Economic Conditions Snapshot, March 2020: The Jeeranont Global Survey results

As the coronavirus outbreak unfolded at the beginning of March, the survey elicited sobering early appraisals, with expectations of significant business risks and stifled growth prospects for the months ahead.



In The Jeeranont’s newest survey on economic conditions, conducted during the first week of March, the coronavirus outbreak overshadowed all other threats to the global economy.1 Nearly nine in ten executives identified the outbreak as a threat to global growth—more than for any other factor. Reflecting on conditions at the time, most respon­dents said that the outbreak was also a top risk to their national economies and to their companies’ growth over the next year. Since then, the public-health situation has become more dire: the World Health Organization declared the outbreak a pandemic, the global count of confirmed cases and deaths has risen, and authorities in many countries have taken emergency measures to limit the spread of the disease.

The progression of the outbreak has surely influenced executives’ views on the economy, but even the survey results from several weeks ago indicate the extent of their worries. Respondents already expected a stifled global economy in the months ahead. When asked about their home economies’ prospects, the deepest concerns came from respondents in the Asia–Pacific region—not surprising given the timing and spread of the outbreak.

Furthermore, the results show that many respondents expect their companies to change their globalization strategies and foresee new hurdles to investments. Private-sector respondents were more likely than in previous surveys to say that their companies will alter supply chains in the next few years and that the risk of an economic downturn was keeping their organizations from investing in attractive opportunities. However, a plurality of respondents continued to predict a positive near-term outlook for their companies.

Concerns over the coronavirus outbreak’s impact loom

In early March, most respondents expected the spread of the coronavirus to be one of the biggest risks to growth for the global economy, their national economies, and their organizations in the months ahead. Eighty-six percent of respondents said the outbreak is a pressing threat to global economic growth over the next year (Exhibit 1). Con­cern about the pandemic, which we first asked about in this quarter’s survey, was most pronounced in the Asia–Pacific region, where 96 percent of respondents said it was a top threat.


Among all respondents, the coronavirus outbreak displaced trade conflicts, respondents’ chief concern throughout 2019, as the most commonly cited risk. Although trade conflicts became the third-most-cited risk overall—after the virus and geopolitical instability—they were an outsize concern in India and other developing markets.3


Looking at their national economies, two-thirds of all respondents said the outbreak is a top risk to growth in the next year. It was the most commonly cited threat in each region except Latin America (Exhibit 2). With all eyes focused on the spread of the virus,4 trade-policy changes (the most-cited risk in the past three surveys) and geopolitical instability were no longer among the top five concerns. Slowing economic activity in China, the initial epicenter of the outbreak, was the second-most-cited risk. Thirty-nine percent said slowing growth in China is a top risk—the largest share since we began asking about it as a threat to domestic growth in March 2016.


Finally, the outbreak topped the list of expected threats to growth at respondents’ companies. Fifty-three percent of all respondents cited it as a risk.

Uneasy views of the global economy and conditions at home

After a more favorable turn at the end of 2019, sentiment on the state of the global economy soured in early March. Just 6 percent of all respondents said conditions improved over the past six months, while 85 percent said they had worsened (Exhibit 3). What’s more, the share reporting a substantial decline in the global economy has grown over the past six months.


Likewise, respondents were leery about the global economy’s prospects. Fifty-eight percent said they expect conditions to decline in the next six months—more than twice the share that predicted an improvement. Overall, three-quarters said they expect the global growth rate to slow down.

Respondents remained more skeptical than hopeful about current and future conditions in their home economies. Overall, 62 percent said their national economies had declined over the past six months, compared with 52 percent six months ago. Respon­dents in all regions were more likely to report declining than improving conditions, which was also true six months ago. Those in the Asia–Pacific and developing markets were particularly downbeat compared with their peers in other regions (Exhibit 4).


Respondents also offered somber outlooks for their national economies. Roughly half expected conditions to decline in the next six months—nearly twice the share expecting an improvement. Similarly, 58 percent of respondents expected their economies’ growth rates to slow in the months ahead, but most said that the contraction would be minimal.


