TL;DR – The world will not end, retail is really in trouble in the short term, you are not in control but don’t fear the unknown.
I wanted to take a break from my typical writing to focus on today. We are in a weird spot right now. None of us have ever been through what we are currently facing. There isn’t a time in our lives where the world has virtually shut down. I suspect the closest example would be the Spanish Flu but that was 102 years ago, a 0.000001% chance anyone reading this was around for that.
Here I sit wondering if this will be my children’s 9/11, or worse, my grandparents’ depression, and at the ages of 12 and 10, they have no concept of what is really going on. Obviously, they understand the basics but not the downstream ramifications.
The businesses out there today are in a position they have never been in before. If you look back at 2008, it was more like a slow-motion accident as compared to today’s high-speed crash. The economy literally ran into an immovable wall and imploded. Physical retail was already in trouble, stores now shutting for at least two weeks (likely going to be 4-6) will put even more pressure on them, and the online retail space will get a boost for all the wrong reasons.
I have been bullish on online retailing since I had my own retail company from 2005 through 2016. We moved from 0% online to 80% online. But most of the large retailers are barely online. For example, Walmart is roughly 16% ecommerce and they are one of the better ones. But they are also losing roughly $1B online, so it isn’t necessarily that great for them to push more through that channel at a time like now.
I look at our own customers. We power over 1,500 websites and while a lot are 100% online retailers, the impact will still be felt. You don’t shut down the physical economy and online just goes on, you have to take into account all the people that are going to be laid off and the quick-dry up of money.
This is happening so fast that no one can prepare. There weren’t (I bet there will be in the future) contingency plans for this sort of thing. Business interruption insurance may cover some businesses that are forced to close but I have dipped into that when one of my stores burned down, the payout isn’t nearly close to the value of being open.
Then there is Amazon, who announced they are hiring an additional 100,000 workers (not a typo) to handle the demand spike, which then makes you wonder if the offline to online switch just got pushed from a gentle curve to a spike. Will people go back to the ‘normal’ or is Amazon going to be even deeper into everything? This has ramifications for other online retailers and not just physical retailers. Obviously those with Marketplaces will be rewarded but Direct to Consumer is where it needs to be, not through someone else (I wrote about this recently).
For Searchspring, we are lucky that we can quickly shift to working from home and aren’t directly impacted, but we are highly impacted in that our customers are feeling the pains. My personal job is to a) ensure my workers are safe; b) ensure our systems operate properly so that we can handle increased traffic; c) protect the overall company and forward viability. That is the order I am operating and why I have been fairly aggressive to protect our employees. I could’ve been more aggressive – looking back – but raise your hand if you have been through this before.
We are also lucky that we are very financially stable. I am glad that we are not in a situation where a short/medium slowdown jeopardizes our business. I thank our strong board of directors for keeping us on a path where fiscal responsibility coupled with growth is the mantra, and not spend at all costs. As a company, we will exit on the other side in good or better shape, but I worry about the retailers we power and the positions they are in. They are our lifeblood and I personally love ecommerce through and through, such that in some sadistic sense I still wish I had my retail company to counter the current market and show up on the other side proud. Instead, I/we are here to help those retailers out there do just that. I look forward to the other side and some chest-pounding proud retailers, knowing they weathered the most unthinkable and something 100% out of their own control.
I will close with this. There is almost nothing inside of your control today. This is an event that is like no other, you will miss the mark on some things and hit it right on others. What is most important is that you take care of your family and your employees and do whatever you can to lessen the impact on the business, knowing that the world is not going to end over this and there is a future out there. It just seems bleak today and will tomorrow, but in a few months, you will look back and realize it was a bump in the road, a huge bump. Being fearful or irrational and acting with emotion will not make it better, it will make it worse.