COVID-19 A New World for Airports - Control what you can. Quickly. Start preparing for the "New World" - The Moodie Davitt Report
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COVID-19 A New World for Airports Control what you can. Quickly. Start preparing for the “New World” Updated on April 8th
COVID-19: Control what you can. Quickly. Start preparing for the “New World”
• COVID-19 is unlike any previous crisis, a “blink” on the long term growth of the Aviation industry
– This time traffic recovery will be hard and long-term, there will be permanent impacts, non aviation will be very different (different
categories/ brands client preferences, …)
• After crisis competitive scenario will be radically different: less Airlines, most of which state-subsidized, less Travel
Retailers, many privately-managed Airports state-subsidized, less secondary Airports?
• To face this, you need to proactively govern the situation, act fast to protect cash as much as you can, proactively
manage 10s of different stakeholders, start putting the basis for the transformation to be ready for the “New World”
• To try and help Airports on this impossible task, we have put together 10 pages to collect experience we are getting from
talking to many players in the industry (Airlines, Airports, Travel Retailers, Brands, Governments) and our Point of View
– At the end of the document you can find, as a reference, similar “game plans” we are discussing with Airlines and Travel Retailers/ Brands
• You most likely have already activated most of the measures and reflections contained here, but we hope you will find these
elements and game plan useful to complement your and your team own actions. We are at your disposal to discuss
and provide further depth
• This is a “living” document, we will issue new versions as new relevant elements come in
This information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation
SAO and may therefore not be Covid
Airports reliedPOV1_vsent
on 2COVID-19 crisis is different form all other epidemics
Epidemics
2003 2009 2010 2014 2017 2020
SARS H1N1 H7N9 COVID-19
Confirmed ~8.000 ~60.000.000 ~1.600 >1.350.000
cases (2002-2003) (2009-2010) (2014-2017) (# as of April 8th,
still ramping up)
Mortality
~800 ~18.000 ~600 >80.000
~9,6% ~0.03% ~40% ~4%
(# as of April 8th,
Rate close to still ramping up)
common “influenza”
Source: National Health Commission of the PRC; WHO; Lit research
This information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation
SAO and may therefore not be Covid
Airports reliedPOV1_vsent
on 3COVID-19 will not be a “blink” as 9/11, SARS or Financial Crisis
Global Air Traffic – Billions of Passengers Carried
Traffic recovery will be not be a
COVID-19? simple “V shaped” bounce
4 back
Financial
Crisis
3 A number of factors will
SARS conjure to prevent it
2
9/11 • Travel restrictions going on
in different part of the worlds
• Travel health risk (real and/or
1 perceived)
• “Doom” attitude linked to
high death toll from COVID
1970 1980 1990 2000 2010 2019 • Deep Global recession
Source: World Bank
This information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation
SAO and may therefore not be Covid
Airports reliedPOV1_vsent
on 4Air Traffic recovery will likely be only in the mid-long term
Hit in short-term, Hit in short-term, Spiked in short-term, Spiked in short-term,
1 recover in long-term 2 bounce back or grow 3 stabilize in long-term 4 keep growth
faster in long-term momentum in long-term
Definition Demand suppressed during Demand suppressed during Demand stimulated because of Demand stimulated because of
outbreak, to recover to pre-COVID- outbreak, to bounce back to even panic stockpile and staying at treatment need and staying at
19 level higher consumption level because of home, to return to normal level home, may keep growth momentum
“revenge buying” or mindset and stabilize after outbreak because of mindset and behavior
change change
Industry • Transportation & tourism • Apparel • Grocery • Entertainment & education (online)
examples • Restaurant & food service • Insurance • Telecommunication • E-commerce (demand spiked,
• Entertainment & education (offline) fulfillment partially constrains in
short-term)
• Real Estate
• Healthcare
• Auto
• Household appliance
Actual behaviour will strongly differ by Airport (Region/ Country, type of traffic, major Airlines, …)
We have tools to help you forecast scenarios specific for your Airport(s)
Source: Lit research, Bain analysis plus a Macro-surveillance website constantly updated with our latest intelligence
This information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation
SAO and may therefore not be Covid
Airports reliedPOV1_vsent
on 5Scenario for key Travel Retail categories more positive…
Key Travel Retail categories – all channels Key Travel Retail categories – all channels
The next 18-24 months Mid-term growth
• Based on the available data and foreseeable evolution 2020 will report a • Mid terms growth driver remain confirmed
strong contraction in global luxury goods purchases, with a likely
reverberation over 2021, which could take different patterns by region/country
Rising Chinese middle class
Luxury market next
• Chinese middle class to increasingly
18-24 months
become luxury shoppers (more locally) and
