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Next in Retail Podcast

Episode 5 - Supply Chain Modernization for the ‘New Normal’ in Retail

Episode 5: Supply Chain Modernization for the ‘New Normal’ in Retail

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This recording of a live session highlights the vast changes that retail supply chains have endured, and how retailers should be considering adapting their digital ecosystems to adapt to these unprecedented times.

Transcript

Reva Bhatia:

We are here for another episode of next in retail. For this go around we're doing something a little different from our usual audio only podcasts. With many folks working from home we've decided to take the session live, streaming in real time from around the world. I'm your host today, Reva Bhatia joining you from snowy Chicago. We also have Hilding Anderson retail strategy lead for North America based in Austin. We also have Andy Halliwell strategy lead for EMEA and APAC out of the UK. And lastly we have Guy Elliot retail and CP industry lead for EMEA and APAC also based in the UK. Again, thanks for joining. We have a quick 30 minutes planned for today and a lot to cover so I'm going to dive right in.

Reva Bhatia:

As many of you know, the COVID 19 outbreak has impacted life as we know it and retailers are on the front lines working to ensure that people get supplies that they need. Retailers are also being faced with incredible challenges navigating both supply and demand right now. The crisis has put an immense strain on supply chains from grocers who haven't been able to keep up with demand and panic buying to apparel and specialty retailers who are determining how to manage inventory visibility and supply production as global trade slows. So today we're going to be talking about what this crisis means for retailers as a whole and how they should manage their supply chains and how they should look to evolve their approach to adapt to what is now the new normal. So I'm going to kick things off. A lot has happened since COVID 19 was declared a global pandemic last month. Where do you think retailers are now compared to where they were when the crisis first began? I'm going to start with you Guy.

Guy Elliot:

Sure, retail is clearly a very different place from where it was even only a few weeks ago. Definitely not a better place, that's for sure. But it's actually, it varies massively actually. Each of the different sub sectors of retail are impacted in a different way. You've got on the one end of the spectrum, you've got the grocers who are struggling to keep up with demand, struggling to keep up with the massive shift channel shift to online ordering and delivery and so much so that they can't keep up and then really struggling. On the other end of the spectrum, you've got the apparel retailers and department stores that are pretty much shut down and have very little revenue stream. Even if their websites are running there. There's, there's relatively low demand because people aren't buying a lot of clothes right now. And then on the spectrum in the middle you have all kinds of different retailers but you have a different and varying impact.

Guy Elliot:

But you are seeing a lot of really interesting stuff around retailers that sell things to make home life for comfortable. Working at home more comfortable are actually seeing a resurgence of demand that is impacting them. So you have this wildly divergent demand picture. But even within that, it's not consistent. If you take groceries specifically, you think life would be great for them. They've got huge domestic demand. Customers are stockpiling and so everything's good. But what's actually happened is this huge channel shift that they weren't ready for and huge amount of inventory consumption. And so actually they are, they're struggling to keep up and in order to keep up, they are reinforcing that they're hiring thousands and thousands and thousands of workers. And so with the shift to e-commerce, which is already a very low profit channel, they're now through operational group force. They're actually using money even more. So the revenue was going up, but actually it's not a profitable revenue in most of the were actually warning about profits going forward. So you had this really sort of perfect storm of either negative revenue or just bad profitable revenue sitting inside retail. Everybody's trying to sort their way through as this virus plays its way out.

Reva Bhatia:

Yeah. Thanks Guy. Hilding, do you have a POV on this one?

Hilding Anderson:

Yeah. You know, from the US perspective in North America, I mean we're seeing that very similar trends overall. Your grocery, it just to put some numbers behind it. I mean groceries up in store, even as up, you know, 150% or more. We view that as kind of an initial surge, certainly as people stocked up, but also now as they, as they continue to want to have a little bit more product in their store. But even more remarkable is the online piece. So you know, some of our grocery clients are seeing 700% increases. I'm in online and as you guys know, the US has traditionally trailed a little bit of Europe around the online grocery. Yeah, we projected a couple of years ago that by 2024 we'd see 50-60% of Americans doing all online ordering at least monthly. And we're pretty much there now. I mean the number of slots that are available is too small for the demand.

