Large retailers demand greater visibility of supply but still struggle to understand their own changing demand requirements, as the new normal begins to stabilise
Thank you to Andy Coe from Retail Insight UK who joined us for the 5th virtual covid19 collaboration group meeting last week to provide his personal insights on how retailers are reacting to the pandemic.
Suppliers confirmed that demand across ambient channels is stabilising with less unpredictability for suppliers, although forecasting requires a new understanding of base demand, as Pre-COVID19 references are no longer valid i.e. ‘New Normal’ days of the week are now similar to the same day the previous week, with the weekly demand smoothed out throughout the week. Big box retailers are working hard to understand the new consumer shopping patterns with store location, queue length, consumer throughput and product availability all influencing shopping frequency, as customers favour on-line and top up shopping, rather than resorting to the ‘One-stop shop’.
On-line sales are also affecting in-store availability; Near doubling of in-store picked on-line shopping is starting earlier, during the overnight store replenishment shift, affecting the traditional high-point availability for shoppers as the store opens at 8am. Replenishment opportunities during the day are then limited by product and staff availability, particularly at the beginning of the week when staffing levels are traditionally lower.
As the ‘new normal’ emerges, there is much speculation across suppliers about what this might mean for the sector longer term. Questions such as ‘will sales patterns return to previous levels as people start heading back to work?’ and ‘what does the future of retail look like with social distance measures staying around for the foreseeable future?’ and ‘are the current changes in on-line and convenience channel behaviours here to stay?’. Collective insight suggests that social distancing will fundamentally change how we operate all supply chains, and it could take years to get back to pre-COVID levels. Flattening of sales across the week is likely to continue as ‘returning to work’ is likely to include an increase in work-from-home and flexible working (Google has already announced no return to office-work until 2021) and shoppers will most likely continue to shop locally. In addition, the shift to in-home vs out-of-home consumption is likely to change only very slowly, even once restaurants and pubs open, with the prospect of ‘eating out’ tempered by a different anticipated level of service and ambience.
Retailers have put many range reviews on hold, with product rationalisation and fewer available experienced resources to deliver any changes likely to restrict capacity for weeks to come.
Retail costs have increased dramatically due to investment in staff, H&S equipment and new ways of working, as well as increased costs from running transport fleets less efficiently. With on-line sales picked from store costing more, margins will be seriously impacted for the ‘bricks and mortar’ retailers. Advice for all suppliers is to focus on recovering availability within their current ranges, reducing complexity and cost wherever possible, even reducing to a single product pack size.
Thank you to all suppliers who continue to engage and share knowledge in our fortnightly meetings.
Next week Christine Tacon, Groceries Code Adjudicator will be joining us for the session to share key points arising from the recent GCS survey plus thoughts and advice on how suppliers should work with retailers during the crisis to ensure they protect themselves from any potential breaches of the code – in particular with regards to variations of supply agreements.
All grocery suppliers are welcome.