evolution by region
driving overall growth of the market
China
Rapid stabilization Younger customers
RoAsia YZ • New generations (Y and Z) recovering
their dynamism and willingness to buy
luxury, delivering all market growth and
Japan compensate for the slow down of older
generations
Americas
Digital channel
Dip and rebound Europe @ • Online to continue represent the largest
growth pool and influence 100% of luxury
purchases
2020 2021 and beyond…
This information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation
SAO and may therefore not be Covid
Airports reliedPOV1_vsent
on 6…but with very different categories/ brands mix
…rise in health concern • The amplification of the current facts and the impact on people lives and lifestyle is likely to
(in general, not just about luxury) reinforce consumers mindfulness (in general, not just about luxury) and sensibility to health concern
…acceleration of share • Consumers will restart shopping at physical stores (once they are open and safe again), but if brands
“elevate their digital game” (better assortment, user experience, optimized marketing, …), the appeal
of digital shopping of the digital channel increases, accelerating its growth
(driven by brands)
• Sustainability will remain a key topic (esp. for Gen Z and alike-minded consumers)
…confirmed advocacy
for environment (possibly • Some brands may take the chance to rethink their end-to-end product lifecycle and supply chain
boosted by “champion” brands) for higher sustainability (also for the challenge of excess of unsold stock)
…higher expectations • Current brands activism (brands advocating for people safety, donating to hospitals and medical
centers) reinforces consumer conviction that brands should complement the action of governments
of brand activism and institutions on social matters
• As some impacted nationalities suffer “social stigma” by international public opinion, they show a
…strengthened local reinforced national/cultural pride and are becoming more vocal against those brands who are
pride not on their side (e.g. Western brands making donation to their home country institutions, but not
supporting the people in their core market – e.g. China)
Also on Non Aviation, Actual behaviour will strongly differ by Airport
We have tools to help you forecast scenarios specific for your Airport(s)
This information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation
SAO and may therefore not be Covid
Airports reliedPOV1_vsent
on 7Short term
A New World for Airports, after COVID-19 Medium / Long term
• Likely fewer, larger Airlines, as the crisis will trigger an involuntary sector consolidation
– Airports relying heavily on an Airline, especially if for connecting traffic, need to assess their position
– Management of Airlines bad debts today will also influence competitive outcome for Airlines
• All Airlines will be much more “aggressively focused” on costs, including Airport-related ones
– Depending on till system, Airports might see “aggressive” renegotiations of their fees (both non-regulated and, at a certain extent, regulated)
• Traffic recovery will not be a “V shaped” bounce back: it will be long and painful, and differ by Airport
– Airports will need to have a continuously updated view on the likely scenarios for their specific situation
– Airports will also have a key role in influencing pax behavior (i.e. addressing health concerns, …) and helping traffic recovery
• Pax choice parameters will likely include, on top of the “traditional” ones (price, schedule, frequent flyer, …) also health protection
– Airports will need to differentiate on pax health protection initiatives (above and beyond country regulations), especially for connecting traffic
• Different pax Retail behavior: omni-channel increase after “forced trial”, reinforced sustainability focus, categories/ brands mix shift
– Airports will need to “double down” on omni-channel (CRM, Tracking, Web, …), on “sustainability” positioning (not only in non-aviation) and re-think
Retail strategy, space allocation and contracts
• Likely fewer, larger travel retailers, as the crisis will trigger sector consolidation, much more focused on costs control
– Airports with a diminished negotiation power vs. retailers, some rents levels challenged as retailers will limit investments also on Tier1 locations
– This will be fundamental in the upcoming full contracts renegotiation in non-aviation (both short term and mid-term)
• Governments will (have to) move to ensure strategic Airports (state-run and private) will continue to operate during and after crisis
– Tier1 Airports might benefit from Government support but their profitability/ ROI might be challenged by public opinion
– Tier2 Airports might face different priorities from Governments, within limited funds
Fundamental to act fast both to “Preserve Cash” AND “Prepare for the New World”
This information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation
SAO and may therefore not be Covid
Airports reliedPOV1_vsent
on 8Airports “crisis game plan” - 1: ACT NOW - Govern -proactively- the situation
• Set-up an intelligence task force and dashboard
– Set up a constantly updated Dashboard(s) and News Room with critical KPIs/ Information to monitor: context evolution, people safety, cash, business perf.
