Executive Smart Talk: Athletic Sales in the Pandemic

As the coronavirus pandemic continues to take a toll on businesses across the globe — and with its impact expected to be felt well into 2021 — many industry leaders are reassessing their go-forward strategies.

In FN’s third installment of its “Leadership in a Crisis” webinar series, held today, FN Editorial Director Michael Atmore spoke with Jennifer Estabrook, president of Fila North America, and David Sykes, head of Klarna U.S., the sponsor, about how they plan to navigate an entirely foreign retail terrain.

Listen to the replay of the webinar here.

Returning to the workplace

“There are two components to it,” said Estabrook. “The practical: the social distancing, the need for cleaning, the need for PPE, the staggering of the workforce. But that’s intertwined with the human component. We have offices in New York City, in Maryland and then people working remotely. We know people will be nervous about coming back, they’re going to have fear and concern. So we’re going through our office set up, [creating] space so people can social distance, staggering shifts so people can come in only two days a week or as needed.”

For Klarna, the successful adoption of remote working eases the pressure on management to get everyone back on-site.

“We work in 19 different countries and in multiple cities within those; there needs to be a different strategy for each with this,” said Sykes. “We view it as, ‘What’s in the best interest and health of our employees?’ We’re very fortunate in that working remotely is something we can do very effectively by the nature of our business but, as we make those decisions, it’s all about what’s in the best interest of our employees. New York is different from Columbus, Ohio, and L.A.”

Lessons from the global experience 

Owned by a Korean corporation, Fila North America has close relationships with its staff in Asia as well as its European teams. Their insights can help better prepare the US approach.

“The pandemic started in China, spread to Korea, spread to Europe,” said Estabrook. “We look to each of those markets to see their experience. In China, they had an absolute shutdown of their country for a period of time, including most retail, and they’re opening up slowly; we’re looking to see what practices they’re taking. In Korea, they were out of the office for about two weeks and then came back — but you can’t go into the office without a temperature check, you need to have a mask.

“In Italy, they’re going to reopen for the biggest industrial companies next Monday,” she continued. “About 30% of the industrial companies were still operating because they had special exceptions; by next week 60% of the country will be open. They will then wait for 15 days to see that impact before they open up the retail stores. What they’ve done is come up with a country-wide protocol that applies to offices and points of sale. Most of the principles are the same: social distancing, the intensity of cleaning, the shifts, etc.”

Jennifer Estabrook Fila
Fila’s first woman president, Jennifer Estabrook.
CREDIT: Fila

Shifts in consumer spending

“We’ve seen these four key periods of spending from an e-commerce perspective,” said Sykes, referring to Klarna’s insight into a million global transactions each day. “One thing we’ve been surprised by is how quickly spending patterns have changed, not just pre- and post-COVID but week to week.”

The initial phase of stocking up on essential items, such as groceries and pet food, was followed by spending increases in “work from home” items. More recent, Sykes described a shift to more activity-based spending.

“We then moved to the ‘let’s do something phase,’” he said. “Individuals who are facing long periods of quarantine at home are trying to work out how they can make the best of that time. So there were real spikes in athletics, whether that’s running shoes or at-home fitness equipment.”

Impact of government stimulus 

“For a lot of consumers, it was a really welcome ability to go out and buy essentials,” said Sykes. “We saw the effect of that stimulus money flowing through the platform and the economy as consumers used that to go and buy, whether it was buying groceries or shopping at Target or Amazon.”

For Estabrook, the contrast between the amount of government financial support in Europe versus the U.S. has had significant impact on the attitudes of consumers.

“It comes down to people needing to feel confident that they have money in their pocket and they know where it’s coming from,” she said. “The social net of Europe is quite different; they know that if something happens, the government will be there to backstop, which gives them a different level of confidence. In this country, with 20 million people unemployed, we are just not set up for that level of support. When people did get those checks, it did make them feel better — it goes to how important it is that we have a different approach in our country to get us through this period of time.”

Avoiding staff furloughs

“The hardest thing you’ll ever do is to let go of staff for the future of the business,” said Sykes. “What’s really important is how you do it and the steps you take. I admire most the businesses that are doing everything they can to retain staff whether that’s mandating holiday leave or suggesting one day off a week. Then it’s treating people like humans if you make that decision.”

Estabrook has prioritized keeping Fila’s employees on staff, leading to negotiating rent with Fila’s landlords to conserve the necessary cash.

“I had to terminate 25 people in the middle of the 2008 recession and that was such a difficult thing to have to do because of the pure fear in people’s eyes,” she said. “When we first closed the office, we didn’t consider laying people off. We had to think about trimming costs to preserve cash flow. What we did was we paid half the rent on all our facilities in the U.S. and I called our landlords ahead of time and I told them, the reason I’m doing it is I need to keep my employees employed.”

David Sykes, head of Klarna US.
CREDIT: Courtesy of Klarna

The benefits of hindsight

“It’s hard to answer that question because I can’t fathom my brain being in a state to wrap itself around how severe this would be, that the country would be shut down entirely,” said Estabrook. “I probably would have canceled more orders. In December we started discussing increasing our credit line with our banks but it’s still in final review this week; I think I would have shown up at their office and done whatever I could have to get it approved and get the documents produced.”

Digital selling

“We’re going to need to learn how to sell remotely,” said Estabrook. “We’ve learned how to have meetings remotely, birthdays remotely, we’re doing everything online; we’re going to now need to do that for sales. It will be a sea change. I heard that Nike is doing video meetings with buyers every few weeks and we might need to too, as it will be several weeks that we’re doing this remotely.”

Communicating with consumers 

“It’s a very, very delicate balance because there’s so much sadness going on in the world,” said Estabrook. “You have to be very mindful that while some people’s biggest issue is that their kids are making them crazy or they’re tired of being home, that there are people among us who have lost people in very painful ways. We’re trying to remain sensitive in our tone and be very careful in our messaging: we’re using our tennis athletes to reinforce and keep people engaged in the message that people need to stay home at this time.” 

What this means for shopping habits

“A lot of what we’re seeing now were pre-existing trends: video conferencing, click and collect, online grocery,” said Sykes. “What COVID-19 has done is accelerate these trends. There are some consumers who purchased groceries online for the first time and for some of them, they will go right back to the store. But for others it will become their preferred method.”

Estabrook agreed that consumers were likely to take different approaches to shopping, once stores re-open: “The people who like to be online and work from home, it has just reinforced how they feel, while people who are frustrated by technology and like to go to the grocery store, those people will likely keep going to the store to control that.”

Economic advice to President Trump

“They need to think about and encourage the banks and funding sources in this country to cut slack to the biggest employers — I’m focused on the retail sector — because those retailers employ a lot of people,” said Estabrook. “They have to encourage banks and private equity firms and all the people who make the live-or-die decisions, to put aside maximizing profits for the moment and keep businesses alive to keep employment alive.”

Sykes said, “This is the real deal: 20 million people have lost their jobs. This may be the most devastating crisis that many Americans will live through. People need to come together with a problem solving perspective, not a point scoring one. This isn’t business as usual or even another crisis — how we comport ourselves will be telling, both how we get back out of it and how people will view us.”

Listen to the replay of FN’s conversation with Deckers president and CEO Dave Powers here.

Listen to the replay of FN’s talk with Foot Locker CEO Dick Johnson here.

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