COVID-19 outbreak has brought unforeseen and unprecedented challenges to the whole world, and no one today can assess and evaluate its future consequences and implications.
Economic experts and analysts are not unified in their opinions. Some of them foresee highly pessimistic scenarios and talk about global economy collapse followed by a world economic recession. Another group of experts thinks that severe turbulence brought by COVID-19 pandemic will have a short-term impact. Both scenarios have one thing in common – COVID pandemic has already influenced all sectors and all spheres of global economy and retail.
Export and import procedures are restricted, the borders are closed, businesses have to put their activities on hold, tourism sector is stagnating, some retail industries are suffering great losses, currency rates are unstable – here is the list of the implications COVID-19 has already brought on our agenda. And the world has to adapt itself very quickly, businesses shall look for the ways to respond.
Everyone is busy: the governments are working on new human social behaviour patterns and safety guidelines, World Health Organization is trying to flatten the COVID curve, doctors and nurses are desperately saving infected people, and we all are thinking about the ways to keep ourselves safe and healthy, preventing virus spreading.
During these uneasy and turbulent times retailers have to mobilize all their efforts in a smart way, keeping customer demand more or less satisfied and keeping their operations active. The reality COVID brought will teach us to turn challenges, limitations and restrictions into new opportunities.
Let’s stop talking forecasts and think about the post-COVID world. Let’s have a look at the real problems brought by COVID on a world retail market, focus on the latest outbreak-inspired trends and discuss how to keep business running, retain clients loyalty and keep profits.
1. Supply chain disruptions
COVID has swept the way supply chains have been functioning. Most of them are broken, as certain supply chain areas are unable to fulfill their tasks. Berkley’s research group says, that COVID has resulted in several China’s major factories closures, therefore raw goods and materials have not been supplied, and manufacturing process has been disrupted.
Apparently, the deliveries are delayed. Data collected by Alphaliner in late February 2020 shows that 9% of container carriers have not been involved in operations (and 9% is a very disturbing quantity for a manufacturing process). These drastic measures have been put in place by China government to stop COVID-19 spreading.
Some analytics say that only those countries that prove their ability to make a shift in their production cycles and steer them towards local manufacturers will survive the post-COVID crisis. Doing business with local supply chain members will help to keep production cycles stable, spend less on logistics and lower out-of-stock risks.
COVID pandemic has brought a high level of uncertainty to post-soviet retail markets. Businesses that had their supplies received from China have to cut assortments, raise consumer prices and struggle with procurement irregularities and delays. Needless to say, business development is being put on hold in almost all retail segments, while fashion and consumer electronics are being hurt the most.
With supply chains and production cycles remaining disrupted, businesses have to quickly adapt themselves to the new reality. To maintain customer loyalty amid pandemic, companies shall start searching for locally-produced materials and goods, reassess their suppliers databases and build new relationships with local manufacturers, as well as remodel the way delivery schedules work.
2. Customer behaviour shift
In March 2020 Morgan Stanley issued research saying that retail traffic across the USA has dramatically dropped by 9.1%, and luxury consumption has decreased by alarming 14.7%.
While COVID pandemic is far from being over, retail businesses will further have to face depressed sales and consumption drop. People have to rethink their shopping habits and cut their spending. Instead, consumers are focusing on FMCG (household items, household cleaning goods, health and personal hygiene items), and grocery shopping (canned and shelf-stable foods, meat and frozen foods). Being afraid of uncertain quarantine times and future restrictions, people tend to overstock their house shelves and buy in bulk.
Nielsen analytics have compared 2020 and 2019 consumer trends across major Russian grocery store chains: so, during the period 2 – 8 March 2020 people have bought 27.8% more groats and cereals, 40.9% more frozen goods, 18.8% more pasta and 21.4% more wet towel wipes than during the same period in 2019.
In order to satisfy pandemic-driven consumer needs retailers have to enact urgent measures to stop panic shopping: some stores limit the quantity of certain goods each customer can buy. This measure can ration panic-buying and stop overpriced reselling that has started with the virus outbreak.
Retailers who can quickly adapt to new challenges, remodel their business, make a shift in product categories they offer, as well as decrease luxury goods procurement, will survive.
3. Social distancing
World Health Organization strictly recommends to avoid mass gatherings and public places. Most countries have already imposed severe quarantine measures and closed all shopping malls, beauty salons, hairdressers, restaurants, cafes, museums etc. Groceries, pharmacies and gas stations are operating with the precautional measures put in place. They have to protect both their staff working on a front line of pandemic and their customers health.
