Expert Insight: Retail’s New Reality — Think Local, Act Fast
Several months since the COVID-19 pandemic began, consumers are still coming to terms with their new reality. Accenture research suggests that many are finding themselves financially squeezed and are cutting back on non-essential spending.
Most are fearful for their health in public places, are shopping online more than ever before, and see social distancing as an act of civic responsibility. Worldwide, in markets where the virus is stabilizing as well as those in which the infection rate continues to rise, consumer insecurity is having a direct bearing on shopping behavior.
In turn, as retailers adjust to inevitable and rapid shifts in consumer demand, they have no playbook and no historical parallels to draw upon. At the same time, the complexity of the situation at a population-wide level makes it extremely difficult to carry out scenario planning, undertake risk mitigation and reach informed operational decisions. To make it even more complex, these decisions need to be made real-time and with, in many instances, limited information.
With so much out of their hands, a priority for retailers should be to get a better idea of what they can and cannot control. In practice, this might mean understanding the pandemic’s impact on their businesses at a local level: tracking how the disease has progressed and been contained in each market, how it has affected local businesses and employment, how the local population is constituted, access to healthcare, and level of comfort in returning to pre-COVID activities.
As each of these factors varies significantly by country, state, county, and city, retailers may need to ramp up their analytic capability and derive insight from new sources of external data. This is no small undertaking, but it will give them a clearer picture of rising and falling demand, and an understanding of which stores should reopen—stocked with which inventory—and which should stay closed.
Simply put, retailers that take action now will gain commercial advantage at a time when many of their rivals are struggling to stay in business. They will be in a position to answer three of the most critical questions in today’s industry: How are evolving conditions impacting demand? How can we prepare for new consumer behavior and trends? And how can we make our business more agile and responsive?
How are evolving conditions impacting demand?
Forward-thinking retailers can develop forecasts and stronger scenario planning models by bringing new demand signals into their analysis, combining these where possible with internal sales and spending trend data.
Relevant signals would illustrate how the virus is playing out in each of the retailer’s key locations, whether there is a potential for a resurgence of cases, and what the local ordinances are as well as the extent to which the population adheres to such regulations. Other variables to track would be economic reports on employment, reporting of movement tracking, and sentiment analysis derived from social media. Put together, these signals illustrate the drivers influencing consumer behavior and outline the implications for market demand.
How can we prepare for new consumer behavior and trends?
Drawing on their growing understanding of each region’s strategic and operational situation, retailers can develop new analytic models to inform smarter decision-making and robust scenario planning.
These new models can help retailers decide how best to respond and what levers to pull with their staffing, inventory and store openings to satisfy consumer demand in each location. In so doing, retailers can also make a call on tough decisions, such as whether individual stores would be better repurposed into dark stores to support curbside or local delivery, or what inventory is needed to satisfy the most important customers.
How can we make our business more agile and ready for change?
Despite the many challenges posed by COVID, brands that uncover valuable new insight and develop smarter plans for the future are in a strong position. This alone, however, is not enough. Unless retailers also have the operational agility required to take action and adjust strategies and operations, their new insight will be of little use.
One priority here is to align cross-functional capabilities, ensuring the business can pivot strategies and operations as required. Our view is that there are six areas that should be aligned and evaluated, based on a clearer understanding of future demand: Merchandising, marketing, planning, inventory, supply chain, and store operations.
Conclusion: Embracing the now and the next
Even before the pandemic, retailers were aware that monitoring evolving demand—and taking action armed with new insight—was key to success. Today, in unprecedented times, this same principle has become even more important.
Indeed, survival as a business depends on timely and ongoing access to local information. Moreover, as the crisis passes and consumer behavior undergoes its next shift, the fastest moving retailers will be set up to thrive whatever the future holds.
Jill Standish is senior managing director and global retail Industry sector lead at Accenture.