The coronavirus pandemic drastically changed the way consumers shop and spend. Sanitizing, social distancing, mask wearing, product cleaning, even toilet paper hoarding; these have all become very common in the commerce and retail climate of 2020.
So how did it affect Black Friday? Traditionally known for being the day when people do the exact opposite of social distancing in order to fulfill some consumer need, how did this work in a pandemic climate and how can retailers best prepare themselves with the changes in e-commerce trends, supply chain, and manufacturing standards?
The key is to adapt and to plan smart.
E-commerce Spending in 2020
E-commerce spending has evolved drastically over the last year. With many Americans unable to leave home, e-commerce spending became the priority. E-commerce sales grew approximately 30.1% from 2019 to 2020. To put it in perspective, for every five dollars spent on retail, one dollar came from an order placed online.
Interestingly enough, this boosted shopping habits overall, and total sales increased by 4% from 2019 to 2020. The four months between April and July saw consistent growth, with a spike in May when quarantine became more prevalent. Retailers had to adapt quickly to keep up, especially the non-essential businesses.
Most retail companies realized that curbside pickup would be instrumental in keeping up sales during the quarantine. The 6.9% of retailers who had curbside procedures increased to 43.7% during the pandemic. Target Co., a retail company that had already established a curbside pickup service before 2020, saw its curbside sales grow a whopping 734%. Additionally, solely online retailers began to see more profit. For instance, Amazon.com Inc., the leading online retailer in North America, had an increase of orders up to 28% (and still rising).
Consumers spent roughly $9 billion online for this year’s Black Friday, according to CNBC, which means online spending increased by close to 22% over the course of a year, much of which has been a result of the pandemic.
New Challenges for Business Owners: Supply Chain and Marketing
How specifically has the supply chain changed what retailers are doing for the holiday season?
Nearly 25% of retailers reported that they were adjusting their advertising and marketing strategies. For most, it paid off. For others, the battle is still ongoing. When comparing e-commerce segments, Apparel, Fashion, & Luxury (AF&L) retailers are the only sector experiencing a decrease in revenue compared to last year, according to Nosto.
Accessibility to goods has also become a challenge in 2020. Supply chain has been disrupted, and manufacturers and products alike are still adjusting. 63% of consumers reported longer delivery times, and 31% of consumers reported limited products. On the retail side, almost 30% of retail products have been reported to have been listed at a higher price, 15% reported to have higher shipping charges, and 56% reported out of stock.
While the traditional supply chain process is more linear, digital supply networks are all interconnected. The purpose of a digital supply network is to promote a resilient supply chain that supports risk management and quick adjustment. It will vary on the specific business and business model, but often utilizes new technologies such as 3D printing, A.I., robotics, etc. Finding ways to mitigate human error has become a way many retailers use to decrease risk.
In North America, 12% of retailers reported a compromised supply chain and 19% reported that the inventory turnover was impeded. The effects of this range from both raw materials to finished products. For example, China is a producer of both products and components that are important to the global supply chain ranging from pharmaceuticals, automotive manufacturing, and the production of iron and steel. A delay in obtaining these products or materials puts a significant delay on inventory turnover, and, subsequently, consumer gratification.
Economists predict unchanged growth trends when it comes to the long-term fundamentals of manufacturing for most industries. However, when looking at the consumer sector, there will be many short-term economic consequences on small businesses. Areas such as catering or travel retail for example have taken a big hit. Many high-profile consumer companies have lowered their net profit expectations because of this. In the long term, though, manufacturing should eventually get back on track.
2021 Supply Chain and Risk Management Strategies
There are numerous strategies to support supply chain and risk management. All of these procedures may fit differently into different business models.
- If your business allows for it, it would be a good idea to work with multiple manufacturers to get your products or merchandise. Being able to rely on multiple suppliers puts you at a lesser risk in case supply chain becomes compromised again.
- Create strategies for inventory in the case of supply chain disruption. Stopping production can lead to a decrease in profits and having a plan for even a slower version of the production schedule can make a difference.
- Maintain or create a strong relationship with your manufacturer(s) as it will allow you to predict or anticipate supply chain disruptions. Being informed, getting regular updates, hearing from the other side, these are things that can enable knowledgeable decisions.
- Have a plan in place when/if you must operate with a lower number of workers. Slower production is better than no production and having those contingency plans will save a lot of stress in the case that workers cannot show up.
- If the work can get done at home, do it. Technology is advancing rapidly to support remote working, and in many instances, it’s more efficient.
- Have a plan in place for if a critical employee gets sick. Employees who are on the front line or talking directly to your customers can be hard to replace and train quickly. Having viable options of people to stand in, who have been trained and know what the position requires, can decrease an enormous amount of stress in the case of infection or exposure to infection.
- Marketing wise, it’s important to understand how your consumers order your products. Evaluate how this year has shaped your relationship with consumers and identify trends that might help you prepare for the busy season next year. For Black Friday and Cyber Monday, for example, smartphones were a huge platform for online spending, according to CNBC. Those kinds of purchases represented 40% of total online spending this year! Insights like these specific to your own customers can help you better position your 2021 marketing strategies.
How to Prevent Future Supply Chain Delays
Proactively communicate with your team to understand their constraints, anticipated challenges and feedback.
Give extra room for production scheduling. In the case of an unexpected delay or cancelation of needed products, having a longer timeframe to troubleshoot, plan, and manage the situation can make all the difference.
Expand your freight forwarding network – space on vessels will be very tight so ensuring you have various options with firms who pre-book space will enable you to have various options.
Work with your manufacturers to place larger purchase orders that you call on over a period time. This helps the manufacturer to produce more efficiently and allows you to pull product as you need it, without having to wait for the production lead time. This may come at a premium, as the manufacturer will have to cash flow the materials, labor and storage costs, but if it saves you from having to airfreight your purchase orders, it may be well worth it.
Despite the constant changes, protocols, and instability that has been created from the pandemic, there are strategies and ways to keep businesses going. The unprecedented shifts in consumer habits have had a major impact on e-commerce, supply chain management and customer expectations. Evaluate what your team has experienced this year, learn from your data and identify new ways you can reduce the risk for future economic shifts. Communication with your team and customers is key; set up regular touch-bases with your operational partners to understand their capacities and constraints and gather feedback from your customers to ensure a successful 2021.
Statistics and percentages are taken from various sources: Deloitte’s Covid-19 Managing Supply Chain and Risk Packet, Bazaarvoice, and Digital Commerce 360 Research.
Ben Smith is the COO at Athletic Greens & Chair of SUBTA Operations Committee. He loves business, solving problems and helping people.
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