Today, our context and perspective as far as where we are and what we are facing is completely different from just 3 months ago. Yet, we could look at these priorities and firmly believe they all still apply, and they do. But it’s these “plus:”
Health and safety of customers and associates
Managing social distancing
Intense focus on how to manage in what will clearly be a new environment
Along with many of you, Parker Avery attended NRF in January with colleagues and business partners. We were certainly channeling our inner prophet when we chose the quote for our NRF recap: “The greatest danger in times of turbulence is not the turbulence—it is to act with yesterday’s logic.” (Peter Drucker). How fitting this is to today, and especially for our Reconstructing Retail discussions. Yesterday’s logic, and yesterday’s retail models, simply won’t help us be successful in the future we are facing. The context is different, and our strategies must change and adapt.
In the last week, many retailers announced opening plans and Simon Property Group announced the opening of dozens of malls and shopping centers. Macy’s announced it would open 68 stores this week and expects to have all 775 stores open within 6 weeks. Once some retailers start to open, while everyone will err on the side of health and safety, they’ll also want their share of the consumer wallet. It’s not unlike when the first retailers chose to open on Thanksgiving Day, rather than waiting until early Friday morning. Many didn’t necessarily want to, yet they felt the pressure.
To help guide these efforts, several industry groups or companies have contributed examples of checklists or blueprints for re-opening of retail. Kroger and NRF offered very good checklists, while Cathy Hotka also shared her company’s compilation of store opening suggestions last week. These are all good starting points and offer good steps for store leaders.
We framed up the emergence from COVID-19 and our “Beginning the Journey” discussion along 3 dimensions:
Triage. Rapidly assessing the “state of the state” and determining immediate actions needed. Additionally, it addresses the governmental regulations and your ability to reopen, communication protocols, risk assessment, collaboration, inventory assessment, etc.
Plan. The immediate plan(s) stemming from your triage of the situation and near, mid, and long-term plans across various scenarios. A key dimension is how these plans differ from traditional plans in their need to be reviewed and revised frequently
Reconstruct. The actions you need to take and/or have taken to be a leader in addressing your customer’s needs. Pivoting to rethink your business operations. This may include new omnichannel fulfillment capabilities, addressing speed-to-market activities, and analytics, to name a few
We touched on this in our first webinar with a focus on inventory. We also need to think about speed and flexibility, communication, collaboration, and cross-functional teams. With a lot happening quickly, some aspects changing daily, and many just returning to work—communication and collaboration are paramount.
Examine what tools you have already in place to support communication both in the back office as well as to the field. Even for back office or headquarters associates, communication will not be normal. Some of the team may be in the office, but certainly some will need to continue working remotely, whether for health or family reasons, or simply limiting associates in tight spaces. Managing a mix of on-site and remote is more challenging than everyone working from home. A lot will be happening across your teams, trying to determine inventory status, needs and placement at the same time store opening schedules are changing daily.
For communication with stores, beyond the typical pricing and promotion updates, signage, etc., stronger focus and compliance with health and safety requirements is crucial. Are you confident all stores are getting and understanding the right instructions and have the right supplies? A lot of retailers still use email or posted newsletters, but there are newer tools that can be rolled out in just a few weeks, that may be worth a look.
As far as collaboration, silos simply cannot exist. Leadership – not just executives, but all of us – must insist on active full team engagement and transparency. There is no we and they.
Rapid and decisive decision making is important now more than ever. Focus on what’s good enough vs. striving for perfection; things will continue to change and evolve; scrappy approaches vs. waiting for a scalable hardened solution is the right approach. Also, for team leaders, anything not absolutely required should be taken off associates’ plates.
Regarding risks, but really common sense – we need to think about return policies and logistics for opening. We suggest adjusting policies: plan on no returns for a stated period of time to ease traffic and mitigate risks of product coming back into the store with no idea of where it’s been. Consider offering customers postage-free mailing labels—while you may not be able to accept returns in the store, you can still make it as easy as possible.
