Smart Retailers Are Looking at Holiday 2020 Through a Viral Lens
The novel coronavirus and the precautions governments and individuals are taking to protect themselves from infection have already had a powerful impact on the global economy. Those impacts are likely to extend well into this year, possibly even into the fourth-quarter holiday shopping period. Between disruptions to manufacturing and supply chains and shifts in consumer behavior and purchase decisions, the retail industry will continue to be hit on both the supply and demand sides. Retailers and brands won't have the luxury of waiting to see how long the current outbreak lasts; they need to plan ahead and place their product bets quickly and accurately for the rest of the year, including the holidays. Forward-thinking retailers are already preparing for a multitude of scenarios by using predictive analytics to understand what their customers really want. They're strategizing on the best practices to accurately make product selection decisions while figuring out how to get those products in a timely manner.
Interdependent Web of Connections
The American economy is dependent on global trade for both raw materials and finished products. It’s well known that the majority of goods sold in the U.S. are sourced or manufactured overseas, with China accounting for a particularly large percentage of goods sold at retail. As noted in , data from Resilinc, a supply chain mapping and risk monitoring company, show that the world’s 1,000 largest companies or their suppliers have over 12,000 facilities, including warehouses and factories, in parts of China, Italy and South Korea, which are profoundly affected by coronavirus quarantines. Manufacturing slowdowns, travel restrictions and port closures have led to delays in shipments of materials and finished products, and now thousands of companies are dealing with tangled international supply chain bottlenecks.
But, of course, it’s not only supply that's being affected by this new virus and the measures enacted to prevent its spread — consumer demand for many items is also shifting. in February that more than half the population of China was at that point under some degree of residential lockdown. By mid-March, the entire country of Italy was in lockdown. Despite consumers’ being forced to move more and more of their shopping online, self-isolation and quarantine policies, travel restrictions, and shelter-in-place/stay-at-home orders are already deflating category demand and sales for thousands of companies.
Shoppers Are Buying Essentials When They Do Go Out to Shop
Although the effects of disruptions in the global supply chain may not be immediately noticed by American shoppers, a found that news of the virus is impacting the shopping behavior of 75 percent of respondents, up from 45 percent (a 70 percent increase) when comparing to a fielded in late February. Women and baby boomers have showed a significant change in purchase behavior. Both groups had been slower to change behavior compared to their gender and generational counterparts, but are now in greater alignment. Seventy-one percent of women now say the virus is impacting where and how they shop, a 115 percent increase from late February, compared to 67 percent of men (a 76 percent increase).
While millennials report the greatest impact on purchase decisions (80 percent, a 48 percent increase from the previous survey), baby boomers now have aligned behavior more with their younger counterparts, with 73 percent saying the same, a 121 percent increase from the prior survey. Ninety-eight percent of all respondents believe the outbreak will somewhat or significantly affect the U.S. economy. While all generations are changing their shopping habits in the wake of this pandemic, shoppers of all ages are still flocking to brick-and-mortar stores to stock up on essentials. Target CEO Brian Cornell “We’ve certainly seen a surge in-store traffic as guests begin to stock up on those household essentials [and] those core food and beverage items.” According to , sales at Costco in February were up 12.4 percent from a year ago, and the company attributed 3 percent of that to an uptick in consumer demand for essentials from concerns over coronavirus.
Retail has always been an industry that thrives off proactive thinking, and this is a time that absolutely requires it. Companies are already facing a time squeeze, with summer and fall orders and shipments delayed. Those delays will have cascading effects over the rest of the year, and retailers and brands will need to significantly speed up their holiday product development, sourcing and shipping operations to ensure that October and November holiday deliveries don’t arrive in January.
Even though some overseas factories are beginning to come back online and some shipping routes are reopening, manufacturing delays and snarled supply chains will not instantly sort themselves out once the outbreak is no longer considered a crisis. Therefore, companies need to move quickly now. recently summed up the thoughts of Thomas O’Connor, senior director and research analyst for supply chains at Gartner, this way: “If production in China doesn't return to normal levels by late April, U.S. retailers could face challenges stocking up in time for the back-to-school and holiday shopping seasons.”
Those retailers and brands that can best predict future demand for particular products, and release the right product, at the right price, at the right time, using predictive analytic tools at their disposal, will be better positioned for the rest of the year. While many retailers and brands still rely on physical samples being sent from the manufacturer, and in-store testing which can be time consuming and often costly, digitizing the supply chain will be critical to success in the new retail reality. With today’s retail technology, digital product creation and 3D design are table stakes, and can significantly shorten the supply chain lead time. Companies will need to continually assess what aspects of their inventory will be most affected by a disrupted supply chain, where they can afford to raise prices, and what products they should introduce at a time when many consumers are preoccupied with safety and security.
Retailers that take advantage of digital product creation and data insights that take into account the preferences and opinions of consumers will be better able to mitigate the effects the novel coronavirus will have on their businesses throughout the rest of the year. Although it's not clear yet exactly what aspects of retail will be most impacted, long-term planning that incorporates the voice of the customer will help retailers and brands have a more successful 2020 holiday season.
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Jim Shea is chief commercial officer for First Insight, the leading customer-centric merchandising platform used by retailers and brands worldwide. Jim’s role spans all market- and customer-facing functions, including strategy, marketing, product management and business development.
Jim has held CMO and general management roles in multiple industries, including medical devices, research laboratory products, telecommunications and enterprise software. Jim has also been a driving force behind the IPOs of two venture/private equity-backed companies. At First Insight, Jim is excited about the opportunity to transform the retail industry through enabling better product decision making through data and analytics.
Jim holds a MBA from Stanford University and a BS in Electrical Engineering from the University of Notre Dame.