More retailers are now closing their non-essential online operations in the face of the threat from Covid-19 coronavirus. Analysts say more retailers may well follow suit – but there are questions about whether some businesses can survive a shutdown that lasts for longer than the initial three weeks.
Online shutdowns
Next last night said that it would close its warehouse and distribution centres temporarily in response to staff concerns.
In a statement issued last night, the fashion to homewares retailer said: “Next has listened very carefully to its colleagues working in warehousing and distribution operations to fulfil online orders. It is clear that many increasingly feel they should be at home in the current climate.
“Next has therefore taken the difficult decision to temporarily close its online, warehousing and distribution operations from this evening, Thursday 26 March 2020. Next will not be taking any more online orders after this time until further notice.”
Next’s announcement came on the same day that River Island said it was closing its distribution centre. It also came days after the government said that non-essential retailers must close their shops, but that online shopping was to be encouraged.
In a statement on its website home page, River Island said: “The government has said that online retailers can ‘operate normally’, but Covid-19 is serious and nothing feels normal at the moment. As a business driven by the love of fashion, we don’t say it often, but some things are just more important.
“Right now, we need to put our people first and so we’ve made the difficult decision to temporarily close our distribution centre. This will help protect our teams and make sure they can do the right thing to keep their families and community safe.”
Orders made by 10pm last night were being sent out, but for orders placed after that time, the retailer said “we are unable to promise when we will get them to you.” River Island has also extended returns to shops to 28 days after the day on which shops reopen – a date that is as yet unknown – while online shoppers have 28 days from receiving their order to send it back.
TK Maxx also closed its website yesterday. In a statement on its website, it says: “You, our lovely customers, our associates and our communities are at the heart of the TK Maxx family and it’s for this reason that we decided to temporarily close our TK Maxx and Homesense stores on March 19. As the situation has unfolded, we think it is necessary to stop taking orders online from today as well.” It says recent orders are being processed as normal, and returns policies have been extended to 30 days from when stores re-open and the website is back up and running.
Games Workshop took the same decision on Tuesday. In a website post, it said it was time to bunker down. Not only would it be following Government guidance by closing its stores, but it would also close its factory and distribution sites, and its online stores would not be selling or shipping products during the period, although its customer service team would be working from home to support customers.
The post said: “This does NOT mean you’re on your own, though. Now, more than ever, the wonderful spirit of friendship and cooperation that binds Warhammer hobbyists together is needed. With that in mind, the Warhammer Community and Warhammer TV teams are bunkered down in their hobby rooms at home ready to update warhammer-community.com with fun Warhammer news, articles and content each and every day.” The teams are also communicating with customers via social media.
Analysts warn of effect of longer shutdowns
Richard Lim, chief executive of Retail Economics, said: “[Next’s] decision to effectively shut down the website shows staff shortages are playing havoc with keeping the business operational. Online was the only channel to drive any source of income and the tap has been completely turned off.
“Next’s decision to temporarily cease online orders follows River Island and Moss Bros and it’s likely that others will follow suit. For many non-essential retailers that had to shut stores, online was their lifeline to continue trading, albeit at much lower levels because of capacity constraints.
“For many retailers, cash flow will soon turn negative and the question is how long these companies can continue to operate without additional financing. Whether this shutdown will have longer-term scarring effects is dependent on the underlying health of the business and whether they can survive a cash crunch in the coming months.”
Commenting, Patrick O’Brien, UK retail research director at data and analytics business GlobalData, said Next’s decision would have an impact around the industry. “Next’s decision is likely to reverberate across the retail industry – and many warehouse workers at other retailers will question why they have not been furloughed to protect their safety.
“River Island, TK Maxx and other smaller players have also shut online operations and as demand for fashion continues to fall, we expect other retailers to follow suit, unless they can find a way to operate warehouses safely. Currently Marks & Spencer believes it can do this, but it and other retailers of non-essential goods will be under pressure from concerned staff.
“While demand for clothing and footwear will obviously be impaired by an isolating population, retailers were hoping that online could partly offset the absence of store sales for the three-week minimum period that non-essential stores have to be shut for.
“In the homewares sector, market leader Dunelm did temporarily shut its online operation but has reopened it for a limited number of items, having cordoned off part of its warehouses and implemented more detailed safety procedures. Some retailers may be able to make such adjustments as well. While both Dunelm and Next are strong enough to ride out the crisis, many others will fail if they are not able to operate online and stores are shut for longer than the initial three weeks.”
How other online retailers are feeling the effect
Retailers that are not yet shutting their shops are seeing their online orders slowed as processes change. Amazon says it’s business as normal, but that it’s prioritising deliveries of essential items and that other deliveries may be slower as a result.
It says: “We’ve changed our logistics, transportation, supply chain, purchasing, and third-party seller processes to prioritise stocking and delivering items that are a higher priority for our customers. These are items such as food, health and personal care products and items needed to work from home. As a result, estimated delivery times for some items may be longer than usual at the moment.”
On its website, Waterstones says that its orders are slower as it usually fulfils orders in store, but is redirecting them to its warehouses instead.
Image courtesy of Next
