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Home » How the Pandemic Will Bring Permanent Change to Retail
EDITOR'S Q&A

How the Pandemic Will Bring Permanent Change to Retail

How the Pandemic Will Bring Permanent Change to Retail
Photo: Bloomberg
June 23, 2020
Robert J. Bowman, SupplyChainBrain

The coronavirus pandemic is wreaking change throughout the retail landscape, especially as it affects the balance between online purchases and traditional brick-and-mortar sales. In this conversation with SupplyChainBrain Editor-in-Chief Bob Bowman, Sanjeev Sularia, Chief Executive Officer of Intelligence Node, describes some of the transformation that is taking place, both temporarily and on a permanent basis.

SCB: How are the big retailers, such as Walmart, Target and Bed Bath & Beyond, going to survive this pandemic?

Sularia: Most of them already made the digital transformation before the pandemic set in, and they're reaping the benefits of that. Target had 141% year-on-year growth for Q1 2020 on e-commerce sales. The number for Walmart was about 74%, and Bed Bath & Beyond 85%. Having a massive CPG catalog has helped them. In the case of Bed Bath & Beyond, we're seeing spikes in non-essentials such as bed sheets, pillows and bath towels.

SCB: What do you mean when you say digital transformation?

Sularia: I mean online and e-commerce, but more importantly, it's omni-channel retailing — leveraging the strength of both online sales and the store experience as well. Walmart and Target took a single view of inventory perspective. That’s why they could leverage deliveries — Target moved to same-day delivery, and Walmart went to two hours for about 160,000 critical SKUS. They were drawing on inventory sitting in stores. They weren't limited by the time it takes to move product from central warehouses to where customers are.

SCB: So you're saying that these stores have managed to perfect efficient picking and fulfillment from store shelves for e-commerce orders?

Sularia: That's correct. I think that as the pandemic lifts and stores open, there will be a growth in sales with curbside pickup and limited foot traffic, utilizing the store for inventory. Allowing a customer who's in the store to log on to a tablet, complete a purchase and have it available at the store or delivered directly to their home is the kind of environment that will be required, even when we start opening up and getting out from the pandemic situation.

SCB: What impact do you see the pandemic having on investments in private labels by big-box retailers?

Sularia: That's a really interesting question. Private label share for U.S. consumer packaged goods varies at around 15% to 20% year-on-year. The number in Europe is about 40%, and in the UK it’s about 47%. It’s primarily being driven by price, since private-label products are typically cheaper than mainstream brands.

SCB: Will it continue to grow in the U.S.?

Sularia: Target is beginning to spend more behind those labels, and develop them as brands and not just something that differs only in price. That’s something that we'll see more and more of.

SCB: Do you see this as an answer to Amazon's own big investment in private-label items?

Sularia: Absolutely. Walmart and Target have visibility into what typically sells from mainstream brands. They have access to so much data that they can collate it and use it to invest more heavily in private-label products.

SCB: What permanent changes, if any, do you see in big-box retailing coming out of the pandemic?

Sularia: The question everybody was asking a decade ago was, how do you replicate the offline environment online? Now it’s how do you replicate the online environment offline? One of the biggest things that big-box retailers have had to compete with is the sheer size of their catalogs. That will become a weakness as consumers get into stores and want to complete the purchase and get out as quickly as they can, rather than go through the leisurely discover-and-shop environment of before. Unlike e-commerce players, big-box retailers don't have the filters to quickly narrow down millions of products into a quick selection of what customers are looking at. If you can guide shoppers by attributes with the help of technology, better shelving, and guidance from store associates, it will make the whole checkout process shorter, and not expose people to spending more and more time inside the stores.

SCB: To what degree might the pandemic have converted previous brick-and-mortar shoppers into online shoppers, now that they've become comfortable with that channel?

Sularia: A lot of people have learned how to shop online for the first time, or at least gotten over the barrier to get comfortable with it. We don't think that behavior is going away. We'll see more and more investment, even from the larger retailers, into onboarding these newfound digital-savvy customers for low to almost no cost of acquisition. But you’re absolutely right in saying that we’ll see a permanent shift toward e-commerce by a lot of customers.

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KEYWORDS consumer packaged goods Coronavirus E-Commerce/Omnichannel Inventory Planning/Optimization Retail SC Planning & Optimization
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