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By Rachel Artiss, Freya Hansen and Ellie Colvin, Business Consultants at BJSS
It is no secret that retailers worldwide have been struggling to cope with the ongoing COVID-19 crisis. As many grapple with adapting to the ‘new normal', we at BJSS believe the winners will be those who are able to both embed insights into their supply chain decision-making process and create the structures needed to implement these decisions at pace. Retailers must focus their analytics capabilities to prioritise quickly understanding changing consumer behaviours, pivot business models to keep up with the shift to online and ensure strategies are in place to deliver both short and long-term growth. In this article, we review each of these trends using the phases of change we’re applying to our own organisation – Recover, Regroup, Renew.
Changing Spending Habits
We know that understanding and predicting consumer behaviour has long been the north star defining retail strategy, but with physical store closures and economic uncertainty caused by Covid-19, we are seeing an unprecedented shift in consumer spending habits. Some consumers are shifting from spending to saving (realising just how quickly those pre-work coffee runs were adding up), with others buying fewer, more expensive goods (Global Web Index, Internet Retailing). And these trends will change post-Covid-19, with a potential for savers to rebound and spend more once the situation stabilises. Either way, post Covid-19 retailers can no longer rely on their existing consumer profiling and could potentially be competing for a larger prize.
As retailers begin to re-group and re-open stores, their ability to generate consumer behavioural insights will be key. They must quickly understand who is coming back to their stores and why, whilst utilising data visualisation tools to gain a clear overview of emerging trends and inform both short and long-term planning.
Embedding a data-driven approach allows for a more agile response to changing behaviour and better-informed decision making, such as the movement of stock. Instead of the traditional manual review of sales, business intelligence tools such as Power BI automatically highlight what stock is needed where, and wherein your network it can allocate from.
Through these tools, retailers can understand demand in real-time, provide their customers with relevant ranges, whilst also delivering business benefits. For example, many retailers have faced criticism for their response to the pandemic (think Victoria Beckham’s furlough U-turn), and so should consider conducting sentiment analysis to understand brand perception.
This approach also allows for a consistent omnichannel experience, which will remain important as e-commerce continues to grow in popularity.
Shift to Online
As the crisis forced stores to shut their doors to the public and resume business online, consumers who hadn’t previously depended on e-commerce were forced to purchase products online that were previously bought in-store. Retailers who were already agile could use their data to keep up with fluctuating demands – but not everyone was prepared. As stores begin to re-open in the coming weeks, with strict social distancing measures in place, e-commerce will still be a vital tool for clearing stock and engaging cautious customers. Retailers who haven’t already must start reviewing their supply chain and how to consider how it will support this shift to online.
The pandemic has highlighted two key aspects the supply chain of the future will need; as well as leveraging consumer data insights for greater end-to-end visibility during the recovery phase, automation will be a crucial factor in the move from re-grouping to renewal for retailers.
Automation in the supply chain will lead to faster delivery times and a greater volume of deliveries. Digitised goods, accompanied by AI in warehouses, can provide live data on inventory levels and enable the reallocation of resources to optimise supply chain processes. In a post-COVID-19 era, where consumers expect next-day delivery with any order as well as online availability of an unlimited range of products, automation will be make-or-break for retailers.
Short vs. Long-term Planning
It is not enough, however, to just synthesise changing consumer behaviour and optimise online. Retailers must ensure these insights are embedded into their demand planning and forecasting processes. They must be agile enough to pivot quickly, but also robust enough to ensure long term supply. By mirroring the Agile Supply Chain concept, of utilising data to drive efficiency through to forecasting, integrated data sets are essential to enabling the insights needed to make decisions at pace.
But there must be a balance – although stores can reopen from the 15th of June, the immediate outlook remains uncertain, and the impact on future key consumption periods is even more unknown. Retailers must be able to adjust buying plans and preserve cash flow in the short term, but also anticipate future sales once lockdown eases. There must be a full review of purchasing algorithms based on the new normal to ensure the protection of key categories and reflect changing consumer habits. Suppliers must also be brought along this journey of Renewal – the retailers that can work together with their suppliers to build sustainable and flexible commercial relationships will be the ones to succeed.
The path to Renewal is paved with data, however, being able to generate insights is not enough in the post-COVID-19 world. In challenging times, it is also essential to identify and remove operational inefficiencies across technology, logistics and store footprint, whilst ensuring the safest working environment for staff. In the next instalment of the “Was COVID-19 the wakeup call your supply chain needed?” series, we review how retailers must rethink their Productivity, People & Utilisation to retain their place in the ‘new normal’