To maintain safety, trust and customer loyalty during these turbulent times all retailers have to adapt these essential safety measures:
1) Install hand sanitizers/disinfectants at store entrances and/or exits;
2) Limit the number of customers who can be immediately present in stores;
3) Put special navigation marks on the floor and introduce one-way aisles, this will help to ensure that customers are kept two meters away from each other;
4) Assign an employee to control the lines and cash desks;
5) Additionally, disinfect and clean all store public areas;
6) Closely control and monitor staff health, ensure staff is practicing proper personal hygiene.
Some stores (mostly European ones) have introduced new extended working hours – in this way they have redistributed customer traffic. Another safety measure the retailers are actively promoting is cashless self-service kiosks use.
4. Boost of e-commerce
COVID pandemic made almost every consumer rely on online orders and e-commerce – people want to stay at home and order deliveries at their doorstep.
Retailers are doing their best, but some of them are not able to respond to this sudden surge of demand. For example, you can have your order from Russia’s “Perekryostok-Online” shop delivered not earlier than 2 days after order placing, and you absolutely can not put the essential goods (cereals, buckwheat, pasta or wet sanitizers) into your online cart. During the most severe days of virus outbreak in Italy, online customers had to wait for at least 10 days to have their orders delivered.
Retailers have to adjust their offline and online operations to combat the spread of coronavirus, respond to changing consumer behaviour patterns and retain fragile customer loyalty.
Retailers need to have a trustworthy, powerful and reliable online inventory system which is capable to cope with sudden spikes in demand, keep delivery schedules stable and track all product information (exact delivery date, timely and actual data on product stock and leftovers, health data for the employees working in stores and warehouses etc.). During turbulent times customers need to have transparent and reliable information on the products they are buying, they want to stay reassured, comforted and informed.
During the COVID outbreak in China, the country’s largest retailer – Sun Art Retail Group – which is operating 486 hypermarkets, has closed 80% of its brick-and-mortar stores, but the chain managed to keep their sales rate levels absolutely unaffected. The company used their own delivery service, and the orders have been processed with the help of their online app, or powered by WeChat social network.
Businesses find creative ways to respond to COVID challenges – for example, one of the major Ukraine’s retailers (ATB network), the largest marketplace (Rozetka) and the widely-used delivery service (NP) have introduced a new option – a grocery basket filled with basic essentials. People can order these baskets in one click and donate them to seniors in need.
COVID outbreak has shown us that consumer behaviour patterns and habits are very changeable. Some trends will change consumers mindset forever – for example, if people get fast and reliable service, they may switch to online shopping and offline stores may see a severe decline, or people may start using the “order and collect in-store” option only.
5. Remote working
COVID has forced companies to quickly switch to remote working. Retail businesses have also transformed their head offices into home-based workplaces. Companies have to organize workflow remotely, so they need to provide efficient and secure online infrastructure and implement remote working structurally, balancing their employees’ performance.
Retailers have to act quickly and choose appropriate online tools to make all their services and processes work remotely – the orders should be quickly created online and automatically sent to the suppliers, bottlenecks should be identified immediately, delivery and order fulfillment schedules should be tracked in real-time.
Maintaining performance effectiveness is very important. Sometimes people need some time to switch to remote working, we have talked about employees adaptation in this article. If a company uses ABM Inventory for its operations, it can retain 100% of its performance even if all employees are working remotely.
Here are some conclusions. It is clear that COVID-19 is a serious unprecedented challenge. Pandemic is a tough time, especially for retailers, who need to balance between customers comfort, online and offline business activity, sales rate and staff safety. Efficient and reliable inventory system can help businesses focus on the new challenges while securing smooth and steady routine operational activity.
Intelligent inventory management system can quickly adapt its algorithms and methods to new customer demand patterns, sales levels etc, making it easier to focus on fighting challenges.
By analyzing demand in real time ABM Inventory can automatically calculate the needed quantity of each SKU in all locations and storage points. Employees who are working remotely will have time to focus on strategic tasks, i.e:
– rethinking product range;
– analyzing overstock reasons (avoiding overstocks for luxury segment goods);
– analyzing the reasons behind out-of-stock and avoiding them (for FMCG);
– finding local suppliers, and rebuilding reliable supplier relationship.
The system will automatically check, control and monitor the necessary levels for each SKU across all segments, analyze current demand levels and make appropriate decisions immediately. Being a cloud-based system, ABM Inventory can be accessed by every home-based employee remotely, regardless of location. Company management can easily track performance using online-generated data.
As a result, the company has a stable and reliable inventory system, which can easily handle all essential needs. Here are some of them:
– dealing with restocking and reordering schedules;
– estimating rational order quantities;
– avoiding lost sales and frozen cash;
– keeping right amount of inventory in right place, in right time;
– decreasing overstock levels and generating extra costs for extra (urgent) orders;
– lowering operational losses and personnel cost while maintaining staff efficiency.
