“The most responsible thing was to close”: Why Fjallraven shut its stores

The Morrison Government on Sunday evening announced new measures to contain the spread of COVID-19. As of 12 p.m. on Monday, March 23, pubs, cinemas, casinos and other entertainment venues have been forced to close, and restaurants and cafes may only provide takeaway and home delivery services.

This is on top of the current ban on non-essential indoor gatherings of more than 100 people and 4sqm-per-person rule for shops other gathering places.

However, the situation is changing quickly. The NSW, Victorian and ACT Governments have announced a shutdown of all non-essential services over the next two days.

While there is still a lot of confusion over the status of these shutdowns, and which businesses they will affect, some businesses have already decided to close their doors for the safety of their customers and staff.

On Wednesday, March 18, Patagonia temporarily closed all eight of its bricks-and-mortar stores in Australia, and on Thursday, March 19, Swedish outdoor brand Fjallraven closed its two stores in Sydney and Melbourne. 

“We decided the most responsible thing to do was to close,” Susan Park, Fjallraven’s brand manager in Australia and New Zealand, told Inside Retail on Friday. 

“Our stores are in the middle of the city – our Sydney store is on York Street and our Melbourne store is in a shopping centre in the CBD – so our staff are coming a long way every day on trains and buses, working their way through crowds to make it to our store and coming into contact with hundreds of customers per day,” she said.

“We didn’t want them to feel anxious or worried about having to do that.”

The stores will remain closed until the end of March, and the team will reassess the situation over the next week. In the meantime, store staff, including casuals, will continue to receive their regular wages, and managers are exploring ways to keep the team spirit alive. 

Head office staff at Zen Imports, the wholesale distributor that manages Fjallraven in Australia and New Zealand, have also been working from home for the past week. 

Like Patagonia, Fjallraven is still selling online, and Park said warehouse staff are taking precautionary measures, such as practicing social distancing and using hand sanitiser. But even an increase in online sales will not make up for lost sales and sunk overhead costs of shutting bricks-and-mortar stores. 

“Worst case scenario, our managing director will take that [loss] on as a business owner,” Park said. 

“There’ll definitely be a cost and an impact. It’s not just us – so many brands are suffering right now.” 

Despite this, Park said closing stores was the right thing to do. 

“Social responsibility has always been a massive part of what we do. Normally, the focus is on sustainability, but now it’s also about looking after staff and our community,” she said. 

The hardest part is the uncertainty about how long the global pandemic and the associated safety measures will last. 

“We’re trying to be sensible and plan and be realistic about what the next few months might be like,” Park said.

But how long can a business survive when stores are shut and people aren’t spending? Park said Fjallraven was confident it could get through the current situation. 

“There’s always bad news about retail all the time. It’s always on the verge of disappearing, but that’s not the case. We need retail. We need good retail. In situations like this, it’s a bit of a catalyst for brands and companies that are super sound in their operational set-up to shine through,” she said. 


1 comment

  1. Stephen Spring posted on March 23, 2020

    LESSONS FROM THE RETAIL RECESSION AND GFC. CRISES MANAGEMENT IN THE ERA OF COVID-19 Many retailers have not experienced such calamitous events we are going through now. However, many of us have and know how to pull businesses through the dark times even without Government assistance. Whilst COVID-19 is an event of an order of magnitude greater than anything before, the business principles are basically the same. Distressed retailers are a fact of life, even without COVID-19 and decisions on closure and restructuring are common place. Cash is king. What cash do I have? Is the business worth saving? Many businesses are marginal, even in the good times. Often this is because of an accumulation of creeping expenses, eroding margins and flat sales. Assume the worst. What’s my true accounts position? Who are my creditors and debtors? How much do I owe them and what do they owe me? When are all these payments due for payment? What do I owe employees? Include all the superannuation and other entitlements such as bonuses promised and commissions. What are my ongoing contracts? Review all property leases, equipment and vehicle leases, and other service agreements such as POS, signage and storage licenses that you need to pay and those who pay you. What’s my legal position? Directors of companies are in a different position that of sole trader or others who have personally guaranteed contracts and owes wages. What’s truly on the line if the business needs to be thrown a lifeline. Acting more like a liquidator than a retailer, and with a “hard moneyman” approach, reforecast your sales and expenses. You may well be surprised that its often not the magnitude of the cash flows, but the timing. The leases and contracts will be the hardest to deal with, but start negotiations or get help. These early indications will dictate if the business is salvageable and needs help from its creditors and/or some loans or needs recapitalisation - or shutting down altogether. Remember, even though the whole world seems to be in this together, in reality, most business people with their backs against the will be out for themselves. Just like the virus is exposing those who live and those who die, only the best retailers will come out the other side alive. Stephen Spring retaillease.com.au

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