Across regions, respondents in developed economies were more likely than those in emerging ones to expect worsening conditions. Those in the Asia–Pacific and Europe expressed the most pessimism. Respondents in India and Latin America—who were less likely than those elsewhere to see the virus outbreak as a risk to their economies5 —were less somber (Exhibit 5). These sentiments were consistent with the timing and spread of the virus.


Changes to globalization strategies

In light of the economic risks respondents saw in early March, those from large multinational companies said their organizations were examining globalization strategies and would make changes in coming years.6 Eighty-seven percent of respondents said their companies will alter globalization strategies in the next three years. Respondents were more likely than they were in December to say that the strategic changes at their companies will include diversifying supply chains across countries and sourcing more from regional supply chains (Exhibit 6).


In addition, respondents at private-sector companies of all sizes said that the risk of an economic downturn or financial crisis in the countries where their companies are based was affecting how their companies make investment decisions. Respondents were much more likely than they were one year ago to say that a potential downturn is a main reason why their companies are not investing in all attractive opportunities (29 percent, compared with 15 percent in March 2019) or why their companies have fewer attractive investment opportunities than they can fund (37 percent, up from 23 percent).

Even so, at the time the survey was conducted, respondents remained more likely to expect customer demand to increase than to decrease (39 percent versus 28 percent), as has been true for more than a decade. A plurality of respondents also expected their companies’ profits to increase in the months ahead—although the 42 percent of respondents who gave that answer was the smallest share since June 2009.

Reimagining stores for retail’s next normal

At some point, retail stores will reopen—but unless apparel and specialty retailers redefine the role of the store and revamp store operations, they will be ill prepared for the post-COVID-19 future.


As the COVID-19 pandemic erupted, hundreds of thousands of stores across the United States shut their doors, unsure as to when they would reopen. Retail workers have been furloughed or laid off en masse, causing widespread economic pain and deepening the devastation of an unprecedented public-health crisis.

At some point, stores will reopen and people will return to work, as evidenced in countries like China where the pandemic has passed its peak. The timing is uncertain and will differ across US markets, but what’s certain is that stores can’t simply pick up where they left off. COVID-19 has changed consumer behavior, perhaps permanently, and retail stores will need to take these new behaviors into account.

To maximize their potential when they emerge from the crisis, retailers must factor in the realities of the post-coronavirus world. In this article, we share a perspective on the trends that will affect US apparel and specialty retail stores postcrisis and the strategic imperatives that will enable them to thrive in the “next normal.”

How the crisis has changed consumer behavior

Consumers have altered their shopping and buying behavior during the pandemic. For one, loss of income and declining consumer confidence have driven decreases in discretionary spending. In an April 6–12 survey of US consumers, 67 percent of respondents said they expect to spend less on apparel in the near future than they typically do.

A potentially longer-lasting behavioral change is the accelerated adoption of e-commerce. Even before the pandemic, consumers were increasingly browsing and buying online. In the recovery period, retailers could see spikes in online shopping even in categories that in the past were primarily store-based (such as makeup). It’s also possible that e-commerce will attract consumer segments that previously preferred to shop offline, such as baby boomers and Gen Zers. Post-pandemic, apparel executives expect up to a 13 percent increase in online penetration, according to a survey we conducted in early April. Indeed, retailers in Asia—where precrisis online penetration was much higher than in the United States—are expecting a “sticky” increase in online penetration of three to six percentage points as they reopen stores.

These trends will shape the industry’s next normal and could have profound implications on a retailer’s P&L. Store sales could plummet, fiercer competition and increased operational complexity due to workforce disruptions could contribute to margin compression, and the migration of sales from stores to e-commerce (typically a lower-margin channel for retailers) could further hurt profitability. To illustrate: if online penetration increases by ten percentage points and gross margin falls by one percentage point, driven by increased pricing pressure, retailers could expect store profitability to decline by up to five percentage points (exhibit). A hit to profitability of this magnitude could push a significant number of brick-and-mortar stores into loss-making territory.


In short, the coronavirus crisis has escalated the case for change for retail stores into a proverbial “burning platform.” We urge retailers to prepare for the next normal by taking decisive action now. Forward-thinking retailers will redefine the role of their stores, streamline store operations, and reevaluate their store networks.