Hilding Anderson:

And so we're seeing a lot of interesting conversations happening around, “Oh, how do you increase your slides?” How do you, how do you shift some of those areas around from an e-commerce perspective as well as get, you know, try to identify some flexible fulfillment and the similar trends as you think about apparel and specialty. But you know, with most of the stores closed, they're really reliant on digital as the primary growth driver for the next four to six weeks and we're projecting a kind of total period around eight weeks or 12 weeks where the stores are closed. So similar but, but also some nuances consistent with the North American market.

Reva Bhatia:

Great. And thank you both for teeing up high level context. You both mentioned one of the most notable shifts in consumer habits has been the huge push for online ordering, home delivery, pickup options, et cetera, causing retailers to have to adapt super duper quickly. But when it comes to digital, again, you both mentioned this, different types of retailers are being faced with really nuanced challenges as it relates to just preparedness and response. So for instance, as you guys noted, apparel companies may have had a stronger digital ecosystem prior to the crisis and are fairing quite differently from grocers who, many of whom were just getting started as it related to online ordering. On top of that, a lot of retailers are even slowing or halting their fulfillment in general due to some of the challenges they're seeing today. So you both again started to touch on this, but I wanted to dive deeper on how retailers in different segments are handling these issues and specifically lean into what some early lessons are that can be learned about leveraging digital channels in the future. I'm, I'm going to start with you, Andy.

Andy Halliwell:

Yeah, I mean as both Guy and Hilding pointed out what we're seeing here, there's an acceleration of the channel shift that I think people were predicting was going to come over, you know, multiple years. Suddenly it's forced people to transform in a matter of weeks. You know, when you look at specifically the, the non-grocery industries, yeah, we have 95 or maybe 100% of their stores now closed they’ve got you know, massive problems in their business. Just managing the, the, you know, the massive reduction in cash flow coming in with the two biggest cost line items, people in rent, maybe he's still sitting there and still, you know, taking money out of the business. So that's why you're starting to see some of these organizations really struggle, you know, some rumors of administration or bankruptcy and those kinds of things. You know, the companies that had actually been progressive with their e-commerce programs have definitely fared this storm a little better than others.

Andy Halliwell:

But the increases that we're seeing in, in an online sales in apparel and home furnishings, especially things like, you know, office furniture and some random subcategories. Even within that, like webcams for example, that we're using this afternoon, you know, then seeing spikes. So you know, some people are reporting 20%, other organizations 50%, some organization five or six times that's all great. But they're actually managing issues in their supply chain and fulfillment systems which are not able to keep up with that spike. So we're seeing higher sick leave, we're seeing problems with throughput in fulfillment centers and distribution centers. Some retailers that we've been talking to, I've actually been talking about closing their doors completely cause they're just not able to stay on top of these kinds of issues. You also got the problem that these companies have got stuff in their stores and if they're, you know, sort of fairly balanced even so they don't have the majority of their stock is in stores, which they can't get to because they're closed.

Andy Halliwell:

So you know, we're starting to see organizations really try and work out what do they do with that stock because that stock is probably seasonal, which means that it's not something that you will be able to sell later in the year. So they've got to kind of a present problem here and now, well what do I do with that? How do I get that back into distribution centers or fulfillment centers? How can I then sell that through? And if I can't, then I have to plan for, I mean frankly fairly significant promotional activity when I can reopen my stores in order to manage them. So you've got challenges around supply chain, fulfillment systems, people, staffing, those kinds of things. Well we are also seeing some really clever but really innovative solutions to some of these challenges come through. I was actually talking to Guy this morning about a donut manufacturer here in the UK that's had to close all their stores.

Andy Halliwell:

That is now offering boxes of produce and vegetables and those kinds of things because they have access to the producers. They have the kind of the fulfillment system. They have an e-commerce platform that allows them to sell these things. They're just changing the product. We're selling them now selling the whole fruits and vegetables, you know, the carrots that would have otherwise gone into carrot cake and now are coming to you as carrots so that you can cook them in stews. So there's some really interesting things happening in here. I think the lessons for a lot of people here are going to be around making sure that you've got a better balance in your supply chain between efficiency and contingency and especially for things like you know, fast fashion and for seasonal items. How do you make sure that you can quickly turn over stores into more of a ship from store model or some kind of store fulfillment model I think is going to become something that people really focus on in future.