The opening of stores must be done in a controlled manner—similar to the approach we recommend for business system implementations (test and learn), with a few specific overarching tenets:
Hypercare-level monitoring (2x daily calls/meetings to discuss what is working and what is not)
Rapid, decisive actions/decisions
Governance to ensure risks and issues are addressed in near real-time and decisions are documented and communicated widely—to avert chaos and lack of clarity
Consider incorporating things that work well in this re-opening period into your new normal; examples:
Rapid decision making
Acceleration in the rate of change – and how we deal with it (rapid decision-making with limited concrete information)
Dedication to one task, or a handful, until complete – no time-slicing
It’s also important to consider and understand the myriad of risks that the teams will be facing.
Follow best practices to avoid legal difficulties when store associates DO get sick…and they will.
Ensure you have transparency and visibility; where you do not, take immediate measures to address, even if it requires manual follow-up.
Use e-mail, Excel, and/or trading partners’ technology (e.g., freight forwarder dashboards) to provide you with visibility you may be lacking.
Supply chain reliability.
Assess the risk of logistics for goods on-order not yet at stores/DCs and put action plans in place.
Assess the risk of suppliers, and their suppliers, based on location, prevalence of COVID-19, and any indication they have given of constrained supply of raw materials, personnel, export visas, etc.
Evaluate supplier production capacity and their ability to export with new certification requirements.
We addressed in our first webinar, but the knowledge of what is saleable now, what is ‘stale’ and not relevant in a future season, and what can possibly be resold in future seasons is very important and will require one of two dimensions of analysis: merchant input and voice of the customer analytics.
Based on this information you can take actions, including aggressive pricing/markdowns as appropriate
There may not be any contingencies immediately available but knowing your risks and constraints will allow you to prioritize and make informed decisions.
Triage. Plan. Reconstruct.
The planning process is inclusive of any immediate/priority initiatives stemming from Triage, but also includes short, mid, and long-term initiatives which may have been contemplated as part of Triage or were part of an existing roadmap. The key is to build the plans but also to put in a place a mechanism or structure to monitor, adjust, and re-plan—often. In other words, you need to be flexible and adapt. Doing this regularly will be essential in an environment that is changing rapidly. Even without changes, a schedule of revisiting the plans should be established to review them relative to new and emerging priorities. There is an old adage that says, “Plan the work, work the plan.” Under normal circumstances that is prudent counsel as revisiting and changing elements of the plan typically create disruption and delay. But in today’s environment, turning a blind eye to the realities of an ever-changing, dynamic environment would be devastating to your business.
In defining scenarios we need to include various factors—the economy overall especially as it relates to consumer confidence and spending, the latest virus status with a special focus on potential rebound in the fall, state and local plans and regulations, and business/competition—your current state and what are others doing. Regarding agility, the plan needs to account for minimizing or right-sizing commitments—this could be our buys, inventory flow plans, raw material commitments, leases, etc.
As we think about planning and scenarios, we’re sharing a framework that looks at a hierarchy of needs and expectations, and some examples. It’s important to note that this is a framework, and what works for one retailer may be very different for others.
We suggest a conceptual hierarchy of needs—starting at the bottom with health and safety and moving up, from basic needs, to trust, customer experience, value.
Health and safety. The definition of frictionless retail certainly continues to expand, initially focused on only making it easy and fast, but now adding emphasis on sanitation and safety.
Connection and community. Some aspects are new with the pandemic, but some will continue as retailers and brands strive to cultivate and strengthen consumer loyalty.
Flexibility in product fulfillment. This is perhaps the biggest focus in the past few weeks and near term, and likely represents a key area of differentiation between leaders and those playing catch up.
Assortment and price. This will vary by retailer and category, but the levers around assortment breadth and depth overall, but also by location, must be critically managed. Pricing and promotions, and how offers are communicated, can be a big opportunity.
The arrow on the bottom right represents the potential degree of change from before COVID-19, and so it will depend on each retailer’s situation. We can argue everyone will have significant changes in cleaning, etc. But some are much better positioned in omni capabilities for example. Think about where your team needs to focus first, and then what might be next.
Another key point is while in Triage we are completely focused on fighting fires and dealing with day-to-day issues. Moving to medium and longer term, how we will think about inventory productivity, how we plan, how we think of item lifecycle and inventory velocity—all may be very different. The plans, scenarios, and roadmap must be guided by an end in mind—which brings us to the Reconstruct phase.
