How Can Digitalization Mitigate Pandemic-Induced Demand Shocks? A Case Study from the Apparel Industry

Abstract

This paper aims to explore how digitalization can be used as a risk mitigation tool against pandemic-induced demand shocks, when customer movements and activities are constrained by government regulations. Due to the disrupting events of the COVID-19 pandemic, we opted for an exploratory study to uncover the risk mitigation capabilities of digitalization under these circumstances, using a fast fashion case company as an empirical example. Several interviews were conducted with middle and top managers at the company. Our empirical insights about the risk mitigation capabilities of digitalization suggest that, as COVID-19-like events may become more frequent in the future, digital tools offering certain mitigations against physical constraints should be valued more highly than they have been previously. We encourage decision makers to look at the risk mitigation capabilities of digital solutions and include those into the cost–benefit discussion when thinking about new investments. In this way, our paper fills a pragmatic gap in this field, and is expected to help companies to identify the key success factors for the successful implementation of a digital transformation. Because of our chosen research approach, the research results may lack generalizability. Further company-wide, industry-wide, and country-wide extension of this research is possible.

Keywords

• risk management
• retail
• digitalization
• COVID-19