The effects of COVID-19 on the working capital management of local retailers

Abstract

Purpose: The aim of this study is to determine the extent of the effects of the COVID-19 pandemic on the working capital management of a set of different local retailers, namely motor, technology, supermarkets, pharmacies, home furnishings and the lease of shopping mall floor space. Design: To properly achieve the objectives of this project, a qualitative method of data collection in the form of interviews was deemed the most appropriate. An interview was carried out with 2 retailers operating in each sector mentioned above. Findings: Whereas the pandemic affected all retailers, 11/12 never experienced a negative working capital during the pandemic, which shows that businesses were prepared to face the crisis and acted quickly to safeguard their working capital from the start. The government aid was also successful, especially the wage supplement scheme. The voucher scheme only helped a few retailers and didn’t create material differences for most. Most retailers feel more prepared to face another crisis from the lessons they learnt through the pandemic. Conclusions: Through this study, we can conclude that proper working capital management is essential to survive a crisis. Whereas only one of the interviewees had a negative working capital balance, cash-flows in all businesses were affected, and each had to change their policies to remain afloat. The wage supplement scheme was the most successful form of government aid which received praise from all those who were eligible to receive it. Value: This study aims to improve the research, which is currently available regarding the pandemic, since this is still a fresh topic. The study also suggests further research which may be carried out to continuously improve this.