Triage. Plan. Reconstruct.
This is a critical inflection point, where you as an enterprise have a choice. You can revert to normal operations, and hope to get back to where you were, or more likely where you were striving to be. Or, you can opt to innovate your operations. Reimagine your business model. Think deeply about what could be.
Our suggestion is that you need to dig deeper and think differently in meeting your customer’s needs now and in the future. You must have a digital focus—but accelerated. How your company takes its next steps will be critical to its future. You can go back to doing things the way you did them before, reverting to your company’s comfort zone of pre-COVID-19 norms. Or you could use this forced transformation, new-found speed of decision making, and adoption of digital tools to reconstruct your business to be stronger, more agile, and more relevant. Tomorrow’s leaders will have seized this opportunity to move faster, experiment, and fundamentally reinvent how they execute.
Times of great disruption are often when new business models are born, and innovative companies forge a new path. Not every company can be Apple or Amazon, but within your own business now is the time to not only think about how to restart operations, but how to pivot, innovate, and springboard the competition. Innovation is the path to future success and provides the ability to thrive in an uncertain environment.
During the past 2 months, many companies have done just that. Companies like Bed, Bath, and Beyond, Michael’s, and Kendra Scott have rapidly evolved their omnichannel capabilities to offer ship from store, curbside pick-up, and delivery. But why? For them it was survival, but always with an eye to the customer. It’s important now more than ever to pivot to the future—determine how to delight the customer…or you will perish as your competition embraces this approach.
One element of what has occurred which is fascinating is the means by which companies deployed these solutions. What traditionally takes several months, or even years, was accomplished in mere weeks. How did they do it? They took the adage that “Perfect is the enemy of Good” to heart, coupled with a burning platform of survival, and they created solutions that may not be fully integrated, or without deficiencies, but they brought them to life in a minimalist way to get to the goal.
Many companies talk about minimum viable product capabilities and the need to deploy just that, but still often complicate these objectives and cause delay. Will this new ‘test and learn’ model, powered by rapid and decisive decision-making and a singular focus persist? I am not suggesting we want to be working 24 hours/day to bring new initiatives to life, but a hindsight of the elements that worked should be revisited and those that are game changers, brought into your normal way of working.
Priorities need to change—and more importantly—it’s incumbent upon all of us to challenge ourselves, our teams, and our leadership. What must we do differently? How are we going to position ourselves to win in the future? Obviously, we can’t expect to step back into how things operated before; if we just re-open and operate the way we did and hope for the best, we’ve already lost. Now is the time to think BIG. And BOLD. If not now, when? Focus on innovation and imagination across the complete business model, not just efficiencies of old ways.
Think about the current pain around inventory. Has anybody heard their leadership say or thought to themselves, “I never want to have this much inventory in our enterprise again—ever.” More tactically, what do we think our inventory levels will look like by holiday, or where would we want to be?
It’s the beginning of May. Many retailers are focused on surviving but beyond that, many are already thinking about how to manage future seasons, including holiday, with a much lower average inventory level than recent years. I’d advise consumers to shop early—the depth of options in holiday 2020 will be much lower than recent years.
To manage inventory better, one key suggestion is improved focus on data and analytical tools. If you have the right sophisticated or advanced tools already in place, along with assurance in your data, then you’re ahead of the curve. However, we’ve not seen many retailers and brands raise their hand with confidence they have both tools and data. Retailers and consumer brands must consider the criticality of accurate and timely data as well as related analytics in helping drive improved decision-making—but this must be done now. Most simply don’t have time, nor likely the budget, for large, lengthy systems projects.
We recommend leading with business objectives and understanding potential change management hurdles, such as reliance on only old metrics, or other examples of “this is how we’ve always done it.” This approach will enable speed to insights, versus analytics without business focus, which is not meaningful. Some example analytics priorities that will be important in the near term: forecasting and sensing demand; markdown optimization; supporting anything tied to fulfillment (especially with complexity of an omni world) and how to deploy inventory across various distribution points including stores. This is a focus in our next webinar, Thursday, May 7.
Back to thinking bold, we suggest using the current opportunity to consider completely different business models, channels, positioning, etc.