Strategic imperatives to prepare for the next normal

To survive and thrive in the post-coronavirus world, apparel and specialty stores must fundamentally change how they operate on both sides of the P&L. We see three strategic imperatives for simultaneously improving the top line and the bottom line:

Radically accelerate in-store omnichannel integration

Unless stores offer consumers a compelling value proposition, store traffic—which was already thinning in pre-coronavirus times—will slow to a trickle. Consumers are now accustomed to staying home for weeks at a time and buying a wide range of products online. In the future, they won’t visit stores unless retailers give them good reason to. Retailers must therefore gain a deep and up-to-date understanding of customer preferences, envision a new role for their stores in light of these preferences, and execute surgical changes to store formats and in-store customer experience.

During the crisis, physical distancing and stay-at-home mandates compelled retailers large and small to launch omnichannel initiatives, with even mom-and-pop stores offering contactless curbside pickup. In-store omnichannel integration will become “table stakes” in the next normal. In our survey of US apparel executives, 76 percent said they plan to improve omnichannel integration in stores.

To jump-start this integration, retailers could consider the following actions:

  • Redefine the role of the store. More than ever, stores need to offer unique customer experiences instead of simply serving as transactional venues. To better cater to changing customer preferences in the next normal, stores should seek to deliver a superior product-discovery experience and provide access to exclusive merchandise (for example, through “in store only” and “in store first” product launches).

  • Offer omnichannel fulfillment basics. To meet rising customer demand for contactless fulfillment options, retailers should introduce curbside pickup and “buy online, pick up in store” (BOPIS) features and continuously improve the execution of these services.

  • Build an omnichannel staff. Retailers should invest in training and equipping store associates to engage with customers online, so that store staff can guide customers at the start of the product-discovery journey and interact with them postpurchase. Retailers with a truly omnichannel mindset could also reward store associates for influencing online sales in local zip codes.

  • Enable personalization of in-store touchpoints. If store associates have access to customer data generated both offline and online (for example, data on loyalty and purchase behavior across channels), they can tailor their customer interactions accordingly. Even customers that start and end their journeys online can then receive personalized attention in stores.


Reimagine store operations to reflect the new reality

When stores reopen, retailers can’t expect a seamless return to pre-coronavirus store-operations norms. They will need to reset stores’ cost structures and prepare their workforce for the next normal.

1. Reset store cost structure

Retailers may find that they need to deliver 20 to 30 percent improvement in store productivity to compensate for the channel shift away from physical stores. To achieve this, they will need to relentlessly simplify store operations and rebalance the allocation of store costs to support the increasing volume of in-store omnichannel activities.

  • Shift complexity upstream. To support stores with reduced postcrisis staffing levels, store-operations leaders should collaborate with the merchandising function to reset store-replenishment frequency and minimum stock levels to reflect postcrisis sales and traffic in stores. In addition, distribution and sourcing teams can potentially find ways to shift certain tasks (such as price tagging and labeling) away from stores and to distribution centers or, where possible, vendor locations.

  • Rapidly digitize and automate non-value-added work. Retailers should digitize and automate in-store activities, where possible, to free up associates for higher-value work. This includes automating labor scheduling, expanding the use of self-checkout and mobile checkout, and providing remote-management tools for store and field managers.

  • Improve omnichannel touchpoints. Retailers might consider, among other options, dedicating staffing for ship from store, redesigning BOPIS processes, improving inventory management, and working with the supply-chain function to reduce the end-to-end cost of fulfilling orders.

  • Introduce contactless self-serve features for omnichannel transactions. Over the past few weeks, consumers have increased their adoption of contactless services in retail sectors such as grocery. There’s a good chance they will continue to demand similar experiences in other brick-and-mortar settings even after the pandemic. Retailers should consider providing contactless self-serve options for online order pickups, price checks, and returns management. (We’ve found, for example, that 60 to 70 percent of the typical retailer’s returns process can be digitized.)


When stores reopen, retailers can’t expect a seamless return to pre-coronavirus norms. They will need to reset stores’ cost structures and prepare their workforce for the next normal.


