Latest posts by Martin Moodie (see all)
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It’s 6am and the sky is just beginning to lighten. Saturday morning at The Moodie Davitt Report seemingly permanent Self-Isolation Bureau. I’ve been going for an hour now, updating my daily column with the latest case COVID-19 counts globally and in key travel retail markets such as China and South Korea. It’s a regular early morning pattern and despite the grimness of the subject matter, simply writing about it gives me some feeling of control.
13 weeks ago we first wrote about a mysterious pneumonia outbreak in Wuhan, China, noting that it was not Severe Acute Respiratory Syndrome (SARS). As of 5 January, 59 cases of a viral pneumonia with an unexplained diagnosis had been reported in the city.
Ten days later we were reporting the first case outside China.
In the intervening three months the world has changed. Your world. My world.
For weeks our analysis focused on the impact of the newly identified coronavirus on travel retail sales to Chinese travellers. “The big difference from a travel retail perspective between this health crisis and SARS in 2003 is the huge growth in Chinese travel and overseas shopping in the intervening years,” I wrote on 9 February.
“Some of the world’s most prominent duty free doors are now shut for business. These include seven DFS locations in Macao, two more in Hong Kong and of course the cdf Mall in Haitang Bay, Sanya, the epicentre of China’s offshore duty free business. One can add to that list the temporary closure of Lotte Duty Free stores (including its flagship Myeong-dong complex) and those of rival The Shilla Duty Free for various periods over recent days.”
I continued: “For retailers, it’s all about how key the Chinese traveller and spend is within their geographic footprint. The question every business executive is asking themselves is ‘How long will it last?’ And that, alas, is a question that no-one, not even in the medical world, can yet answer.”
And they still can’t. 9 February. Really? By the following day the global case toll had reached 40,561. Of those 40,185 were in China. Look at the two heatmaps below from Johns Hopkins University from 10 February and today, 4 April. From 40,561 to almost 1.1 million cases. From a China-centric problem to a global pandemic. China now only ranks fifth in the total cases league. “We are now in the early phase of a medical and economic tempest unmatched in most of our lifetimes,” wrote Peter Wehner in The Atlantic this week.
[Note: I urge you all to read this article called ‘Coronavirus: The Hammer and the Dance’ by Tomas Pueyo, which considers the various mitigation v suppression strategies being deployed by various governments around the world. It is a superb piece of analysis.]
9 February. That’s eight weeks ago. Since then our industry has been transformed to a degree that if you had ever predicted it, you would have been dismissed as a combination of fantasist and scaremonger. Travel retail has simply been starved of its essential oxygen – passengers. For a while we did our best to keep up with the run of store closures. After a while it was impossible. For it wasn’t just stores, it was terminals. It wasn’t just terminals, it was airlines. It wasn’t just airlines, it was whole countries. Borders were closed, whole nationalities banned from leaving or arriving or both.
Today, like every day, I scour the figures, try to identify trends, correlate the medical statistics with the likely travel retail impact. I search for positives constantly and put them up in lights when I discover them. It’s not easy to do that when you’re living in a country where the virus is raging and you’re subjected day and night to a barrage of hellish news. It’s not easy to do that when you know of so many people and businesses that are hurting. So many people laid off, so many very good companies imperilled. My company is no different. I have the same human issues, the same need as others to shed costs, cut production, hang in, hang tough… hang on.
As I told you in my last Blog, this week we placed four staff on the government furlough scheme, which pays 80% of their salaries to a certain cap. We had a virtual cocktail hour over Zoom to thank them and to reinforce our collective determination to get everyone back to work. We’ve dubbed the project, ‘Free the Furloughed Four’.
That meeting was attended by our Publisher Irene Revilla, whose dad sadly passed away with COVID-19 in a Madrid hospital last week, separated from his loved ones. Irene cannot get back to Spain to be with her Mum at a moment when they need each other most. Yesterday Ramon Revilla was cremated and Irene had to leave our end of week virtual staff meeting to oversee everything remotely from London and ensure all was in order. It is just too cruel. And there are many, many such stories.