– Establish a process for developing and constantly updating short and mid-term market scenarios. Key input for short-term decision-making
– Invest >1FTE to systematically track what is going on in the industry at large (Airports, Airlines, Travel Retailers, Industry Associations, Gov’t entities, …).
Another key input for short-term decision-making
• Establish a high-velocity decision making Emergency Response Center
– Nominate and empower an ERC with crisis leaders, functional experts and external advisors
– Make sure legal is over-represented in ERC: contractual issues, potential health-related claims from employees and pax, …
– Make sure ERC has full visibility of situation (full access to all information, governance of the intelligence task force and dashboard) and has centralized control
of all levers (ability to direct action with any company employee/ asset)
– Make sure your people balance “fire fighting” with “thinking and planning”
• Proactively manage all stakeholders: the number and complexity of interactions has grown 100x
– Reinforce the team with senior people from other dept’s
– Prepare and continuously update a Plan: what you need, how to get it, from each stakeholder
– Be proactive in setting and managing interactions
• Over-communicate internally and externally
– Make sure your Top and Middle Management is fully constantly updated on the evolving context, business, priorities, action plan
– Have a clear plan on who communicates what internally. All of your people should have constant updates and feel “over-communication”
– Drive a clear and constant external communication: your are a fundamental part of the community you serve, you need to be present and active
– drive a clear and objective communication internally and externally with few honest and fact based messages
This information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation
SAO and may therefore not be Covid
Airports reliedPOV1_vsent
on 9Airports “crisis game plan” - 2: ACT NOW to address immediate risks/ opportunities
• Protect People
– Go above and beyond government regulations to ensure your people, your partners and your pax feel safe. Over-communicate on health protection
internally and externally. Use this as a differentiating lever for you and your partner Airlines
– Evaluate to close non-essential areas of the Airport to reduce infection risks
– Ensure maximum support to critical operations that go trough your Airport, both pax and cargo
• Re-modulate operations capacity aggressively
– Adjust operations capacity on a weekly basis based on updated short term and mid-term plan
– Re-think operations forgiving “traditional” constraints: Airlines separation, Retail flows, …
– Cancel any ops job you can (unless subsidized by Gov’t). Accurately select jobs to cut/ reduce/ suspend in HQ (most people you will need more than ever)
– Cancel any outsourcing contract you have, if you can quickly fill that in with internal resources (training/ certification needs)
• Control Cash
– Re-think Capex based on your best-estimate mid-term scenario, define plan to cancel/ re-modulate balancing need vs penalties/ stakeholders impacts
– Aggressively re-negotiate short, mid and long term debt / credit lines even if think to be able to honor them
– Aggressively ask for Government “moral suasion” to support you on Capex and Debt re-negotiation. You are a strategic infrastructure
– Launch an aggressive procurement re-thinking/ re-negotiation campaign. Most likely there is significant value hidden there, considering the crisis
– Postpone any payment you can, leverage Supply Chain Finance (with Gov’t support/ guarantee) to ensure suppliers get liquidity anyway
– Cancel dividend payment if you have not already materially paid them
• Manage key Partners
– Assess realistic future of partners Airlines, identify those that will be crucial for your future (not necessarily the same as before crisis). Examples
> Unpaid Airport fees: support only the crucial ones
> Health concerns: prioritize the crucial ones on co-preparing operational plans to address pax health concerns (beyond regulatory)
– Evaluate Non-Aviation MAG re-negotiation based on necessity to ensure your current partners do not go bankrupt. Difficult to substitute in the short term
– Assess realistic future of Non-Aviation partners and act accordingly also on short-term decisions
This information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation
SAO and may therefore not be Covid
Airports reliedPOV1_vsent
on 10Airports “crisis game plan” - 3: PLAN NOW - Transform to prepare for the future
