Whether you own a grocery store or shop at one, you already know the COVID-19 crisis has had a massive impact on the consumer products supply chain as panic buying and hoarding have created unprecedented volatility in demand patterns for groceries and household goods.
What’s perhaps less obvious is how the crisis will impact consumer behaviors in the long term, as millions more households are now experiencing e-commerce, delivery and pick up services, many for the first time.
We project that millions of consumers forced to adopt online ordering and delivery during the crisis will change their shopping habits forever, and traffic levels in bricks and mortar stores will never return to pre-crisis levels. This will expose a myriad of problems for traditional retailers as they accelerate the omni-channel strategies that many have only moderately adopted, and in many cases begrudgingly deployed up to now.
The operational challenges facing brick and mortar operators are already apparent, as stores scramble to handle spiking volumes of online orders in the face of total stock-outs in high-demand items such as dairy, bakery and beverage, all of which are direct store delivery (DSD) items that comprise a sizeable percentage of store sales and margins.
Even after demand patterns normalize, stores are likely facing a new reality where a significant percentage of their shoppers perform at least some of their shopping online. This will place even more emphasis on inventory visibility and reducing out-of-stocks in key DSD categories, where stores traditionally don’t track inventory on the shelf and out-of-stocks can routinely exceed 30-40% in normal times.
Suppliers will also need to massively improve their order forecasting and accuracy, and get daily access to retail sales data to understand evolving consumer demand patterns at the store level.
While it’s nearly impossible for retailers to think long term in this environment where decision making is day to day, the smart ones will understand that we have now entered a new era of shopping behavior where every decision must be made with omni-channel in mind, and visibility to sales and inventory data must start flowing more freely between trading partners.
That’s what the smart retailers will do. The rest will be charting a different, less promising course.