Retailers have begun to open their doors again, but the sector is staring down a long road to recovery after weeks of lost sales owing to the COVID-19 pandemic. Indigo Books and Music Inc. chief executive Heather Reisman spoke to The Globe and Mail this week about the challenges facing the industry.
Amid the store closures, e-commerce has surged. But most retailers say that doesn't make up for all the losses. What is your outlook in terms of recovery?
We will never recover what we lost. Yes, we’ve had an increase in online [purchases]. But the cost of doing online at this time is very high because you also have to have physical distancing in your warehouses. So the productivity can’t be nearly what you would expect. It is a very high-cost way to operate. It’s not profitable growth. As we create environments for our customers that are safe, we limit the number of people we can have in the store. It will be a lovely experience for the customers who come, I am absolutely certain. But the impact on the business is huge, and it will be - from what we can see - right through Christmas. That’s very, very hard from a financial standpoint.
If customers are aware that numbers are being controlled, is it possible they may not feel free to linger and browse? Does that affect the size of their purchases?
Exactly. They will have that opportunity [to shop]. But maybe a customer will be sensitive if there are other people waiting outside.
What will it take for you to become profitable?
Our knowledge of the situation changes all the time. We expect it will easily be into 2021 before we can experience business as usual. That means operating for the better part of a year at massive losses.
Does this also hurt your ability to invest in things like digital capabilities?
Of course. You need to be continually investing and we have been in the last two years. This year, we’re making investments to provide a very advanced form of click-and-collect, which we think will help. But eventually, you run out of money. For this year, we are on track. But if we lose all the money that we had built up on our balance sheet through this period, we lose the ability to invest.
What does this mean for your staffing levels?
Until now, we have been able to keep all of our home-office team, although the pressures are getting strong. We made the decision to keep our retail leadership staff on full salary even while stores were closed. But we did have to furlough a very significant number of our everyday retail teams. Now we’re slowly starting to bring people back on. We can bring them back according to the amount of business we have. The reality is, when you see business at this level, there’s no way that 100 per cent of the jobs will come back. It’s hard to overstate the pressure on businesses in our sector. Our sector employs 1.4 million Canadians. We are very hard hit. This is a very, very significant challenge that we all need to come together and address.
You have come together with some other retailers and some of the country’s biggest landlords to propose a rent-relief program for larger businesses, partly financed by government loans. The Trudeau government has introduced a program offering bridge loans to large companies, but has not discussed the proposed rent-relief measures. How is that going?
We’re basically nowhere. We put what I thought was a fantastic proposal to government in March. The five leading landlords in the country came together to say they would make actual concessions to their tenants, assuming the government did its part to help our sector come through. As goes the success of the tenants, so goes the success of the landlords and, by extension, the support for the ecosystem. The five landlords that came together on this really did understand that. They need tenants to survive. What we asked for was, frankly, less than what we would ask for today because two and a half months ago we didn’t know this was going to last this long. Unfortunately, we’ve had no response. And frankly, as it stands today, based on what I’ve heard, we already know that we’ve lost at least part of the landlords’ support. By June 1st, we suspect it will be gone.
In the absence of real, serious help from government to this sector, yes, I would say we will see a lot of bankruptcies. There will be pressure everywhere. What people need to understand is, not only do retailers support their communities in all kinds of ways, but by extension, we support the landlord community — big and small landlords — and retailers are also major payers of taxes that support our cities. Look at all the manufacturers that make things, who we support. Government, frankly, needs to step up to the plate in a meaningful way. As retailers, we know we have to accept some pain, but we can’t accept 100 per cent of it. It’s not like the money we lose is coming back. It’s gone. Do we imagine that there could be a lot more bankruptcies if no help comes? Yes. But this problem is easily addressable.
This interview has been edited and condensed.
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