BRG report examines coronavirus effect on retailers

The retail and consumer practice of global consultancy Berkeley Research Group (BRG) has released a report on the effects of the coronavirus (COVID-19) on the retail sector. The report also outlines steps that can be taken to adequately prepare for potential supply chain disruption, travel restrictions, shifting consumer habits, and other challenges.

"For retailers, the coronavirus is a stark reminder that global supply chains can be disrupted quickly and with dramatic effect," Keith Jelinek, managing director and co-leader of BRG's retail and consumer practice, said. "While the primary concern is the public's health, the long-term implications are significant for retailers of all sizes. As factory closures and travel restrictions continue, retailers that have worked aggressively over the last few years to lean out inventory levels will experience shortages, while current season shipments and future season purchasing delays could disrupt revenue forecasts."

The coronavirus has impacted retail shopping in China – the virus' country of origin. Now, dozens of countries are feeling the effect of the pandemic. Should the virus continue to spread, the possibility of reduced inventories, delayed product launches, shortages of seasonal goods, and changes in online purchasing habits increase.

BRG’s report shows a statistic first revealed in The New York Times, stating that Chinese consumers made up 40% of total spending on luxury goods and 80% of luxury goods sales growth in 2019. Currently, 780 million Chinese citizens are under some type of travel ban, resulting in international consequences for both consumer goods purchasing and manufacturing. Tourism is also facing hardships, with fewer consumers either willing or able to spend money.

The report also offers recommendations for actions companies can take to protect their business models. Organizations should strategically monitor the coronavirus situation, assess sales and inventory, and react to short-term opportunities while planning for the future, thereby increasing opportunities for growth rebound. These actions should be accompanied by analyses that can help objectively assess challenges.

"The strategic necessity for companies to develop scenario plans with short-, mid- and long-term actions is of critical importance," Rick Maicki, managing director and co-leader of BRG's retail and consumer practice, said. "While no one is sure when supply chain operations will return to normal, one thing is for sure: panic is never a good strategy."

BRG is based in Emeryville, California and operates out of offices worldwide. It focuses on disputes and investigations, corporate finance, and strategy and operations.