• Support your community and the global travelers to maximize speed of air traffic recovery
– Once the pick of the crisis will be over, ensure you have a leading role in re-assuring passengers that air traffic is safe (addressing air travel health
concerns and over-communicate them)
• Identify the key decisions that you are taking now and will affect your business mid-term
– Which airlines to prioritize (see previous page), and how to partner with them
– How to address Non Aviation partners in this situation: enforce current contract-MAGs?, re-negotiate an “emergency” bridge?, …
– Capex cancellation/ re-thinking
– Debt re-negotiation
– …
• Make sure those decision are based both on immediate necessity and mid-term scenarios
– Generate (and constantly update) mid-term traffic, aviation and non-aviation scenarios and leverage them support short-term decision making
– Elaborate a “zero based” view of your business (revenues and costs) in the new mid-term scenarios, and identify the initiatives to get there
> To be launched immediately: e.g. procurement re-thinking
> To be launched after crisis: e.g. automation/ digitalization, travel retail “new” full potential, …
– Elaborate explicitly which initiatives you can launch “leveraging” the crisis, that you would never had been able to do in a less critical situation
• Explicitly dedicate “10%” of your and your team time now to think at how you get out of the crisis stronger than before
– Better position with Airlines and Non Aviation partners
– Well prepared for the “New World” both on Aviation and Non Aviation (re-think retail)
– With a higher market share in your catchment area/ on connecting traffic
– With a differentiating position on health control and sustainability
– Maybe with an investment in another Airport
– …
This information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation
SAO and may therefore not be Covid
Airports reliedPOV1_vsent
on 11Final thoughts: act now to “Preserve Cash” AND “Prepare for the New World”
• The greatest challenge is governance and engaging
senior management
– A dramatic move away from traditional “long term planning”
• The shift to cash conservation will be fundamental
– But will need enormous effort
• The level of senior management bandwidth to manage
partners aggressively is unprecedented
– Labour, different Government stakeholders, Regulators,
Airports, Banks, Travel Retailers, etc.
• This event will likely change our world, the “New
World”, even after Crisis has ended, will be different
– Need to start preparing now for it, it will require significant
change, cancelling/ acceleration of projects, …
The sum of a fast short term action and
dramatic mid-term business re-thinking
This information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation
SAO and may therefore not be Covid
Airports reliedPOV1_vsent
on 12ANNEX
COVID-19 Airlines game plan
COVID-19 Travel Retailers/ Brands game planAirlines “crisis game plan” - summary Airlines
Be focused Engage with
on main Protect the Separate 2020 Prioritise customers
levers people first from beyond cash & partners
Establish a Dedicated Protect your staff: S2020 & W20/21 realism Ensure executive mind- Understand changing
Unit: close to key invest to ensure the – Leveraging real world shift to cash needs and expectations
decision-makers and safest working experience – Daily position shared
empowered to make environment with execs Create drumbeat of
– Collaborate with labour – Goal shift in AP/AR
recommendations and communication:
track all COVID-19 Protect the Rapidly adjust coming Reinforce balance sheet especially with
related activities passengers: working months commercial partners
Immediately engage in
internally with authorities and – With JV partners renegotiations Rapidly engage with
learning from partners
– With eye on competitive – Hub / Lessors / OEM hub operator as a
Over-communicate: actions /MRO
relevantly and Focus on the hub: as – Distribution channels partner
a network airline, – Clear triggers to thin or
consistently to all – Grind out procurement
particular care around pause flying Appeal to authorities for
stakeholders savings everywhere
connecting facilities and support and clear
Considered 2021-22 Rethink overheads
Scan the market and lounges is critical guidance
scenarios: – Freeze all hiring & non
listen: absorb best essential training
– Manage slot portfolio Closely monitor supply
practice and respond – Seek break clauses
– Aligned with partners chain:
quickly to regulatory Adjust key commercial
changes – Prepare sufficient buffer
Assess need to change levers: especially in
strategy – Credit cards Maintenance.
