A recent Wall Street Journal article on the emerging Coronavirus consumer quotes Unilever CEO Alan Jope saying, “There is no such thing yet as a new normal. Businesses and commentators who have professed too much wisdom and insight on what the world will look like on the other side of coronavirus have come to eat humble pie.”
It’s comforting to know we’re not alone in feeling this way, but we’re also still searching for clues about what demand will look like post-COVID. So until we can get more definitive, we’ll use anecdotes to help inform your perspective and highlight new angles to consider. Specifically, we’ll share what we’ve heard recently from our consumer goods customers as they respond to the evolving situation, pointing out trends and emerging practices for supply chain resilience while heeding Mr. Jope’s warning that it’s still early to draw conclusions.
A permanent increase in online sales seems to be the least in doubt. The article cites Target’s CEO and Unilever’s 36% growth in the quarter in online sales to conclude that “one change seen as likely to be long-lasting is the shift to online shopping.”
Our last post providing a demand framework for COVID-19 highlighted a consumer electronics executive who’s questioning whether consumers will return to stores in the same numbers as before. Compared to the convenience and safety of shopping from home, driving to a store, touching the same products as others and standing in line to check out can all seem quite unnecessary.
With Alloy, a customer in the personal care industry is seeing nuances across different channels at traditional retailers and e-tailers. For example, their online sales at Target have jumped from a single-digit percentage of their total sales pre-COVID into the double digits. However, they’re still closely tracking the trend to answer outstanding questions, like:
- How is the proportion of online sales going to change over time across retailers, even assuming online will be a permanently higher percentage?
- When will it stabilize, or reach a “new normal” that can be reliably used for forecasting?
- What does the shift mean for Amazon sales, or will they just be completely different?
We’ve also heard customers dealing with the impact the channel shift has had on inventory and their ability to fulfill that demand.
With the sudden move from brick-and-mortar to e-commerce, a gaming company saw retailer inventory stranded at stores when it was needed to fulfill online orders. They’re now constantly reviewing the data and demand changes to optimize for the latest situation, working closely with key retailers through a CPFR practice.
For one sporting goods manufacturer, it’s created an unfortunate divide between different parts of their business. Their direct-to-consumer division continues to have record days, and even saw a spike recently, likely due to stimulus checks and tax refunds. For retailers that they support with drop shipping however, inventory is constrained, so they haven’t seen a further increase. Now they’re watching for a spike at Amazon or other retailers that may still have some inventory on hand to realize an increase in consumer demand.
Product mix shifts
In a similar vein, the benefits of online growth haven't been distributed evenly across product categories and characteristics within companies.
We work with a power tools manufacturer who’s experienced an increase in e-commerce sales at DIY and home improvement stores. Breaking it down, they know it’s mainly their lower priced products that have much higher velocity and have driven the comp growth. As a result, they started analyzing sales performance by price and trying to understand elasticity based on store factors. The impact has visibility all the way up to their division President, who is asking whether the shift is moving their overall business toward a lower Average Selling Price (ASP) and what that means for the health and strategic direction of their company.
Another customer that sells through DIY retailers has said their partners are eager to hear what they’re seeing in the data, which is that there are very specific products consumers are looking for right now. People are filling their time at home with house projects like painting, and those businesses are off the charts. The reality is retailer systems haven’t caught up yet and buyers want to hear from their trusted vendors to help them make the right ordering decisions. By stepping up to the challenge during this critical time, this supplier is positioning themself well for the future.
COVID-19 has also played tricks on product lifecycle management and changed the trajectory of different products. One consumer technology manufacturer told us how sales have reversed course in one of their older product categories that was on the decline, likely the result of people investing in home offices. In contrast, some of their newer products have declined in popularity—a surprising twist in an industry that typically focuses on innovation!
It’s perhaps a trend that even spans industries. Mr. Jope mentions that Unilever “underestimated initially the positive impact this would have on our business for at-home cooking. Those center-of-the-grocery-store businesses that have been a bit flat for many years, all of those are seeing a rejuvenation.”
Some of these changes can be logically explained by stay-at-home orders forcing people to work, cook, and stay entertained at home, and which may create new habits that stick. However, it’s important to also critically examine the shifts, especially when they have manufacturing implications. For instance, we heard from a home care brand that some of their less popular scents have suddenly started selling in record numbers.
The reason? Their other scents were out-of-stock and consumers were simply substituting with whatever they could buy, not paying attention to preferences like scent. It’s the same explanation for green cleaning products now selling so well: because there is nothing else left! However, if the brand had translated the increased sales directly to increased production without understanding the bigger picture context, they could have been left with millions in unsold inventory clogging warehouses and shelves when demand returns to “normal.”
COVID-19’s unpredictable nature has altered the time horizons that companies are focusing on. A Director of Sales at one of our customers summed it up well:
“A lot of the questions are centered around the fact that we typically don't look at the data this way: What happened last week versus this week? How fast are our sales dropping off week after week? I don't care what we did last year, just what's happened every week for the last five weeks. That COVID-19 dashboard looks different than what reports would normally look like."
That desire for a real-time understanding of what’s happening and what’s changing so they can respond accordingly extends to many functions beyond Sales. From different customers, we’ve seen:
- Supply chain doing daily planning to ensure they’re just manufacturing what’s actually needed
- Inventory managers tracking week-by-week point-of-sale trends to manage inventory relative to sales
- Marketing identifying a spike in a particular item at Amazon this week and analyzing forecasting impact
- Leadership asking about yesterday’s sales to inform tough decisions about headcount
Alloy’s flexibility shines in this respect. Whether it’s dynamically changing the time frame for reporting or adjusting a dashboard because each person wants it to look a bit different, any user can quickly make changes on-the-fly. This short video shows how it works and some of the ways customers are using Alloy’s supply chain visibility and retail analytics to respond to COVID-19 demand changes while it still matters.
If you’d like to learn more about how we’re helping consumer goods brands and our free trial offer, please reach out today.