What is a ‘season?’ Is it important to us as a retailer or brand? Does it matter to the consumer?
How early is new product needed in a store or available online?
If we consider all the steps in a merchandising calendar – design, development, sourcing, manufacturing, packaging, shipping, etc. – what is truly required, and what are some ways to dramatically alter the makeup of these steps, and therefore the real end-to-end timing? If my overall calendar for development, buying, and lead-time is, as an example, 30 weeks, what would it take to reduce it to 20, 15 or fewer weeks?
Bottom line, can we leverage data, analytics, and AI to help determine what my optimal assortment mix looks like; breadth and depth; overall demand patterns; and pricing lifecycle?
And remember, retail matters.
Q1. Joe spoke about unresponsive systems on replenishment planning and ordering. How are retailers handling the forecasting capabilities as the stores comes back up?
A. It’s clear that any forecast based on prior demand patterns is essentially useless in the current period. We’ll touch on this further in our 4th webinar with a focus on how to manage through this. But we can think in terms of:
Geography – where are stores opening?
Timing – what is open, and when are other locations opening?
Channel – what is my likely demand online, versus stores?
Planning – how do I account for macro-economic conditions as I plan next season’s inventory, including holiday and beyond
Longer term and going forward, how we account for March-May 2020 will be a challenge for most of us. What is traditionally a key demand period including spring, Easter, graduation, and Mother’s Day will for 2020 be an abysmal legacy.
Q2. There will likely need to be a team focused on our reemergence as we “start the journey.” Do you have thoughts on what areas of the company should be represented and how much time these individuals should dedicate to this effort? Is it a full-time dedicated team? If so, until what event(s) should the team be in place?
A. Absolutely, this will need an ‘all hands on deck’ approach. Whatever you call this team, it must be cross-functional, with senior participation or sponsorship. Echoing our survey, collaboration and transparency are critical—this is no time for traditional silos. Participation is needed from finance, supply chain/operations, stores, planning, merchandising, product development / sourcing, IT, HR – and this should be considered full time or as much time as required, until full operations are in place and can be transitioned to a steady-state team.
Q3. As we embark on reconstructing our business model, should we assign a different team to focus on innovation and pivoting to a new business model? If so, what characteristics should these folks possess and from which business areas should they be assigned?
A. Not certain if a separate team than the above team is required, provided they are strategic thinkers. But it will take a different mandate from executive leadership to shift from triage and stabilization to looking at what the future should hold.
Q4. You talked about restarting brick-and-mortar stores, and the likelihood of multiple Day 1’s driven by easing of governmental restrictions. Should we also assess the density of stores we actually need since most projections do not expect an immediate return to the same level of brick-and-mortar shopping?
A. Yes – in the larger context of cost to serve, profitability, consumer-facing fulfillment needs, etc. So as geographies ease restrictions, balance the ability to open with the need and value of re-opening.
Q5. How do we provide a feedback loop from stores back to HQ? It seems like the teams will be seeing a wide variety of challenges and issues, and we need to ensure there’s an ability to get questions and issues raised very quickly – basically real-time.
A. Part of the same Triage team that communicates out to stores; there needs to be a mechanism to capture input (intranet, town Halls, etc.). We agree this is heightened from typical feedback needs, so the teams should clarify tools, frequency, and general exception management.
Q6. Analytics with good data sounds good, but how do we know if our data is ‘good enough?’ How clean does our transaction history need to be, and how accurate does our inventory need to be?
A. First, let’s agree your data is never as good and clean as you’d like it to be. But, hopefully, given the recent “quiet period” within your supply chain and stores, some of the noise and bad data has moved through or settled down. Anything showing as in transit should be somewhere, whether officially received or not. The teams (operations, supply chain, stores, and IT) may be able to determine some atypical approaches to further address some potential data updates.
Q7. How do you balance speed of actions and decisions with ensuring you have enough information to make a good decision? It seems like there will be a risk of snap decisions based on minimal real data?
A. You WILL NOT have enough information but need to be decisive with the best information you have and agile to adjust as necessary. Things will be evolving quickly over the next 2-3 months, so its best to keep moving based on the best information you have right now—and be flexible to adjust as things change.