– Loyalty
– Relative cost position
– Interline
– On-board product
This information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation
SAO and may therefore not be Covid
Airports reliedPOV1_vsent
on 14Airlines “crisis game plan” – details (1/2) Airlines
Establish a control • Set up a small but trusted Dedicated Unit attached to CEO/CFO/CRO Office
Centralise • Hold together multiple ongoing communication initiatives
tower
visibility of levers • Track internal progress of COVID-19 related activities and be ready to adjust up and down
• Report internal KPIs deemed relevant for major commercial decisions
Over - • Ensure staff hears it from you first and create extra bandwidth across all channels internally and externally
communicate • Activate extra handling resources at hub and key transfer points
Scan the market • Dedicate >1 FTE to scanning other airlines’ actions
and listen • Support Network/ commercial/ ground teams with timely information of COVID-19 spread into markets
• Cancel non operationally critical gatherings > 20 people and consider closing canteens
Protect the Protect your Staff
• Review crew centre /airside gatherings pre/post duty and halt (almost) all staff travel
people first • Consider reducing IMO in-bound travel for IT contractors
• Clear hygiene and health advice to all staff (head office, flying crew, station staff)
• Review cleaning/hygiene facilities, in the light of regulatory input, for all staff and adapt
• Take advice on possible deep cleaning of most used areas/facilities, sites and in the hub
Protect the • Clear information provision in coordination with Hub and outstation operators, Alliance/JV partners
passengers • Review inventory and availability of hygiene products (soap, water, wipes) on board/lounge/check-in/ gate
• Changes in refund/change conditions and review of cleaning protocol following regulatory/expert input
• Consider stopping/changing catering service and alterations to lines of flying for geographic focus
Focus on Hub • Review all connecting procedures along with key partners (airport, security and immigration)
• Identify infrastructure opportunities to manage passenger flows from affected regions separately
S2020 & W20/21 • Design a core set of graduated scenarios preferably based on currently observable realities.
Separate 2020 realism • Ensure Revenue Mgmt systems are manually adjusted
• Plan with labour to address short term options such as furlough, reduced duty flexibility or other forms of leave
from beyond
Rapidly adjust • Evaluate competitor actions and announcements:
• Immediately agree with JV/antitrust partners
coming months
• Agree guidelines and clarify network/schedule teams decision rights for route thinning / suspension
• Evaluate Fleet size adjustment
This information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation
SAO and may therefore not be Covid
Airports reliedPOV1_vsent
on 15Airlines “crisis game plan” – details (2/2) Airlines
Considered 2021-22 • Design a set of 2-3 year scenarios: market sizes, yields, competition, fuel prices, environmental costs
Separate 2020 • Aggressively reshape fleet planning options
scenarios
from beyond • Rethink completely balance of capacity across various group entities
(cont.) • Map out the combinations of market, capacity (MAX return?) and competitor actions
Assess need to • Ensure balance sheet can create a safety net and resilience to hostile approaches
change strategy • In case of persistent low yields lay out path to retaining/building relative cost advantage
Understand • Ensure feedback from front desks and call centers is consolidated and fed back
Engage with • Engage in ethnographic studies along physical journey and launch a program of evidence-based say/go testing
changing needs
customers and
Communication • Leverage Control Tower to ensure direct channels and ensure PR teams are working together
Partners
Hub operator • Ensure codependency is clear at highest levels and enhance focus on staff and passenger safety
Appeal to • Locate key counterparts and ensure your executives engage fully and be aware that Health guidance is critical
• Identify potential areas of government support and consultation for all travel restriction changes
