “asking parents to hold their child's hand" and has placed merchandise out of reach of children, the store supervisor Viktor Surowiec said in a phone interview with BNN Bloomberg Monday.
Taken all together, the added costs of PPE and the temporary suspensions of key services could drag on business performance.
Bruce Winder, a retail consultant for over 25 years and founder of Bruce Winder Retail, said he expects industry consolidation due to the slowdown.
“These added costs and losses of revenue make it very tough in an already low-margin industry,” Winder said in a phone interview with BNN Bloomberg Tuesday.
He added that he expects double-digit percentage declines for retailers’ EBITDA for this year.
"Some of the small to medium players will disappear. They won't be able to make it through this from a financial and cash flow standpoint," he said.
Winder said he is more optimistic about companies that have made the jump into e-commerce, as he believes online shopping traffic will continue to increase post-pandemic. He said he has heard about retailers leapfrogging years beyond their digital capabilities as a result of taking their businesses online during the crisis.
Though social distancing measures will ultimately be lifted, Winder said “some safety protocols will remain in place" long after the pandemic is over.