Reva Bhatia:

Great, thanks Andy. You did a great job at teeing up some of the innovative items that, what we are calling non-essential retailers are leaning into. I'm going to kick it over to you Hilding to give some perspectives on what some of the essential retailers or grocers might be employing.

Hilding Anderson:

Yeah. You know there was a range of techniques we're seeing, you know, I think you have to separate the initial kind of coping with the surge and a longer term strategy. So from a, from an immediate response, obviously all hands on deck, obviously trying to reshape the store and make it safer for everybody as a priority. So you know, you're seeing things like, you know, the one way aisles, you're seeing markers on the floor, kind of ad hoc and probably additional. But I think effective to say, okay, here's how long you have to sit, how far are you up?

Hilding Anderson:

Maybe spaced in order to be, you know, 6 feet plus away from the next person. I think as you think about the next wave though, you really get into these questions about how do you maximize the number of slots that you have for online and we've built some technology that helps improve that by  close to 20% so that you can actually deliver more products. Making sure that you've got the curbside pickup optimized and ready, you know, thinking about the broader online partnerships that you need to deliver digitally and to be knowledgeable about those customers. And you know, as we look out at the next 10 years and how this world, our world is going to be reshaped by COVID. I think data is going to be an essential aspect of that. We think the next 10 years are going to be about the algorithmic retailer and about a retailer that uses data to build those relationships.

Hilding Anderson:

And to date, especially in the U S a lot of the mid-tier retailers still rely on Instacart as their primary partner or they've only had limited investment in some of the digital channels and they really don't have all the insight they need into their customers and being able to reach out and touch those customers and being there for them during this period through the digital channel. And I think that's going to be one of the questions that executives are going to be talking about is you know, how do I transform for this new era and it's going to require a greater, greater focus on those digital channels and a greater understanding of who your customers are, who are your most profitable customers and best customers that you want to retain here.

Reva Bhatia:

Great. Thanks. Hilding and you started to touch on what comes next. You know, you started to touch on flavors of data playing a critical role as we move forward. So you know, it's, it's really interesting because with so much still unknown planning for the short term, the medium term and definitely the long term impacts on supply chain is critical though obviously very difficult since none of us unfortunately have a crystal ball and can see into the future. So you know, what other things should retailers be thinking about in terms of modernization as they look to navigate the crisis now and also try to be prepared for what comes next. Again, Hilding you touched on data, but I'm gonna kick things off with you Guy and see what your perspective is here.

Guy Elliot:

Yeah, I think, you know, there are so many horizons you could look at. I'm actually gonna sort of skip over the immediate short term brute forcing of just getting the job done. And I look more at the kind of medium to long term. I think I'll talk about the grocery sector. The problem with all this conversation is you have to answer it per sector, but it'll all start with the grocery sector and somebody else could cover something and the other sectors. But I think there'll be two big questions retailers need to ask. The first one is what's the new normal from an online standpoint after we emerge from the crisis. So massive surge in demand, how much of that holds and how much reverts back to where it was before. And personally I think a lot of it will hold, you know, studies have shown that after sort of three or four online shopping journeys in grocery, you tend to get a repeat customer coming back, right?

Guy Elliot:

So assuming the recurrent crisis lasts for more than three or four shops, a lot of those, those customers will have converted and that realizes how convenient it is. And so what do you, how do you handle the new normal? And then the second one is what do you need to do looking for the route to minimize the impact of this happening again, you know, if heaven forbid it, winter rolls around next year and then the virus comes back or something else happens, right? So I think there'd be a lot of soul searching around that. So in terms of those two things, in terms of the new normal thinking, I think there's probably two big questions. The first one is, is you've either acquired or lost a bunch of customers as a grocer over the course of this thing, depending on how well you've done, how do you keep as many as those as possible and how do you reaquire them if you've lost them?

