Containment in Hong Kong – interview with Richard Yeung, CEO at Circle K Hong Kong
Richard Yeung is Chief Executive Officer at Circle K in Hong Kong and 2018 NACS Asian Convenience Retailer of the Year. He was especially keen to take part in our series of global interviews in order to convey learnings from the experiences and lessons his business has already had in the current crisis.
“There is no need to thank me at all. I think it will help a lot of retailers if you can write up the facts and give them a good warning so that they can be as well prepared as possible to face what has occurred here, what will be coming and the aftermath of economic shocks. The economic shock is going to be bigger than the 2008 Financial Crisis. This is a lot broader and a lot bigger. All retailers need to be prepared and it makes sense for them to do some stress tests in order to prepare for the coming 6 months”.
Stress tests
From an operational perspective, Richard believes in stress testing retail businesses to ensure they will be able to weather the storm.
“The first priority is obviously business continuity; make sure that the stores, the supply chains, the logistics and the vendor community are still able to operate. Then, carry out some financial stress tests. What if my sales drop by 10%, 20% or even 30%? What will my P&L and, more importantly, my operating cash flow looks like then? Advise all to do what they can now in order to weather the monster storm that is coming”.
Richard emphasises that this crisis has to be dealt with in a comprehensive way with a partnership approach which co-ordinates the actions of individuals, broader civic society, businesses and Governments on all levels.
“From our experience in Asia, this crisis has to be dealt with quite seriously, on all levels; the government, the society, the organizations, the families and at an individual level – all have to simultaneously take precautions to deal with this epidemic.
Circle K Hong Kong, photo taken in March 2019 during Insight Study Tour
The most important thing is to ensure that you, your family and your company teams are all taking the most rigorous precautions to avoid infection. In fact, we have set zero infection as our goal. Always, keep your hands clean, try not to touch a lot of the high-risk surfaces, never rub the face and avoid congested areas and avoid eating/drinking in congested areas. And if in congested areas, or any public transits (or even riding a taxi), do wear a mask (as this virus can be contagious even before an infected person develops any symptoms).”
Richard advised that executives needed to acquaint themselves with the best research from experts in order to better understand the trends and implications for future business activity.
“On a country level, please refer to the links below to two papers which used big data analytics (based on the cases in Wuhan) to indicate the trends and implications of the impact of the virus.
This is a very good reading to understand what we are dealing with:
Richard’s own predictions for the level of disruption coming make grim reading.
“From a business point of view, this crisis and the resulting lock-down or “shelter-in-place” will definitely create a lot of disruptions. In Asia, almost all sectors are affected and some are put to a standstill. The airline, travel industry, tourism, restaurant, retail (except supermarket, drugstores and online) are facing disruptions which they have never faced before. Most of the retailers of discretionary products (such as fashion, footwear, durables) are facing sales drops of 50% to 70%. And this is not a matter of weeks. The most optimistic outlook is that we have to deal with this problem for months ahead.
In HK, even though we are in the containment stage (we have not gone into any lock-down), we are still experiencing this sort of figures. So, retailers in Europe have to be prepared that even after the lock-down ends, there is still this melt-down impact that has to be dealt with. It is really unheard of. A lot of weaker retailers will not be able to survive”.
The impact on his own Circle K business
“For CVS here in HK, because of the drastic drop in working consumers and student traffic, the traffic into our stores is down about 35% in the commerce areas and about 8% in the residential areas. We are kind of lucky to experience what we consider as mild impact (when compared to our peers). As we cannot control the traffic, we just try to work on increasing the basket size. Also, another learning is that the loyal customers in the CRM program (OK Stamp) also cushions us against a big fall and the sales to this segment are holding up. So, this also helps us.
In a nutshell, my major takeaway is that this is a serious disruption and we have to take it seriously. The economic shock will also be as drastic and all retailers will have to be very well prepared to deal with it with fast and quick actions. Ensure that the viability of the company is not going to be affected although there will be a hit in the profitability”.