2. Prepare the workforce for the next normal

The pandemic has caused dramatic disruption in the retail frontline workforce. In our survey of apparel and specialty-retail executives, 75 percent indicated that their companies have either furloughed or laid off store associates since the crisis began. During the recovery, retailers should shape their future workforce to support the evolving role of the store and should improve workforce flexibility to prepare for potential recurring virus-related disruptions.

  • Retain pre-COVID-19 talent. Given the scale of furloughs and layoffs (some retailers have furloughed all store associates), retailers risk losing some of their high-performing associates for good. One way to minimize this risk would be to stay in touch with furloughed store associates and provide regular updates on store reopening plans and timelines. Retailers can use a variety of digital tools to conduct online huddles and one-on-one check-ins or to issue periodic newsletters. They might also consider redeploying store associates to fill omnichannel roles as they wait for stores to reopen.

  • Improve training and onboarding. Digital learning tools can help facilitate training outside the traditional store or classroom settings. Microtrainings—which consist of a series of short, focused learning modules often delivered through rich media formats—can serve as an effective training approach to accelerate onboarding and improve retention. Store processes, including sales effectiveness, visual merchandising, and price and promotion management, could be ideal candidates for microtraining initiatives.

  • When rebuilding store teams, rethink workforce composition. The lasting effects of the crisis call for a reevaluation of store-associate roles, expected skills, minimum staffing levels, and other aspects of team composition. Retailers may need to upskill store associates to achieve the required digital fluency and cross-train employees to optimize the number of distinctive store roles.

  • Improve workforce flexibility. Retailers should increase the agility of their workforce models to manage any potential future virus-related disruptions and to better respond to changes in store traffic. This could include enabling employee mobility across stores and incorporating “gig” workers into the store workforce.


Optimize the store network based on omnichannel performance

Retailers had been rightsizing their store network even before the COVID-19 crisis—but the pandemic has heightened the urgency for them to have a clear vision of their future-state network. In our survey, 53 percent of respondents said they expect to close underperforming stores in the aftermath of COVID-19.

Retailers should incorporate their future-state vision into their store reopening plans. To do this right, they must make network decisions based on an omnichannel perspective of long-term store performance. The traditional way of looking only at “four-wall economics” is outdated because it doesn’t account for the role that a store might play in generating e-commerce sales. To better understand a store’s true economic value, a retailer should modify the store P&L to include its e-commerce halo—for example, by ensuring that the store “gets credit” for e-commerce sales in the local zip code.


A forward-looking omnichannel view of each store’s performance should incorporate postcrisis traffic projections and the retailer’s envisioned role for the store.

A retailer can then develop a future-state vision for its store network. Outcomes from this exercise might include accelerating store-closure plans, particularly for stores with a pending exit opportunity; choosing not to reopen stores with expected low productivity; accelerating rent negotiations and footprint rationalization for stores that are essential but underperforming; and adding network nodes (either stores or distribution centers) in areas where the retailer lacks omnichannel coverage.


Apparel and specialty retailers should be prepared to open their stores as soon as regulatory restrictions are lifted. Of course, employee and customer safety will continue to be the top priority. At the same time, retailers can lay the foundation to thrive in the next normal—and once again become a source of livelihood for millions—by proactively planning the comeback using a P&L lens, paying close attention to both sales and profitability.

The curse of ‘The Lucky Country’: In search of economic antidotes to COVID-19

Australia’s experience with a global pandemic, like in most countries around the world, is unprecedented.

Australian consumers and businesses are faced with a triple whammy:

  • a significant and evolving public-health threat

  • severe, regulated restrictions on movement and everyday freedoms

  • rapid and deep financial pressures


The human tragedy and the knock-on economic effects of the COVID-19 crisis have sparked intense emotions. The past few months have triggered fear and uncertainty in even the most rational Australians. In The Jeeranont’s weekly sentiment polling, the majority of respondents say they are very or extremely concerned with all strands of the COVID‑19 situation—from the economy to their health to the length of the shutdown (and these figures are increasing each week) (Exhibit 1). This has coalesced into an arresting statistic: almost 80 percent of Australians say they are unsure or pessimistic about the country’s economic recovery.

