Retail demand planning is a key aspect of supply chain optimization. Understanding and predicting how much stock to have on-hand to appease consumer demand at any given time helps dictate the retailer’s manufacturing and shipping needs. Not surprisingly, consumer demand can change rapidly based on environmental, economic and geo-political influences.
A couple years ago, I wrote about retail demand planning challenges caused by rapidly changing consumer buying habits as a result of economic downturn and the tectonic shift towards online shopping. Looking back, those were the good times for retailers, as the small fire that was a retail recession in 2018 has evolved into a complete conflagration in 2020.
“The future for retailers is unclear as consumer behavior has changed forever, but the road is certainly full of potholes and challenging curves and only those willing to adapt will survive.”
The COVID-19 pandemic has changed consumer behavior almost overnight. The pandemic is reshaping the retail industry in near real time, rapidly accelerating long-term underlying trends in the retail space.
Changes in retail demand vary by industry
As consumers focus on purchasing basic goods, consumer goods retailers such as Wal-Mart are enjoying brisk same store sales. Meanwhile, restaurants and luxury retailers have taken a beating as mandatory shutdowns and changing consumer behavior has left many of them empty. This is made evident by the following examples:
- After Kroger announced it would divest its stake in Lucky’s Market in December. The following month, Lucky’s filed for Chapter 11 bankruptcy.
- Home goods retailer Pier 1 filed for Chapter 11 bankruptcy on February 17. In May, the Texas-based company said it would shut down its business after failing to find a buyer.
- FoodFirst Global Restaurants, the parent company of the Brio Italian Mediterranean and Bravo Fresh Italian restaurant chains, filed for Chapter 11 bankruptcy on April 10. The company said that 71 of its 92 restaurants had temporarily closed amid the coronavirus outbreak.
- J. Crew filed for Chapter 11 bankruptcy protection on May 4.
- Neiman Marcus filed for Chapter 11 bankruptcy on May 7.
- GNC filed for Chapter 11 bankruptcy on June 24, announcing it planned to close between 800 and 1,200 stores while it looked for a buyer. In September, a judge approved GNC’s sale to China-based Harbin Pharmaceutical Group for $770 million.
- CEC Entertainment, the parent company of Chuck E. Cheese, filed for Chapter 11 bankruptcy protection on June 25. Its finances had been in freefall since the coronavirus pandemic hit.
- Brooks Brothers filed for Chapter 11 bankruptcy on July 8, citing disruption from the pandemic. It said it planned to close 51 stores. In August, Sparc acquired Brooks Brothers for $325 million.
- Lord & Taylor parent company Le Tote filed for Chapter 11 bankruptcy on August 2 and said it would seek a buyer. On August 27, it said it was beginning the process of liquidating all its stores.
Consumer behavior changes impact retail demand planning methods
While many of these behavior shifts were already underway, the pandemic has rapidly accelerated consumers’ desire to make purchasing decisions from the comfort and safety of their home. Social media usage, for example, is at an all-time high. According to eMarketers, 51% of adults are using social media at higher rates during the pandemic, and 22% of adults say they are more interested in shopping via social media than they were last year, according to Salesforce.
Combine this trend with a stark spike in e-commerce, and we have a clear trend-shift in how consumers expect to engage and buy from their retailers of choice. Consider:
- S. total online spending reached $73 billion in June, marking a 76.2 percent increase year-over-year (Adobe).
- 1% of consumers say they are highly likely to continue to shop online even if retail stores open back up (NetElixir).
- 6 out of 10 Boomers say they’re now using online delivery services, like Amazon Prime and Shipt, specifically because of COVID-19 (NRF).
- Globally, more people expect to make portions of their purchases online post-COVID (McKinsey).
- Buy online, pick-up in store has seen record year-over-year growth, up 208% (Adobe).
- 50% of people have decided where to shop online based on whether or not they could pick up in-store (Invesp).
“To survive, businesses must adjust their strategy to meet the new normal of post-COVID consumer behavior.”
How retailers can adapt their demand planning methods for future success
Consumers’ attitudes, behaviors and purchasing habits are changing—and many of these new ways will remain post-pandemic. Retailers must adapt or perish. A strong ecommerce presence is critical as consumer behaviors have forever changed. Online shopping has rapidly replaced brick-and-mortar store visits. A robust and well-designed website supported by a strong supply chain model is critical for survival.
The virtual workforce is here to stay. Many companies have embraced the virtual workforce and found that employees can still be productive, saving the company the cost of office space. Restaurants that previously relied on the business office lunch traffic must now cater to a different consumer offering at home delivery, curbside pickup and creative take away specials. For restaurants that rely entirely on business park consumers, the only option may be to relocate to a more residential area.
Seating and serving strategies must be reengineered in restaurants. The Plexiglas partitions may remain an optimal solution as customers will continue to seek out more isolation from other customers. Cruise ships, once famous for their buffets, will need to switch to a server model – the challenge being how you preserve the feel of over overflowing abundance and choice. Consolidation in the airline industry is almost certain as business travel will probably never return to pre-COVID-19 levels.
As you navigate these “new normals” in retail demand planning, you might be asking yourself, how can Profit Point help redesign your network to make it more resilient and sustainable? With more than 25 years of experience and 250 supply chain redesigns under our belt, we’ve seen the past and predicted the future. We look forward to helping you evolve your supply chain to thrive in the new economy in years to come. Learn more about our supply chain optimization services and contact us today.