Guy Elliot:

Right. So how do you hold onto the ones that you got during this crisis? That's probably out of the scope of this conversation is probably a different podcasts cause it's not really pushed on the supply chain, but the one that is relevant is how do you serve as this increased online volume that is likely to sort of continue on afterwards in a profitable way? I think for a lot of retailers, especially the ones in the beginning of their journey, it was about revenue growth, about channel shift, about capturing customers in the online space. Now that you've kind of jumped a couple of years, all of a sudden they're going to, they've got a huge amount of non-profitable revenues I talked about at the beginning. They're gonna have to figure out how to optimize their supply chains, their end to end process to make those customers profitable or they have a huge business challenge on their hands because all of a sudden, let's say, how could that'd be grocery is 20% of their business, whereas before it was five or 3%.

Guy Elliot:

Yeah, that's a big portion of your revenue that's not profitable. You've got be problem, right? And so they're going to have to look at really powerful order management solutions that allow them to optimize their entire network and actually understand where their inventory is and how do they pick from white stores, dark stores, how do they do trunking, how they both have warehouses and actually do that in near real time. Whereas you know, typically retailers are kind of done network planning on a, on a sort of annual or quarterly basis. It's actually now on a, on a very, very regular routine basis to understand how do you optimize the network. Then also, I think they're going to have to start to be much more proactive in breaking down the traditional silos and their business and actually getting the fulfillment people to work with the front end people.

Guy Elliot:

Because actually historically the fulfillment has got an order and they had to optimize from the point of the order to the delivery point. And they never talked to the people who actually took the order. But actually there's a lot you can do to optimize your business. If those groups are working together, you can actually start to drive incentivizations for less use slots, right? Because everybody wants deliveries end of day or Saturday morning or whatever else. How do you incentivize people to go to different slots? How do you put together solutions so a neighborhood can order together? So you know, the truck comes once that neighborhood and now you incentivize people to do that. How do you use a little bit, maybe a little bit more friction in the process to actually drive customer behavior in a certain way? So there's a lot of stuff that I think they're gonna need to think about to, to both from a fulfillment process perspective but from an end to end process to try to make this channel profitable for them through this increased demand.

Guy Elliot:

And then on the, on the other point we were just around kind of looking into the future and you really got to look at, you know, why the supply chain broke and how you fix that, right? That's pretty old school in terms of solving the problem but you go back, I think we had much more dynamic and data-driven responses to that. I think there'll be a lot more focus on automation and that was, that's probably a big topic in and of itself. And then maybe a little more on localization strategies. A lot of supply chains requires that global network, which you know in times of crisis as it is right now suffers significantly. So actually how do you have a fallback position to source a little bit more locally if you need to or at least have some hedging in there. So a lot of points in there. And I won’t go into a lot of detail. I think there's a key key areas people need to look into in terms of that future minimization of impact area.

Reva Bhatia:

Great. Thank you Guy and great context with a focus on grocery. So Hilding I'm going to kick it over to you and maybe give us some context on perhaps the apparel sector.

Hilding Anderson:

Yeah, and I think there were a couple of different areas that we're seeing in apparel really start to pay off and you get prioritized on roadmaps and one is around inventory visibility. So being able to track inventories from from factory all the way to store, obviously, especially during times of sort of complex supply chain disruptions, store closures, understanding where that inventory is so that when you do have online orders that want a specific blouse or a specific shoe or purse, you're able to get it to them quickly and efficiently and more importantly profitably. And then when stores reopened, being able to do that as part of it. So inventory visibility is one piece. Demand planning. So I talked about, you know, the algorithmic retailer, the ability to actually anticipate where demand is going to come from and how to best optimize that demand is a key part as well.

Hilding Anderson:

And the third area that we're seeing a lot of traction around is around returns and optimizing returns. And obviously in apparel and specialty right now, a lot of stores are closed, but for some apparel and specialty, they're seeing close to 30 to 50% of all orders online actually be returned. And that's a huge drain on profitability. And so we've actually have worked with some clients to optimize that returns problem as part of our process. So I think if you look across those three or are some of them and yeah, it's also sort of recognizing that, you know, even though the store is open tomorrow, you're still to see a 10 to 15% cut off the top line for the full year. And they're going to be some real challenges for a lot of these apparel retailers. And they need to put some thinking into place to cope with that. And I know that. And of course many of them are doing that already.

