Online Business Models come to the rescue of ASX Retailers amid COVID-19

By - Team Kalkine Media

Amidst the outbreak of COVID- 19, people are being deprived of their day to day livelihood due to the government imposed lockdown in various nations of the world. It has led towards the plunge in footfall to stores followed by a wave of closure of doors by many retailers creating a prodigious uncertainty.

This situation is critical for the retailers (especially for “non-essentials” retailers), posing the biggest concern as to how to compensate for loss in-store revenue and to sustain themselves in the market.

However, this time of crisis provides an opportunity to the retailers to adopt digital way of conducting business to help them sail through the storm and see sizeable increases in online retail sales yielding dual benefits for them as well as for the consumers.

In the current period, we may also see a paradigm shift in the consumer behaviour as most of them are working from home, so they are tend to spend more time online making it the right time for the retailers to shift to a new online business model. The effects of this setup might continue in future as well.

Yes, it’s a difficult time but at the same time it can put retailers in better shape and ensure business continuity once the world revives from the crisis.

In this article, we have covered the two ASX-listed companies with online platforms that have beaten the blues and continued to work hard so as to poise strong during the current coronavirus pandemic.

Let’s have a look at their latest updates-

Adairs Limited (AXS:ADH)

A home furnishings retailer in Australia, Adairs has nationwide trail of stores across numerous formats and a thriving online set up.

Source: Company’s Report

Considering the ongoing pandemic followed by the closure of physical stores on 27th March 2020, ADH has divulged that its online operations came to its rescue to manage working capital and costs reduction across the business.

On 4 May, the Company notified the market with the trading update with regards to how the business fared during the last 5 weeks when the stores were shut down, and its further plans for reopening them.

Following are the highlights which showcase how online business outshined and came as a silver lining in the dark clouds:

With the implementation of number of measures alongside multi– channel expansion to reduce the impact of COVID-19, on the balance sheet and liquidity front, ADH came out strong with the cash in hand of $41 million, net debt of $43 million and undrawn debt facilities of $12.5 million (as on 4 May 2020) noting that the April rent for the period post store closure has not been paid.

ADH was trading at $1.560 on 5th May 2020, up by 6.122% (at AEST 2:02 PM). Also, ADH’s market cap was noted at $248.54 million.

Also Read: Would You Consider These Stocks in Your COVID 19 Equity Shopping List?

Accent Group Limited (ASX:AX1)

A retailer and wholesaler of premium lifestyle footwear in Australia and New Zealand region, Accent Group has more than 420 stores in ten distinct retail banners.

As the coronavirus crisis has changed the way people shop, AX1 saw a surge in the Company’s digital sales, as notified by the Company on 26 April. Digital sales grew from an average of circa $250,000 per day prior to store closing on 27th March 2020, to between $0.8million and $1.1 million per day for the last 14 days of April.

Although AX1’s stores were closed to the public during April, they made sure to open some of the Group’s stores, along with some of the staff members to operate as ‘dark stores’ utilising their incessant aisle tech for accessing their complete inventory base.

AX1’s digital business has outperformed, as it has responded on time to the shift in consumer behaviour by providing targeted consumer content and offers to propel traffic to its online platform and converting them into digital sales.

With the growing momentum of the digital sales, the number of stores which were opened as dark stores increased at a rapid scale in April.

In this crisis time, AX1 saw a rise in demand for footwear for critical workers, such as the Skechers range for healthcare specialists. A vigorous demand was seen in active footwear and apparel space as majority of people were engaged in physical works.

AX1s Offline stores, as well as rise in the online business, gives a competitive edge to the Company. Further, in the coming months, they will re-evaluate the location, size and format of numerous stores to strike a balance between online and offline store sales.

During the last 2 months, AX1 gained further banking facilities, and the total facilities stood at $207 million, while the current net debt was noted at $112 million.

Accent was trading at $1.19 on 5th May 2020, up by 9.677% (at AEST 3:51 PM). AX1’s market cap was noted at $588.25 million.

Interesting read: Measures adopted to manage the meltdown and survive COVID-19 – JIN, RBL, CKF, DMP

The road ahead

The COVID-19 pandemic may pose a challenge in the short run, but it may unfold an opportunity to transform the companies and provide plenty of time to invest in their digital way of running business, helping companies to build revenue streams via offline and online platforms and come out stronger from traumas that might pose a challenge even in the future.