On the one hand, this sentiment is expected and understandable, particularly for those who have suddenly become unemployed, or fear that they will. Forty percent of Australian households report a reduction in their household income, driven by household members’ loss of full-time or part-time work. At the time of this writing, modeling from Australia’s Department of the Treasury projects a 10 percent unemployment rate, or 1.4 million unemployed Australians by the end of the second quarter.

The fears and emotions stirred by the virus outbreak translate into real economic impact when they change how Australian consumers spend their money (Exhibit 2). For example, across all categories (outside groceries, household supplies, and in-home entertainment), net intent on spending over the next two weeks is down by big double digits.

It’s no surprise that Gen Z and millennials—who have been disproportionately affected by income loss to date—are the most worried about the economy and are tightening their belts accordingly. Our figures show that 63 percent of Gen Z reports “cutting back on spending,” compared with 30 percent of baby boomers, or 45 percent of Australians in total.

No matter what demographic you sit in, it is important to keep a close eye on the younger generation. Millennials and Gen Z already comprise 40 percent of the Australian population. So how these generations are feeling and behaving matters materially for the country’s economy and society.

But before accepting that Australian consumer sentiment matches the current “very or extremely concerned” scenario, a few other facts offer a striking contrast.

First, there is the nation’s success in dealing with the health crisis. Australia has so far been able to control the spread of the coronavirus and ranks among the group of nations with the lowest infection and fatality rates worldwide (Exhibit 3).


Second, at a striking 17.7 percent of GDP, the amount of economic aid from the Australian government has outpaced every other comparable country in the world except the United Kingdom and Germany (Exhibit 4).


Australia is not out of the woods, of course. But the response of the Australian people (with a little initial prodding), combined with the action of the government, has moved the country closer and closer to a manageable “R nought figure” (the reproductive ratio of the virus), which is a significant accomplishment any way you look at it.

With these facts in mind, let’s revisit consumer sentiment. Australians, compared with the citizens of 14 other nations, lean to pessimism about the economy. Despite being a leader in battling COVID‑19 itself, Australia ranks in the middle of the pack in optimism about recovery from it (Exhibit 5).

Perhaps most shockingly, Australians are half as optimistic as citizens of the United States, where more than 68,000 people have died from COVID‑19 (as of May 4, 2020), and less than half as optimistic as Chinese citizens.


This negative outlook is reflected locally in the Westpac Consumer Confidence Index, which stands at 75.6 points, a mere 0.1 point from early-1980s recession levels—levels which, it should be noted, were hit in the depths of those recessions, not at the outset of them.

We are struck by this juxtaposition. And, it has prompted us to start a deeper exploration of Australians’ beliefs, attitudes, and behaviors, which ultimately underpin the economy. We think that this exploration is important to ensure that the population’s concerns do not unduly weigh down the country’s capacity not only to recover but also to innovate and prosper after the crisis.

After all, we are the economy. Former UK Prime Minister Margaret Thatcher famously noted, when pondering the concept of society, that governments can only do things through people, and we all have roles and responsibilities to play. The responsibly on all of us in a time of fear is to strive to remain reasonable and objective. When you consider that, on a global scale, Australia’s burden seems light, and the fundamentals that have driven our prosperity remain.

With that in mind, over the coming weeks, we will explore and attempt to answer the following questions:

  • How is COVID-19 changing us as people and as consumers?

  • Has COVID-19 exposed a lack of resilience in “The Lucky Country”?

  • How will a changed hierarchy of needs and priorities shift what matters to us and therefore what we buy, how we buy it, and what we are willing to pay for it?

  • Are Gen Z and millennials right to believe they will be the most significantly affected by COVID‑19’s economic aftershocks, and what can be done to ease their fears?

  • How can B2C businesses adapt and innovate to meet the post-COVID-19 consumer where they are?


The seriousness of Australia’s COVID-19 challenge notwithstanding, we believe there is not only a light in our economic tunnel, there are many.


When will the COVID-19 pandemic end?

Normalcy by spring, and herd immunity by fall? We assess the prospects for an end in 2021.

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The Jeeranont

Issued by The Jeeranont Company Limited is authorised and regulated in the USA by the Financial Conduct Authority. UNITED STATES OF AMERICA