authorities
• Initiate conversations on broader industry support and explore IATA support & guidance
Closely monitor • Ensure access to engineering spares
supply chain • Explore opportunities for earlier/later refurbishments, heavy checks and shop visits
Ensure executive • Daily position shared with all execs with weekly reforecast and stay away from P&L budgets
Prioritise cash mind shift to cash • Ensure Finance tightens /loosens and defer executive fixed compensation and adjust variable
Reinforce balance • Draw down on all existing credit lines and then extend lines and support from FFP credit card bank partners
sheet • Suspend non-critical payments where possible and review hedging policies on fuel and currency
Immediately engage • Renegotiate Fleet both with OEMs and Lessors and with other strategic suppliers
in renegotiations • Procurement to immediately renegotiate with all suppliers and renegotiate with FFP partners
Rethink overheads • Freeze all hiring and cancel all non-essential (operations) training and seek break clauses in contracts
• Reduce & rethink marketing/ advertising and consider flexible staffing/ shift models
Adjust key • Review interline agreements, immediately adjust marketing spend/type and moderate capacity
commercial levers • Reduce regulatory delay fines and review loyalty earn/burn (status retention) and Cargo opportunities
This information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation
SAO and may therefore not be Covid
Airports reliedPOV1_vsent
on 16ANNEX
COVID-19 Airlines game plan
COVID-19 Travel Retailers/ Brands game planTravel
Travel retailers – brands game plan: summary Retailers/
Brands
Govern
don’t be carried away
Intelligence task-force High-velocity decision making Internal and external
and dashboard committee communication plan
(assess, plan, re-assess, adjust)
Act
to address immediate opportunities & risks
Transform
to prepare for the future
Top line protection and “Smart & agile”
mitigation initiatives execution decision making & way of working
OpEx and CapEx
Supply Chain Reinvention
re-phasing and shifting execution
Short-term operations
Digital Boost
contingencies actions
This information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation
SAO and may therefore not be Covid
Airports reliedPOV1_vsent
on 18Travel retailers – Brands game plan: define and fine-tune plans Travel
informed by robust and fresh intelligence, and drive teams actions Retailers/
Brands
GOVERN
Intelligence task • Set up an periodically updated dashboard(s) and news room with critical KPIs and information to monitor
force and – Context evolution
dashboard – People safety
– Business performance (i.e. Retail turnover, production lead-time, inventory stock)
• Develop external market scenarios (on consumption) based on evolution of epidemiology and socioeconomic
responses
• Assess impact to P&L, balance sheet, cash-flow for each scenario, considering contingency plans
High-velocity • Nominate and empower a (restricted) committee of crisis leaders, and extends invite to functional experts
decision making and external advisors (based on topic)
committee • Establish a lean but dedicated project management office (PMO) to coordinate and support the committee
• Periodically re-assess the situation and adjust priorities and plans based on the evolving scenario and
emerging results
• Delegate to operative task-forces by objectives
Internal and • Constantly update top management on the evolving context, business and priorities and action plan
external • Drive a clear and objective communication to teams to enable their action and contribution
communication
plan • Define few, honest & fact-based messages to be conveyed externally to inform on business continuity (don’t lie
/ don’t panic)
This information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation
SAO and may therefore not be Covid
Airports reliedPOV1_vsent
on 19Travel retailers – Brands game plan: execute contingency plan Travel
through pragmatic initiatives across top-line, costs and operations Retailers/
Brands
ACT
Topline • Redirect sales to the more resilient channels / geographies (safe for people / not impacted): e.g.
