CAs working in retail talk about the unfolding crisis

The Covid-19 crisis has triggered an almighty shift in shopping. Big-name brands fight for survival, while supermarkets and online delivery services flourish. CAs working in retail talk about the unfolding crisis and the shape of shopping to come…

This summer, finance professionals working in retail should have been dealing with the usual spending spree on barbecues and holiday clothes thanks to the (hopefully) rising mercury. Instead, they’ve been upskilling like never before.

From the moment lockdown was announced in mid-March, CAs working in retail were suddenly flung into military-style operations: overseeing supplies of stock, drafting in armies of temporary workers, factoring furlough into payroll, perhaps pivoting an entire business model from physical to digital overnight.

If, as Napoleon once sneered, Britain is a nation of shopkeepers, then the travails of the retail sector during the Covid-19 crisis fill us all with existential dread. For most people, a traipse to the shops – with their shuttered storefronts and ghostly silent streets – has been an exercise in eeriness. Famous brands – Oasis, Cath Kidston and Carluccio’s – have collapsed.

Retailers once assumed unassailable are facing economic strife: see Arcadia Group (owner of Topshop et al) seeking £50m of funding, while shoppers “buying more Scrabble but fewer sofas”, as John Lewis Chairman Sharon White put it, caused sales to slump at the department store chain. Half of all major retailers in the UK risk falling into administration by the end of August, according to consultancy Alvarez and Marsal.

Yet some retailers are prospering. In April, Amazon was reported to be making $11,000 (£8,800) a second. Demand for food and online groceries has soared while supermarkets have also thrived – British households have been spending an average of £26 per shopping trip, the highest figure ever recorded, and in March, sales at food stores increased by slightly more than 10%, another record.

The fortunes of retail serve as a useful barometer for the rest of our shopkeeper nation. Just as early panic-buying presaged the chaos to come, current shopping trends offer a glimpse of what to expect once we reach the other side. Here are three very different stories…

The Supermarket

Richard McGinn CA, Senior Director of Corporate Finance at Asda, relays the essential role supermarket finance teams have played during the emergency…

How indispensable have finance teams been to retailers during this crisis?

What we’ve seen over recent months has been unprecedented. Asda had to make some key decisions, and it was the role of finance to provide data analysis and insight that supports these decisions. Whether that is guaranteeing full pay to vulnerable self-isolating colleagues, reducing payment terms for suppliers, investing in additional online capacity or increasing the contactless limit from £30 to £45, finance’s input has been critical.

How did the finance team cope with the initial panic-buying?

It was similar to our busy Christmas rush. The difference is, many months of planning go into that – something we didn’t have this time. It became critical to work closely as a team, as well as with suppliers, and the depot and store colleagues replenishing stores. It isn’t just about internal communication, but ensuring information flowing to stakeholders outside the business is swift and accurate too.

How did you set about ramping up the delivery service?

We increased the number of delivery slots from our usual 450,000 to 700,000 per week, reduced opening hours so we could pick customer orders overnight, and introduced electric vehicles to run orders from shops to click-and-collect points. My finance colleagues have been at the heart of increasing online capacity – working through the data analysis, financial modelling and scenario planning.

What advice do you have for any other CAs working in retail?

Be clear on your organisation’s sense of purpose, as it’ll guide decision making. Right from the start, Asda has been focused on ensuring that we do the right thing for our customers, colleagues and suppliers. Having this as our north star was immensely important during those first few weeks.

Have your ICAS qualifications been useful during this period?

In times of crisis, it’s important to go back to your core skills and competencies as a CA: having a structured, analytical approach to problem solving; allocating resources to where they’ll generate the greatest value; having the governance and control mindset that ensures the organisation acts according to its values.

ICAS is more than just an accountancy qualification; it’s provided me with a broadbased business education that has helped me to scan the horizon, join the dots and make clear decisions based on balancing risks and opportunities. These skills have been incredibly useful throughout my career, but particularly when working through this recent uncertainty.

The indie coffee shop

Michaela Kyriacou CA is the founder of London-based coffee bar Bean + Brew. Here she talks about the challenges of shutting up shop, furloughing staff and shifting to online deliveries…

On 11 March, Bean + Brew, the coffee shop I founded, celebrated its first birthday. The shop was full of balloons; it was our best-ever trading day. I was proud. After all, I’d left a well-paid job in corporate tax at EY to work as a barista, and now my business was a success, full of regulars embracing us with open arms.

