Thomas O’Connor, senior director analyst with Gartner, relates the lessons that manufacturers and retailers can learn from China, which is just now emerging from lockdown due to the coronavirus pandemic.
Having been hit first by COVID-19, China is ahead of the West is recovering from it. Consumers there are beginning to return to stores, although sales volumes are far from what they were pre-pandemic.
Supply-chain leaders are taking a number of key strategic actions to drive recovery, notes O’Connor. They’re considering the vital indicators that signal a return to “normal” levels of business. Because demand is no unpredictable, many have been opting for zero-based forecasting — rebuilding the forecast from scratch. Their efforts represent an attempt to make more effective use of historical demand.
It’s not a question of returning to normal, however, if that means the way business was done before COVID-19 struck. O’Connor sees the likelihood of permanent changes in consumer behavior, including a greater reliance on e-commerce purchases. Meanwhile, in the stores, returning consumers mostly consist of “mission shoppers” — those with a specific intention to buy, not browse.
Food and grocery is one area where e-commerce sales are likely to account for a larger share of total activity. Older customers in China who hadn’t historically been inclined to shop online came to realize the convenience of that model during the lockdown. The same pattern is now playing out in the West, O’Connor says.
Relationships with suppliers are changing as well, as retailers and manufacturers seek closer collaboration to ensure continuity of supply during future disruptions. The trend is especially evident in the fast-moving consumer goods (FMCG) space, O’Connor says. At the same time, manufacturers are viewing the situation as an opportunity to create broader product portfolios, to meet change consumer tastes.
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