Reva Bhatia:

Yeah. Great. Thank you Hilding. Andy, do you have a POV on this?

Andy Halliwell:

I completely agree with well going and hitting a thing. I think what we're seeing though is the, there's quite a lot of variability depending on where in the world you are and which market you're addressing and it's the combination of kind of category plus market consumers overall maturity when it comes to online behavior and online buying, those kinds of things. You know we've seen much, much greater shifts and much greater acceleration in some markets like Germany for example. Whereas perhaps in the UK people are a little bit more okay with the idea of buying online and so that kind of shift in the market place I think is putting more pressure on some organizations and some organizations supply chains even more heavily. And then when you combine that with kind of a local consumer expectations around how do they expect to be shipped to them and people's demands for sort of express and next day people wanting to only pay for stuff once it's actually been delivered as well, which has a, you know, an adverse impact on cash flow for organizations. There's lots of real kind of like, you know, detailed challenges around operating and especially if you're a global brand or a global retailer, there's a lot of nuance in kind of how you're going to perform in market that you're going to have to really focus on in order to try and resolve some of the sections. I'm going to leave it there, but you know, there's a lot of detail in there I think.

Reva Bhatia:

Yeah, there’s a lot to unpack with this. So, you know, perhaps shifting gears a bit, managing supply chains is as much about process as it is about people. How can retailers ensure that they're keeping employees safe and maintaining consumer trust? Feel free to toss in some examples of, you know, retailers you think who might be doing this right. Hilding why don't you go ahead and kick us off?

Hilding Anderson:

Yeah, I mean there's no question that retailers are a huge part of keeping their employees safe is one of their, one of their top priorities. And I think, you know, some of it goes into how do you reshape the role of the store and make sure that that you can manage the number of interactions that employees have with the customers that do come in. So one of the examples I like to see is one of the things that Walmart has done is actually implemented a scan and go technology that allows you to actually walk in, scan as a customer, walk in and scan and then actually exit without going through the traditional cashier line. And that obviously is great for the employees. There's obviously some table stakes stuff around masks and ensuring spacing and thinking about that side as well. And so I think Walmart, it's actually their app was the number one downloaded app in North America, their grocery app and speaks to, I think this broader shift of moving online as well as how do you, you know, if you can drive a little bit more and do more curbside pickup and do more ship to home, it actually is better for the employees as well.

Hilding Anderson:

One of the things I haven't seen, you know to date, it actually, I'm surprised there hasn't been more discussion around actually shifting some of the stores to dark stores in North America. So the look at this huge surge in demand. We have, you can think about these stores as giant warehouses. Essentially you could close the store and do everything through digital fulfillment, better for the employees, a great experience for customers and I really haven't seen no one's, we've had a few quiet conversations with some retailers I can't talk about, but in terms of actually making that shift, I think that was a little bit of a missed opportunity during some of this peak to really push innovation in that area, in this market.

Reva Bhatia:

Interesting. Guy do you have a POV either related to grocery and or non-grocers?

Guy Elliot:

Yeah, I think there's a lot of stuff people in place to protect employees and obviously the public, I think the most sort of interesting one is the contactless delivery. So it's, it's turned into a bit of a knock on the door and run kind of model or brings it back to my childhood a little bit. But let me do, they kind of knock on the door, put the package down and back away like 10 feet. Okay. And then wave when you, when you come out. So this other mechanisms like that, but actually as it starts to stretch out longer and Hilding you touched on it for dark stores, for grocery. I think the same thing is true in any apparel space. And actually Andy, you mentioned it as this drug draws out longer and his warehouses are harder and harder to work in because obviously warehouses are fairly confined spaces where people are packed in pretty tightly and in the warehouse they're already trying to do things like have one way aisles.

Guy Elliot:

So the employees come in one way and then there's designated corridors in a certain direction. Again, to try to minimize that of people coming back and forth around the warehouses to make them as contact free as possible. But I think more and more pushing it out into the stores. Right. So as Andy mentioned, there's inventory in the stores, but also there's a lot of space in the stores. So you can open  must and I should have five, six, 10 employees wandering around that far, far apart from each other, fulfilling orders, putting stuff in boxes, taking stuff off shelves. I think if the stretches out significant longer, they'll have to stop looking at those kinds of options to solve these problems. I do also think they're trying to look at things, especially in the short term, prioritizing the [unintelligible] less about their employees, but more about the public.

Guy Elliot:

But how do you prioritize them and the disadvantaged people who can't stand in lines at the stores. So I think that's a nice thing that some retailers are doing. I don't know. Again, I'll use the example of next to this weekend. So next weekend actually shut down their online solution as well as their stores up until this last weekend. And what they've done is they've actually constrained the number of orders they can take right now and actually they who they sold that about 90 minutes to match the throughput they can put through their warehouses in a safe way for their employees. So getting back to that, funneling your employees and keeping them apart. And so they're trying to ramp that up while keeping the employees safe, but they're made to take, you're very cautious and admirable in some ways approach to ensuring their employees are safe while bringing a line back and back in as they go.

Andy Halliwell:

I just want to build on that if I may Reva. So one of the other things that we've seen a lot of grocery supermarkets stores that are still open doing is really, really simple but effective stuff like marking out on the floors where exactly is two meters so that you know that you can always stay two meters apart. So almost putting these grids into their stores. So one person occupies one wrong grid. Tesco is a one way system through all of their stores. So you can only travel in one direction down every aisle to help minimize kind of congestion. And you know, we're seeing them also introduced this idea of still the hours. So I love this idea. So my, my both my parents are 80 years old and yeah they really struggled with this. But you know, they can now go to supermarkets between the hours of, I think their local one is seven 30 till nine o'clock and they know that the only people who are going to be in the store at that point in time are those at risk shoppers who it would otherwise need to be in isolation on, you know, and can’t be exposed to huge numbers of people. And as a final point, I actually wanted to say thank you to everybody who works in the supermarkets who works behind the tills because you know, this must be a very difficult time for them and it must be really concerning being exposed to so many people coming through the stores. And you know, a lot of the people that I've spoken to in my local supermarket, so I mean frankly they're doing an amazing job. So you know, a big shout out for those guys and girls.

Reva Bhatia:

Great, thank you Andy. And that's a great segue to our final question for folks before we dive into just a little bit of Q and. A. So you know, as we've chatted about, there's a lot for retailers to consider and much more than we're able to fully unpack in a short 30 minute interval. And there are a lot of lessons that many retailers have learned so far. So you know, as a final question to this group, I'd love to understand what you all think the long-term impact of COVID 19 will be on consumer habits as a whole. And how can retailers begin to prepare for the potential new normal. And I know many of us touched on this already, but I'm going to start with you Guy and give us your final take.

Guy Elliot:

Yeah, and I love this question. I mean it's, so it's a really good one. I think, look a lot of the stuff that was happening was accelerated as a, as a, as we've talked about already, but I, I think you will see actually depends on how hard we want to push. I think there is stuff that we could make happen if we have the will. So for example, I think right now people are more willing to pay for deliveries and returns, which they weren't before. Retailers could take advantage to capitalize on actually starting to charge for those things and you know, reinforce to the public are these things cost money, which is obviously been a big pain point, especially for apparel retailers for a long time. So there'll be there, there was a little bit more tolerance there and we may be able to play with that as we come into a new normal.

Guy Elliot:

But also things like subscription models and automatic replenishment and just as much a new services that could come around because people have realized these changing behaviors and patterns. You just if people who have a regular grocery slot right in our life that are quite happy with life because that just continued for them. And so I think there'd be a lot more of that kind of thinking that you could offer to your customers. And then actually getting into things like packaging, right as you move into online. One of the things that hadn't been explored nearly enough is if I'm ordering toilet paper or laundry detergent for delivery, it doesn't need to be in a bright red container of a certain size cause I'm not carrying it and that doesn't need to be to catch my eye on a store shelf. So actually you can start to get into much more environmentally friendly packaging, better sizing it ties into auto replenishment as well because maybe you don't need packaging, it just shows up in some solution for you. I think it was a lot of stuff that will come out of that. Again, it was all arriving. It's more about how fast it's going to arrive and how fast retailers are gonna have to be creative about solutions to offer their customers that both connect with customers and improve their profitability because that's going to be a key focus.

Reva Bhatia:

All right, thanks Guy. Hilding?

Hilding Anderson:

Yeah, I think this next five plus years we're going to see this start of consumer behavior really fundamentally change the way that they interact. You know, consumers interact with multiple retailers, whether it's grocery, a home improvement, apparel and specialty. You're going to have to have a digital strategy that is focused on data, embracing the channels that customers know that they want to interact with you on. And as part of that journey, it's about moving forward some of those transformation plans that you may be had on a five year roadmap and say, look, we need to do this in the next, not in the next six months and the next two months so that we're ready for this new type of behavior and we can retain market share and really drive some of those growth numbers that we're going to need to close the gap between, you know, the 10% drop that we're seeing.

Hilding Anderson:

I also think it's important, you know, you've got to balance that investment when you think about it. This might be the worst recession we've seen since the great depression as a world. And that challenge is going to be key to overcome. And part of that focus is about how do you profitably serve these customers through the digital channels. And so I think that rather than saying, Oh, that means we should put off our investment. I actually think it means you have to double down on these investments digitally and do it right and do it in a profitable way because that's where the shift is going to be and that's where you've got to serve those customers and understand and connect with those customers from a one-to-one basis in a way that we have not as an industry I think done enough of over the past five years.

Reva Bhatia:

Thanks Hilding. Kick it over to you Andy.

Andy Halliwell:

So I think, I think there's a couple of things. So one, I think consumers have started to place a more realistic value on some of the things that potentially they’ve been given for free in the past. Let's tell you in things like getting an online grocery delivery slot, suddenly you know, people are celebrating when they're, you know, Walmart or Tesco's delivery drivers turns up at the house cause it's been so difficult to get hold of a delivery slot. I think maybe you'll start to see a shift in the value on what people are prepared to pay in order to secure a slot on a regular basis as a part of their household chores or you know, running the household. I think the other thing that we, from a retailer perspective is the, you're going to see people realize that optimizing out all of the inefficiencies optimizing are all of the kind of the slacking in your supply chain has really not served them well during these periods of crisis and so they're going to start to put that in and they're going to have to, they kind of start to realize that you can use that lack in order to innovate and to find new ways of doing things a little bit differently.

Andy Halliwell:

Experiments and test and learn and that's how they should be using that additional kind of contingency that have built in rather than trying to optimize it out and cut margins and reduce costs. I think that's one of the big shifts that we're going to see in response to kind of the sort of black swan events.

Reva Bhatia:

Thanks Andy. I know we're at time, but I do want to leave just a couple of minutes for some interesting questions we've been getting from folks. So one of the questions we've been seeing quite a bit on LinkedIn and Zoom is around how folks can retain the new customers that are coming into the digital fold. So really as folks are starting to engage with digital channels more so than ever before, how can retailers really build customer loyalty and what are some strategies that retailers can employ to retain these customers? I'm going to start with you Hilding.

Hilding Anderson:

Yeah, I mean it's huge, customer loyalty is perhaps one of the largest drivers of value for retailers. And I think it starts with data. So if you think about, you know, customer loyalty and understanding what those customers are, if you have the right kind of platform and you're able to run some of these models, you're able to understand customer lifetime value, churn propensity, next best action, and you're actually able to drive a better relationship and create a better relationship with those customers using your existing loyalty program. And certainly in grocery, this is a huge, you know, groceries were one of the very first to have great loyalty programs and this is just the next generation of that. But it's, you know, as you think about this broader digital shift, there's so many opportunities. You just think about that substitutes alone in grocery, it's one of the critical decision making aspects of any shop.