Fast forward one week, and I shut the doors on the shop I’d worked so hard to build up. It was heart-wrenching. The government had announced hospitality businesses could only run as takeaways. We had to close up for the safety of staff and customers.

Today, my dad drives me around north London as I deliver to Bean + Brew customers. It’s the only trade that we’re doing at the moment. In comparison with our day-to-day business, the revenues we take are insignificant, a drop in the ocean. But I’m grateful for every single order.

I’ve furloughed four of my staff. The government’s job-retention scheme has lifted a colossal weight from my shoulders, but I’ve been phoning HMRC daily on behalf of one staff member ineligible for the scheme because she was hired too recently. Supply chains are another challenge: one of our bakery suppliers isn’t operating because it can’t implement social distancing among its staff.

The whole Covid-19 experience has been a steep learning curve. On the upside, I like to learn. It’s pushed me to become more resilient, and make decisions more quickly. I’ve drawn on skills developed through my ICAS training, such as the ability to see things through when times are tough.

Like many business owners, I have had time to reflect on the way Bean + Brew operates during lockdown. Thanks to home deliveries, we’ve developed a more personal relationship with customers: some have shown support by buying gift cards to redeem when we reopen. Given the popularity of our coffee popularity of our coffee beans, bakery and grocery goods with customers, I’m looking to create a permanent online shop.

Still, it won’t be easy. Once lockdown lifts, people will still be working from home, meaning we’ll lose day trade from local office workers. Th is whole period has been a rollercoaster and easily one of the most stressful times in my life, but coffee is an affordable daily luxury that brings comfort.

Demand will still be there, but it will be a while before things return to normal.

The cosmetics chain

Sarah Bruce CA is Finance Controller, MENA, at cosmetics chain Lush. She is based in Dubai, where stores reopened on 24 April. She talks about what UK finance teams can expect when we re-emerge from lockdown.

  1. Collaborate with other departments

Gone are the days when finance sat in an office, not communicating with the rest of the business. It is now part of the team at the centre of everything. It can’t be standalone anymore. We’ve had to suddenly adapt and make quick, considered decisions to sail the ship through the storm. It’s felt blind at times, but working collaboratively has got us through – departments such as digital or fulfilment have needed speedy answers from us on minimum orders, average spend and what they need to push more on.

One day, I could be working on digital, the next involved with Christmas pricing or brand messaging. I always wanted to work in industry to see different areas of the business. Th at has definitely happened recently.

  1. Deep-dive into data

Data has been critical. Our finance team has an Adaptive data management system, which means I can see all our shops at the touch of a button. It’s been brilliant for reforecasting – showing us different staffing levels, or helping us estimate how much money we have for stock. Meanwhile, Lush’s data systems track business drivers such as sales, footfall, customer conversion and average spend. There will be more people within the business who want to know this data analysis. Remember, not everybody reads it the same way. Some like a chart, others a table or face-to-face rundown. Finance controllers will have to be adaptable when presenting this info.

  1. Less footfall but higher average spend

Stores have reopened in MENA, but footfall is down 75% on last year – partly due to the government insisting malls run at 30% capacity and sales are down around 50–60%. But customer conversion and average spend are increasing.

Digital sales have shot up, too. Digital sales have shot up too, beating the forecasts by a long way.

  1. Get creative

Lush has had to be more creative in how we display and demonstrate products. We’ve let passers-by use soap and sinks for free, to help to halt the virus spread. And with frequent handwashing leaving palms feeling like sandpaper, we’ve launched letterbox-friendly hand-care kits. We created a vinyl-shaped soap that plays Happy Birthday twice to remind people to wash their hands for long enough. Shoppers might not want to touch products in stores, so we’ve launched our Lush Lens iPhone app, which scans the product and gives you info on it.

  1. Payroll and rent will be challenging

Our biggest challenge is rent. Without sales coming in, how do you pay the rent on stores? We’ve been working with landlords: some are offering rent-free periods during closure, and then turnover rent for the first three months after reopening. There’s no government support for employees in the Middle East – it’s left to the company. We’ve had to put measures in place, such as asking employees to take leave and change working patterns to ensure that all staff receive something.