– Double down on online (including digital messaging) in response to retail traffic decline in interested epidemic areas
protection and
– Update CRM playbook and initiatives; activate top customers while growing customer experience across touchpoints
mitigation – Perform quick evaluation of expected upside potentials and related costs for the various initiatives
initiatives – Perform preparatory activities for when the outbreak will be over (e.g. China), with clear “go/no-go” deadlines
execution • Test new models to next sales campaign for buyers (e.g. virtual showroom, trunk shows)
• Postpone/cancel non-converting mktg. activities (incl. fashion shows) and re-negotiate agency fees (if any)
OpEx and CapEx
re-phasing • Postpone all non strategic CAPEX investments (e.g. stores openings in affected countries)
• Manage retail and other costs (e.g. hiring, training, VM rotations & Props, rents renegotiations, travelling)
Short-term • Optimize current season working capital (stock reallocations, temporary stores/outlets activation, production
operations phasing/postponement – e.g. permanent items with sufficient stock levels, …)
contingencies • Put your Supply Chain in crisis mode to ensure end-to-end product dev., production & delivery (“red and
actions blue” teams in prototyping/manufacturing/warehouses, 3D product dev., reshoring, expedite of late deliveries,… )
• Develop buying approach and guidelines for next season (how to split the OTB, how to cluster stores based
on expected impacts on consumption of Covid-19, what and how much to buy for identified store clusters)
• Review OTB for next season, accounting for evolution of Chinese and other nationalities consumption –
develop scenarios (be ready to trigger actions - e.g. to unlock budget if situation rapidly improves)
• Review next season collection structure to account for potential production issues (both façon but also
raw material – e.g. cashmere, silk, leather,…); potentially focus on key raw materials (especially fabrics) to order
in advance to ensure availability when production will start (considering current disruptions in sourcing)
This information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation
SAO and may therefore not be Covid
Airports reliedPOV1_vsent
on 20Travel retailers – Brands game plan: take the opportunity to fully Travel
transform those areas that this outbreak has made more critical Retailers/
Brands
TRANSFORM
“Smart & agile” • Enable faster and more robust decision making
decision making – Design and set up advanced-analytic dashboards, easily available, updated and insightful
& way of – Streamline governance and accountabilities (removing old legacy process / silos)
working • Make the way of working more in line with the mindset of the new generations
– Design and roll out a model for flexible working hours / locations (to better fit individual lifestyles, and optimize costs)
– Enable virtual meetings and collaboration (saving on travel costs, allowing flexibility, reducing carbon footprint)
Supply Chain • Transform your Supply Chain becoming more reactive and flexible to enable a “seasons-less” and “drops-
Reinvention oriented” collection structure
– Upgrade suppliers/vendors base, carefully judging their ability to quickly react at scale (without deteriorating product quality)
– Redesign all internal processes, from product dev. to delivery – also cross-functional (e.g. S&OP), to reduce lead-times and
gain speed without increasing risks (e.g. blind orders)
• Increase your bar on sustainability and innovation
– Enhance your sustainability initiatives and control across value chain and introduce innovations (3D product dev., …)
Digital Boost • Unlock the full potential of omnichannel
– Define your omnichannel full potential vision and unlock current constraints (functional silos among channels, lack of shared
MBOs / incentives across channels and geos, lack of integrated customer view, B2B logistics mode and processes, …)
– Design, launch and execute enabling initiatives (including enabling IT systems enhancement /re-platforming)
– Revise the role of the store in the omnichannel eco-system and take opportunity to optimize the sub-optimal DOS & doors
• Optimize marketing spending and take more control on digital marketing
– Identify digital capabilities (systems, talent, …) to be internalized (vs. agency black-box)
– Adopt a marketing model based on test and learn to optimize costs and results
This information is confidential and was prepared by Bain & Company as a summary of best practices in response to COVID-19. It has not been tailored to any specific situation
SAO and may therefore not be Covid
Airports reliedPOV1_vsent
on 21Mauro Anastasi mauro.anastasi@bain.com Lorenzo Ferroni lorenzo.ferroni@bain.com Derek Gerow, Bain Global Aviation Sector Head derek.gerow@bain.com
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