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A light at the end of the tunnel for retail (yes, there is some)

  • Posted on June 9, 2020
  • Estimated reading time 3 minutes

“Hope is a renewable option: If you run out of it at the end of the day, you get to start over in the morning.”

Barbara Kingsolver, Novelist

Let’s get the bad news out of the way first. The list of retailers filing for bankruptcy, administration or whatever the equivalent term is in your country, gets longer and longer. Every few days comes another announcement about a retailer shutting down operations. Admittedly, some of these businesses were having serious problems even before the coronavirus pandemic. But forced store closings, supply chain disruptions and massive employee layoffs have sped up the process for these unfortunate companies, many with long and storied histories of weathering previous disruptions.

So where’s the silver lining? The good news we all want to hear? Well, some retailers, generally those considered “essential,” are posting record earnings this quarter. That’s especially true for those that have moved quickly to stabilize and enhance their online presence and expand delivery options, like curbside pickup. But those moves have also come at a cost: hiring additional staff to stock shelves and clean stores and warehouses, setting up additional delivery modes, finding and transporting products from alternative sources, etc.

While no one could or did predict the huge impact the coronavirus pandemic has had on the retail industry, there are examples of organizations where being prepared has paid off. H-E-B, a regional supermarket chain in the American Southwest, is one. It has an Emergency Operations Center in place that was activated in early March to pull together all the impacted areas of the company to streamline decision-making. This enabled the retailer to adjust its supply chain and store operations quickly and minimize disruption to customers and staff.

We can never be this unprepared again
Maybe that’s the main takeaway for retail from all of this: Never be completely unprepared again. That means the industry will need to rethink almost every aspect of how it does business, to come up with new ways to survive, operate and move forward. In that spirit, we suggest retailers consider five priorities as they move through and successfully emerge from the current situation:

  1. Cost containment and optimization: Assess what can be stopped or delayed and reduce legacy spending where possible. Prepare for multiple cycles of demand/supply realignment. Invest in technology/automation solutions with long-term benefits.
  2. Talent agility: Empower employees to be brand ambassadors by equipping them with the proper digital and collaboration tools. Reskill employees so they can quickly scale and adapt to changing business needs (e.g., omnichannel, buy online & pick up at store). Implement a change management program to accommodate remote working/flexibility where possible.
  3. The resilient core: Use data and analytics to control inventory, tracking and delivery. Make the most of online options to accommodate customer shopping needs. Build more flexibility into the supply chain through regional/local diversification and partnerships.
  4. Customer care and operations: Safety comes first for both customers and employees. Build up contactless delivery and services. Balance customer loyalty with availability (need vs. want). Rethink e-commerce to include stores, click and collect, distribution centers, curbside, and include cross-channel and contactless payment methods.
  5. Products and services: Prioritize new product development and create agile platforms for the rapid launch of products and services. Focus on tools and ideas that drive personalization and contextual engagement with customers. A great example is the work we did for Subway, taking its paper-based loyalty program digital, increasing its website ordering conversion rate significantly.

Taking “rethink” to heart
I want to go back to rethink for a minute. This term has become a bit of a mantra for us. It’s our guiding star, a way to try to make sense of the disruptive environment we all find ourselves in.

Our thinking on rethinking is reinforced by a quote from the MIT Sloan Center for Information Systems Research (CISR). At the end of March, they stated “…we see these challenging times as an opportunity to rethink how we do business. This will include transforming your company to have an even better customer experience and more efficient operations.”

At Avanade, we are proposing a systematic, three-phase rethink approach to help businesses move forward. We’ll dig deeper into each of these steps in subsequent postings, but for now let me give you a brief look at the focus for each of them.

  1. Respond: First and foremost, protect your customers and workforce, as most retailers have already done. Then take immediate actions to mitigate impact and secure the business.
  2. Reset: Any restart will need to be aligned to new customer behavior and a more resilient core. It will require a lighter-weight, agile business approach to get through the economic slowdown and be more resilient going forward.
  3. Renew: Solidify the gains (operations, cost and culture) from crisis-inspired changes and position your organization to re-emerge quickly and gain market share. You’ll need to think about where innovation fits into your strategic capability planning.

Rethink. Respond. Reset. Renew. Time and space to recover would be nice, too.

Download our new guide to learn how to rethink how you do business and set your sights on the long term.

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