  1. Get ready to reforecast

Once shops reopen, customers will be more cautious – you won’t be ordering at the same levels. We’re now reforecasting for 2020–21. It’s a rolling forecast that we’ll adapt every month.

  1. In 2030, there will be exam questions on business during Covid-19

It feels like we’ve been living through a TPE case study in real life. In 10 years’ time, there’ll be an exam question for ICAS final-year students on how they would handle such a crisis in their business. I can guarantee it.

The future of shopping

Retail experts discuss what lies ahead for shoppers in the post-pandemic world.

A shift to online shopping

Before Covid-19, online grocery shopping was relatively small, representing around 7% of all food sales. As families have become used to shopping from their mobiles, it is expected to rise by a quarter in 2020.

“The early indications are that the market will shift online especially with social distancing measures continuing for some time,” says Ewan MacDonald-Russell, Head of Policy and External Affairs at the Scottish Retail Consortium. “It’s going to create some tough competition on the high street; the sales of some non-food retailers have dropped to zero because they don’t have an online brand and are unable to trade.”

Coronaphobic consumers

“Once the economy revs back to life, we’ll see a prolonged period of consumer anxiety as it’ll take time to adjust to this new normal,” says Richard Lim, Chief Executive of consultancy Retail Economics. “The buzzword pre-Covid-19 was ‘experiential’. Now it’ll be ‘safety’ – shoppers need an environment where they feel protected. The places where they decide to shop will be those putting the safety of employees and customers first.”

At your convenience: the sudden revival of local shopping

Local convenience stores have experienced a surge in sales. It’s a trend set to continue. “People will want to shop closer to home, where they don’t have to travel or use public transport,” says Lim. “They’ll prefer open-air environments to enclosed shopping centres.”

Tech-ready companies will come out on top

“Technology certainly has a role to play in managing the in-store experience,” says Matt Ward from Market Gravity consultancy (part of Deloitte in Scotland). “We’re seeing trials of digital signage for traffic lights systems outside grocers and there are many ways to better assess footfall and space, from CCTV camera feeds to the use of WiFi. The winners will be those brands willing to invest in new tech when cashflow has been so badly disrupted.”

It’s about to get expensive for retailers

“Retailers who continue trading will do so in a more costly environment,” says MacDonald- Russell. “They may have to refit stores for social distancing, bring in extra staff for absenteeism, and invest in their online services. The cost base has gone up by an enormous amount.”

Things don’t look good for fashion brands

When the pandemic took hold in the UK, clothing sales immediately plummeted by 34.8% compared with the previous month.

“There isn’t a demand for new clothes. People aren’t going out and socialising so they don’t need them,” points out Lim. Implementing social distancing in clothing stores is also a logistical headache, with many possibly having to reconfigure their changing rooms.

“Customers won’t want to walk into a shop and try on a T-shirt or pair of trainers that somebody has tried on before,” adds Lim

Cost-cutting will be the mainstay of many retail CAs’ jobs

“Rishi Sunak’s job-retention scheme has given businesses some much-needed breathing space, but over the next year, retailers will look at restructuring the entire business,” says Lim

“[Accountants] will be involved in structural changes needed to make the business more viable. Much of this will revolve around store closures, cutting the number of shopfloor workers, and thinking about marrying the digital and physical experience.”

Understanding and analysing customer data will be crucial

Retailers love data: it allows them to forecast sales, strengthen audit and drive footfall into

stores. What was useful is set to become indispensable. Many accountants could find themselves pulled away from budgeting into financial planning and analysis roles using data harvested from sales receipts, website visitors and loyalty cards to help decision making on where to locate new stores (or which ones to shut) and which products to stock. “This data is going to be essential in making a business profitable in these difficult times,” says MacDonald-Russell.

M&A accountants will be busy

“Putting it bluntly, there’ll be a number of retailers that won’t survive this,” says Lim.

“We expect there’ll be consolidation in the sector: businesses falling into administration, liquidations, and mergers and acquisitions.”


This article first appeared in the June 2020 issue of CA magazine: