To say that 2020 has been a challenging year for everyone is an understatement. The last six months have brought an enormity of difficulties and change to both the world of retail and the global population. While we don’t have the fabled Sports Almanac to identify future results, we wanted to share five questions that we have used with our clients to help plan for the second half of the year:
How are you supporting your current employees and remaining agile to meet new opportunities?
COVID-19 has disrupted our lives and added challenges from homeschooling young children to caring for family members. This is no ordinary time and it is also an extraordinary opportunity for leaders to demonstrate empathy for what is happening in their team’s lives.
It’s imperative to demonstrate to all employees that people come first and that their whole lives are welcome at work regardless of whether the impacts are visible. This can take the form of extending certain benefits to help manage through those challenges such as flexible work schedules, childcare reimbursements, and family care leave. It means providing adequate sick leave and income stability to those battling the virus to ensure their recovery and the safety of their colleagues. Target, for example, temporarily raised wages, provided free backup childcare for loved ones, and up to 30 days of paid leave for team members 65 or older, pregnant, or with underlying medical conditions.
This is also a critical moment to be agile to meet new opportunities. Essential businesses are having to flex up to meet a surge in demand. How can they quickly and safely identify and onboard talent? As retailers accelerate digital transformation initiatives like online ordering and curbside fulfillment, how can they shift resources to accelerate and deliver on those initiatives? Nowhere was this more critical than Walmart, the nation’s largest grocer, which has aggressively leaned into curbside pickup. To rapidly hire over 150,000 team members, they launched an expedited recruitment process and partnered with companies across restaurants, hospitality, and retail that had furloughed workers, in some cases going from application to offer within 24 hours.
How has Covid-19 affected your customers? Has your customer changed?
As with team members, it is imperative to understand the impact COVID-19 has on the lives of your customers. Customers are facing challenges caring for children at home or affected family members, or could even be battling the illness themselves.
As with employees, retailers should take a proactive stance in communicating measures that demonstrate genuine understanding. Reviewing data from loyalty programs, online profiles, or syndicated research to observe changes to frequency, basket size, and items purchased is paramount. Retailers should also evaluate sales trends pre- and mid-pandemic, including ecommerce vs. brick-and-mortar sales trends. Special communications can then be sent to impacted clusters with special offers, extended payment terms, etc. Walgreens, for example, recently emailed senior guests to communicate their support for customers that included a 30% discount offer for those 55 and older.
While it’s hard to predict all the changes, frequent customer insights snapshots through surveys or other means will help reshape assortments, along with the omnichannel shopping journey, and other aspects of the business to adjust to where customers are today and where they will be tomorrow.
What impact has Covid-19 had on your industry and competitors?
As states – and as a result, stores – start to re-open, retailers should consider what has happened to the industry and competitors during the pandemic. Have new opportunities sprung up to expand your share of the market or have new business models from competitors sprung up that make sense for your customer? Identifying these trends and putting an action plan in place to capitalize on the opportunity can be an important way to build sales momentum in the wake of the pandemic.
As an example, in segments such as apparel, there has been a good deal of announced store closures and department stores such as Macy’s have struggled and will not be the same. Understanding how those closures might impact your stores that might be in the same mall or located nearby and what, if any, actions should be taken will help guide a recovery plan.
In the home furnishings space, the bankruptcy proceedings of retailers such as Pier 1 or struggles of department stores with legacy home furnishings businesses – such as the aforementioned Macy’s or JC Penney – present opportunity for retailers such as Bed Bath and Beyond and Williams-Sonoma to aggressively go after share in the space, particularly as home improvement is often cited as the #1 store-based non-food retail segment for the year. Retailers that increase their share will be ones with flexible fulfillment options along with a relevant assortment that takes into account the shifting landscape.
What impact has COVID-19 had on your suppliers and supply chain?
COVID-19 has marked a period of unprecedented disruption to the global supply chain with factories in China closing for weeks, cargo capacity dropping by roughly a third and aggressive shifts in customer behavior. Companies everywhere are confronted with the unexpected challenge of maintaining production as vital parts and raw materials from their suppliers become unavailable.
Companies that focused on driving lower costs and minimal inventory within their supply chain have also found the need to improve network resilience and flexibility. Businesses are experiencing a drastic drop in revenue and face increased costs paying a premium sourcing supplies through reactive channels. For example, Hyundai temporarily shut down production plants in February due to a shortage of essential components and materials.
The companies who will successfully emerge from the pandemic will be those who mapped their supply chain network and know which suppliers, sites, parts, and products pose the highest risk. Thus, they are prepared to act quickly and secure constrained inventory and capacity at alternative suppliers.
How are you preparing in the event your revenues are still down 10-20% from last year?
Without a doubt, there will be a period of adjustment as revenues for retailers bounce back to their previous levels, with forecasts varying from 16 months to 3-4 years and with the uncertainty surrounding the impact of a second COVID-19 wave, there is little use searching for a crystal ball. That said, while this pandemic has caught many by surprise, with proper planning and foresight, an ‘orderly retreat’ can be implemented to avoid a total breakdown in a business.
One of the famous Amazon Leadership Principles is “Frugality” and businesses that survive this steep decline in revenue will need to embrace this ideal wholeheartedly. Described as “Accomplish more with less. Constraints breed resourcefulness, self-sufficiency, and invention”, there is little doubt that by being thorough yet prolific in restraints, teams will adapt.
Having said that, innovation and progress should not – and cannot – stagnate and capital investments will be tough to justify with revenue projections are shaky as they are. Instead, teams must find alternatives. What partners are available to provide needed creative boosts? What intangibles does your company have that others do not, and how can you bring them to a partnership? Focusing on creative deal-making makes it possible to iterate and innovate, often without a significant capital outlay.
One recent example we’ve seen: In a bid to match Amazon’s surge in grocery, Kroger has partnered with Roku (yes, the streaming platform) and while at first glance, this seems bizarre, it makes sense for both companies once you peel back the covers. Mailers and advertisements are still a staple of grocers and loyalty programs, with sales data, help retailers track their impact however, these campaigns are heavily reliant on geo-specific customer data to be effective. On the flip side, streaming platforms are continually attempting to place a monetary value in the ads they sell but often lack the conversion metric which shows what the customer has bought. Companies like Amazon have a closed-loop system, by which they benefit from being able to capture, analyze and take action on all of this data – but this is not the norm and indeed not a luxury of riches shared by Kroger or Roku. By sharing their sales data and customer data, both companies will significantly increase their effectiveness, all without having spent any direct capital in acquiring capabilities.