All our furloughed staff are good people who had been doing a great job. And doing it at a time when, perversely, we are busier than ever and experiencing record web traffic levels, in fact ones we could never have anticipated in our wildest dreams. Yet, in a strange way, never wanted. Not like this anyway.
We’ll battle this one through, though like just about every industry player we will be transformed after it. A crisis of this magnitude makes you evaluate everything you do and how you do it. Do we really need that office overhead when our respective self-isolation bureaus and the wonder of the web and platforms such as Zoom have served us so well? Do we really need to produce all we produce? Do we need to produce it in the way we do? In a digital age, why are we sending reams of paper around the world?
The same sorts of questions are being asked all around the world by industry stakeholders. I had a fascinating chat with Dubai Airports Executive Vice President Commercial Eugene Barry this week about what airports would become in the future. The traditional blend of the operational and the commercial won’t be enough. Other qualities will matter, other terms will enter sector parlance – personal space, assurance, hospitality, welcoming, wellbeing, respect.
Tensions, never far from the surface given the fundamental flaws of the Trinity model are emerging between stakeholders. Suppliers accuse retailers of unfair extended payment terms. Retailers push back, asking for understanding and enraged that some suppliers have actually tried to increase pricing during the crisis and pointing that those same suppliers have domestic market business (sure to recover quicker) to fall back on.
As one retailer I like and respect very much put it to me, “Let’s face it, vendors still have the off trade and people drink and smoke more than ever in crisis and can do that at home. Whereas if [travel retail] business comes back then it will be very slow because there will be no travel expenses for business trips, and fewer holidays because people have had less income.”
I summed it up in a news alert this week: Airports beseeching governments for rescue packages; retailers demanding relief from landlords; brands increasingly concerned about when – or whether – they will get paid by retailers. Throw in a beleaguered airline sector, large chunks of the worldwide population confined at best to their national borders and at worst to their homes and you have the recipe for commercial catastrophe.
In growing sectors of the brand community there is a very real fear that major retailer clients may default if the crisis continues for many months. An unthinkable proposition just weeks ago. Already payment terms by many retailers have been extended beyond what some suppliers consider reasonable. In some cases stock has been taken back. But when you have no customers, what are you meant to do, retailers ask?
There is no room to hide in a pandemic. Your business’s resilience will be challenged, exposed, perhaps ultimately prove insufficient. I have many friends in the service industry – restaurateurs, cleaners, bar owners – who think they won’t make it. But another thing is exposed in crisis. Your values. How you treat people. Customers, staff, colleagues.
I draw on lessons from the past constantly to help me guide the small and listing ship Moodie Davitt through this. All the sensible lessons of course – get costs down early, cut out anything peripheral. But also less obvious ones. Shine during crisis, have a voice, listen (and air) other’s voices. Give back. Don’t demand assistance and not give it. Be flexible. People will remember how you treated them during this crisis.
We refuse to hold advertisers to commitments by quoting “terms and conditions”. How can I write about the need for flexibility if I cannot give it myself? I would sooner go out of business than hold a distressed company to their investment against their will. We prefer to try to maintain the investment by offering an enhanced partnership, added value and a continued free (and, we hope, very high quality) service. So far it is working.
And hard as it may seem to do, it is important to keep innovating. We are trying something new every day. We have created ‘The Lab’, into which all ideas, mainstream or wacky, travel retail-related or not, go and are seriously considered.
I am among the lucky ones. My business has always functioned well virtually. I have a home, a garden, birds taking their breakfast from the feeders outside as I write, loved ones (even if I have to see most of them virtually). I know my company will make it through. It will look very different but it will still be there. You will forgive me being personal but I suppose that is what a Blog is all about. I have beaten two life-threatening illnesses and a mental health crisis during my 18-year journey of owning and running this business. Damned if I will let a flu bug, however bad it may be, beat me or us.