Commentary: The Next Normal as Retail Faces Shifting Expectations

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Commentary: The Next Normal as Retail Faces Shifting Expectations

By Todd Hassell and Steve Mauchline - 06/18/2020
AI design

Retailing has always been a dynamic industry, turning changes out of their control into moments that redefine the consumer experience.

But lately, consumer expectations and behaviors are evolving so fast and deep that they no longer resemble those from just a few weeks ago.

But hold on: the pandemic, itself, is not triggering this wave of change. Instead, it's accelerating a shift already underway – a retailer-consumer relationship that is more digital, service-oriented, and curated. 

If we learn anything from this disruption, we should understand why predictive capabilities are essential when delivering experiences that consumers want. Retailers cannot trust that supply and demand three months from now will look like it does today. They need to assess consumer shifts in real time, as well as forecasts of emerging economic factors, supply shortages and overages, and social trends and their impacts on existing processes, strategies, and experiences. Then, they must act on those insights – immediately.

Closing exposed gaps with future-focused, honest insight

Every retailer is exposed in ways that present both opportunities and challenges, such as an unexpected surge in demand, the forced closure of brick-and-mortar stores, or erratic supply from upstream vendors. Instead of using their physical storefront as a catalyst for growth, brands are facing an existential crisis that range from reaching consumers who value real-life experiences to selling high-demand inventory and moving low-demand products.

No matter the lens through which this ever-evolving world is viewed, brands should dissect every aspect of their business with a mindset focused on the future of consumer experience. Every assumption, dependency, decision, and strategy should be placed on the table for a "light of day" review of their relevance and effectiveness in handling challenges ranging from sourcing and inventory planning to value chain visibility. 

Such a critical assessment is needed to accurately respond to a world where yesterday’s hurdle rate for investment is just a fond recollection of the “good old days” and is replaced by key capabilities such as:

1. Master the table-stakes nature of instant access to accurate, real-time inventory

The moment a digital order is placed, consumers expect to receive exactly what they ordered and paid for, nothing more and nothing less. This is not the time for retailers to run out of high-demand items. Out-of-stocks will compel shoppers to run to a competitor that has the product and return for future purchases as if it is the only store in town.

To remedy this situation, retailers should double down on supplier collaboration to manage supply chain volatility. Unfortunately, traditional batch processing – often executed overnight – is a day too late. Business and supplier systems should continuously communicate with each other to provide real-time transparency into forecasting systems’ calculations and safety-stock parameters. Additionally, machine learning and predictive techniques must be incorporated to determine which SKUs are available for sale at any given moment.

2. Clear a transparent path to the future of the consumer experience

In addition to serving as a vital tool in the consumer experience, inventory visibility and transparency provides the guidance to forecast future business needs. It provides a foundation of insights to collaborate with suppliers in real time to respond quickly to market dynamics, while mitigating risks and strengthening global and domestic supply chain stability. 

But first and foremost, inventory data needs to be accurate and accessible. Brands have known for years that they can't count their way out of trouble; otherwise, they would have done it by now. Instead, they need to capture and consolidate inventory data from stores, warehouses, in-transit shipments and suppliers in real time. 

When given access to this inventory information through a commerce platform or mobile app, both consumers and employees can close the sale confidently. The promise of knowing that the desired order will be waiting for pick up or will be delivered at a specific date and time provides a level of reassurance that keeps people shoppers from looking elsewhere.

With tools such as RFID, robotics, process automation, and machine learning, this information can provide the latest insights on the product movements. Retailers can sense changing demand for specific offerings as well as detect when alternative sources for component materials, ingredients, and ready-to-sell merchandise are required to address imbalances between supply and demand.

3. Address the challenge of labor availability quickly and effectively

As subsegments of the retail industry are temporarily furloughed, some brands are still experiencing massive, short-term spikes in demand and related labor shortages. They must be prepared to flex their skilled workforce as soon as possible, both now and in the future. 

While incentive pay is tempting, the ability to customize schedules, pay, and benefits can make a considerable difference in whether candidates choose to accept the job offer and stay long term. These enticements include picking and choosing regular hours, receiving by-the-hour pay differentials, and being paid immediately following a shift. 

Plus, brands can tap the experienced workforce of brands that are not in direct competition (through symbiotic partnerships) to manage demand peaks and troughs better, while keeping workers employed with a steady wage.

4. Predicting demand for products, supplies, and workers

Improving consumer models and forecasts requires much more than just informational access to past sales history and inventory. It also calls for automation and a workplace culture that proactively identify and effectively manage exceptions with clearly defined accountability and processes based on an agreed-on work schedule. 

This pragmatic approach allows retailers to evaluate supply chain exceptions to pinpoint anomalies across a multitude of known external factors such as staffing, merchandise, and financial forecasts.

With great flexibility, they can quickly and easily adjust current parameters and incorporate new variables, demand signals, market drivers that reflect the ever-changing world they serve today, tomorrow, and for years to come.

Moving to the next normal accurately, immediately, and reliably

As retailers adopt different approaches to nearly every aspect of their business, one thing is undoubtedly clear: immediate, accurate, and reliable information is the gold standard for moving forward. Now more than ever, brands should mitigate top short-term issues, so they can better prepare themselves to acquire capabilities that help ensure long-term visibility as quickly as possible. 

Such a rapid and effective transformation calls for business partners and solutions providers that can smooth the path accurately, immediately, and reliably. More importantly, this partnership can help brands think differently and engage consumers better, while solving challenges early on.

Todd Hassell is a value advisor for SAP's Midwest (US) Market Unit.  

Steve Mauchline is a business architect in the North America Presales Unit at SAP. 

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