Asos resumed trading today after a fire broke out at its main warehouse on Friday. What plans do retailers need to have in place to cope if disaster strikes?
Why are we talking about this now?
Asos was forced to suspend trading after an apparent arson attack at its warehouse in Barnsley. The fashion etailer temporarily closed its website on Friday after the fire, and reopened it in the early hours of Monday morning.
The etailer held around 70% of its stock at the distribution centre which, as of May 31, was around £159m of stock at cost. Asos said it was “fully insured for loss of stock at business interruption”.
What contingency plans should retailers have in place to prepare for potential disasters?
Retailers should have a contingency plan in place for scenarios including loss of a key facility like a warehouse, prolonged technology failure and supply chain failure.
The plan should have clear strategic actions, says Deloitte head of resilience and crisis management Rick Cudworth. “It needs to be clear how that plan is invoked, such as who is responsible and which are the right parties to take action. Not planning leaves you very exposed. Retailers should plan for the worst – they should look at when, rather than if.”
In the event of a loss of a facility such as a warehouse, Cudworth says retailers should have the back-up of an alternative warehouse to operate from. “Most retailers are not dependent on one warehouse and have several. They would have looked at which other of their warehouses could pick up the load, or which may require a rejig of their current operations.”
Andrew Scott, spokesman for the Business Contingency Institute points out that there are organisations that specialise in temporary warehouse and office space. Retailers may also explore using warehouse space belonging to other retailers.
What else do retailers need to think about in these situations?
When disaster strikes, typically a retailer will have insurance and they will look at the management of their insurance claim. The retailer will also carry out damage assessment, says Cudworth. “This is what any organisation that loses a facility would do. I also recommend that after such a crisis, a retailer carries out a post-event review, looking at how they dealt with the situation and how they would better avoid it in future.
KPMG UK head of business resilience John White says that during any incident, the protection of life and safety should always come above all else. “The local incident management team should be working with emergency services to establish who may have been on site at the time, to locate them, and to provide assistance wherever necessary.”
Retailers should also considering how to drive sales back up to normal levels.
Should retailers continue to trade?
The consensus is that retailers should be transparent and honest with their customers. “If there’s severe problems that compromise their ability to deliver then, if possible, retailers should reduce their service,” advises Cudworth.
Scott says that retailers need to consider their reputation. “If they continued to trade and there was more damage to stock than originally thought and they couldn’t fulfil, they risk frustrating customers. It can be better to take the initial hit and stop trading altogether,” he says.
How should retailers communicate with their customers?
Retailers should communicate openly and honestly to ensure customers are fully aware of the situation. The Asos homepage displayed a prominent explanation what had happened at its warehouse and progress being made to get back to normal. It also updated its Twitter and Facebook accounts with frequent messages updating on the incident and its team of social media managers was on hand to answer any specific queries.