Given the onset of the COVID pandemic, in your meetings around the world with different customers, what are you seeing as some of the major impacts on consumer behavior?
Of course, when COVID first arose, we saw panic buying and huge stockouts within the supermarkets. It had tremendous impact on the supply chain. As we’ve gradually come out of the first COVID impact, we’re seeing shopper trends returning to some sort of normality. The basket size has remained up from the average shop, but it’s not to the extent of what it was during initial COVID onset. Footfall is normalizing as countries ease their lockdowns.
The other interesting trend has been around price perception. You have the normal competition between discount and traditional retailers. However, during challenging economic times such as those now where many people have been laid off or furloughed, price becomes more of a consideration. Traditional retailers have dropped prices to match the discounters, but with discounters offering core ranges in their stores, they’re gaining more market share. And with price becoming a key factor, many shoppers are switching to non-branded/private label goods, as they find the private label to be as good or even better in some cases, which poses a problem for brands.
What is different now for retailers and CPGs? What do they specifically have to think about to address in these changes?
Online growth is big. We’ve got retailer customers that have seen 400%-500% growth in their online shopping and it appears that online is going to continue strong. So, many more people are now used to online shopping. They’ve realized the convenience that it’s not substantially more expensive than shopping in store. Online growth has really accelerated, particularly in the U.S.
The question for the retailer is, “How do I maintain that customer that started shopping online?” There are interesting things that retailers have done to meet the needs in online shopping. Some places in Europe are using Uber and also bike deliveries for groceries. For example, at Sainsbury’s in the UK, you can order up to 20 items and have it delivered in about 30 – 50 minutes from your local supermarket. You can go online with your app, your credit card details are in the system – it’s all made very easy, very little friction.
The other key thing for CPGs and retailers is understanding the buying habits of shoppers. Having the data and the understanding around what impacts loyalty, or buying habits based on availability vs. habits a customer would have normally, with no availability constraints. Keeping the loyal customer has always been most important to retailers, but of course that has become a bit more complex these days.
How will supply chain be impacted going forward?
Overall, I think CPGs and retailers are embracing change more than ever. COVID really made the point that you must have the end-to-end information to manage your supply chain and make sure that you’ve got stock availability. It’s critical. I also think that collaboration between CPGs and retailers going forward is going to be even more important – to make sure that if we do have another major disruption, that they understand how they can work better together.
Part of this is having insight, end-to-end insights, that enable customer needs to be met. But it’s also about having agile systems and an organizational structure that can support changes. For example, you can’t have lots of bespoke systems that aren’t connected. Processes like category resets once a year? They’re a thing of the past. They may need to be monthly or at least quarterly. But this requires tremendous collaboration between the retailer and CPG.
Bottom line, industry does not want to repeat issues where supply chains couldn’t meet shopper needs at the beginning of COVID.
Overall, in your conversations around the world, are you seeing retailers and CPGs embrace change?
Yes, I think they realize they’ve got to be flexible and time is against them. We cannot wait, decisions on investments are now even more key. Every out of stock is an opportunity lost. You just can’t afford that in today’s competitive market.
I’ll use the good and old analogy of a foundation for a building or home. If it’s not rock solid, you can’t extend or alter the structure, at least without issues. We know change will always be there, so you must have a strong foundation, and then you can add on and address more complex issues and changes as they arise.
I don’t think shopping’s going to go back to 100% of what it was. Consider the recent online behavioral changes as one example. Or, look at the fashion market. No one really thought it would work well online, as customers want to touch clothing and try it on. What did the clothing industry do? They gave us the ability to return something if it didn’t fit or you didn’t like it. No questions asked. They adapted to the constraints of the market, and I think the high-volume grocery market needs to be just as adaptive.
What would be some advice that you’d give to CPGs and retailers right now?
Think about time to benefit. The days of the long, monolithic implementations that take four, five, six, seven years are over. You need to get value; you can’t wait three years. So, you really need to look at systems that deliver flexibility. Those systems you can implement and get payback relatively quickly. Sure, it might certainly be a three-year implementation to get the full value and the full system up, but there’s no reason, for example, why you couldn’t put your forecasting and replenishment in first and get the benefit from that. During the start of the pandemic, forecasting and replenishment was one of the biggest problems. Firms need to look at where they want to end up, but prioritise those processes that give you value and return on investment quickly. They also need to look at solutions that can mix and match.
With our supply chain and category management solutions, you can upgrade parts of the system rather than the whole system. If there’s a new forecasting and replenishment module brought out that’s got some really great features that you need to take advantage of, you only have to upgrade that bit of your system that gives you the value. That’s how to structure things and, again, if you’ve got the right foundation, you can add, and more importantly change.