Hilding Anderson:

And if you put the wrong substitute in for a product and none of that, none of the kids can eat it. It's a huge pain point for that dad or that mom that put that order in. Right. And so just little things like that start to become very, very important. And again, it's driven by and understanding of who the customer is and this sort of sophisticated, but whether it's customer data platform or whatever, you know, marketing data warehouse, whatever the tool is from a technology perspective to deliver one-to-one messages to understand who those customers are and then to deliver an actual experience for those customers that to make them feel special.

Reva Bhatia:

Great, thanks Hilding. You know, another question we've been getting quite a bit on LinkedIn is around how folks can balance implementing all of these new measures with the fact that cash flow isn't that great right now. And you know, some of it comes down to how retailers manage their own vendor relationships in order to unlock cash flow at this time. So you know, when it comes to sourcing, how can retailers better manage these relationships and find new opportunities with existing partners to really allow for more flexibility, both either from a cash flow perspective, release of working capital perspective during these types of crisis situations. So I'm gonna ask this one to you Guy.

Guy Elliot:

Yeah, I don't, working with vendors is going to help them with their cash flow. Well they're doing some stuff. I'm not sure it's necessarily the best of this they should be doing, but it's actually I think the opposite in some cases. There are examples a little more on the consumer product side, but a, a company's propping up small suppliers to actually help them through this period, this typical period. But I think the answer to your question really comes down to a combination of data and transparency and then maybe a bit of creativity. So I think working more closely with, with suppliers to help them understand what a demand is and then creating systems and mechanisms for actually having that work in more real time so then they can adapt more quickly. A lot of, a lot of what we're struggling with right now is not an inherent shortage is in product it's in, it's, it's actually the ability to get it to where it needs to be.

Guy Elliot:

So creating options with suppliers potentially around different forms of drop ship or are you using the existing B2B logistics network to route orders a little bit more dynamically from the suppliers? Maybe not necessarily directly to consumers, but it's different sort of dark stores or different delivery fulfillment channels. So I think it's a lot more about visibility demand in real time so they can react more quickly. And then again, I think it is going to be, there's going to be some need to look at the supply chain, understanding where the weaknesses are. You hear a lot of packaging these days. There's actually plenty of product. There's nothing to put it in for consumers because they're the, you know, the, the demand from the restaurants is dried up. So the really large boxes or crates or barrels are needed, but little little bags of flour for example, are, and so actually consumers are getting 16 kilo bags of flour because that's what's available.

Guy Elliot:

So I think looking at how the supply chain plays out, I'm not sure that's going to sensitize all the cashflow problem per se. That's a bigger, more challenging issue. And it's going to be about prioritization. And I think, again, doubling down on things that connect to customers that increase profitability. And it goes back to that breaking your silos. As I mentioned earlier, I think the, the challenge has always been that you kind of separate these two things, you know, acquiring customers and profitability and actually they can be very, very interrelated. A great example in the apparel is just, yeah, this inherent Go To of next day shipping, right? So that's the default option. It costs a huge amount of money to ship product next day. So actually and most customers don't care about the next day. If you order clothing on a Sunday night, you probably don't need it on Monday.

Guy Elliot:

You may be quite happy for direct Saturday for the Friday, for the weekend, next weekend, maybe not so you still have to offer the next day shipping but maybe consider defaulting to three day shipping which is much, much cheaper and if the customer wants to change it, they can change it and you put a lot of customers won't as they're getting smarter about how you actually keep customers happy while still saving yourself money I think will actually allow you to free up that cash in on that too to invest in all the things that you do need to invest in. I kind of answered your question and a different question at the same time. Sorry.

Reva Bhatia:

I like it. I like it. Buy one get one. I know we’re a little over on time. Again 30 minutes is not nearly enough to start skimming the surface on this. But hopefully folks found this of use. And again we’re at time. So those of you that have questions that we were not able to get to, either on Zoom or on LinkedIn feel free to reach out to us directly to continue the dialog. Thanks to everyone for joining us today for this unique next in retail session. For more insights, feel free to subscribe on publicissapient.com/retail to check out all of our latest content and thanks again for those who are able to make it.