There are lots of articles and blogs written on what happened in retail during the 2020 holiday season. This blog goes beyond what happened and presents the seven lessons learned from Holiday 2020 that can help contribute to the future success of your retail organization:
- The tipping point. A tipping point is “that magic moment when an idea, trend or social behavior crosses a threshold, tips and spreads like wildfire.” I have read more than 25 articles that explain how COVID-19 caused the problems related to the inadequate capacity to handle online shopping. The truth is, COVID-19 did not cause the problems related to Holiday 2020 online shopping, but rather created a tipping point that resulted in a major shift to online shopping. This tipping point not only impacted Holiday 2020 but has forever changed the face of retail. Even after the COVID-19 pandemic is behind us, online shopping will not return to what it was in 2019. Therefore, do not look at the past to understand the future of retail, but look at Holiday 2020 and envision the impact on your business going forward. Store traffic, customer expectations, returns and product delivery/pickup have all changed and will not go back to the old norm or even a new norm. The fact is retail has evolved and the future is about continuous change from the next normal to the next and so on. So look at Holiday 2020 as the beginning of “Next Retail” and the starting point to prepare for 2021 and beyond.
- Agility. In the old days (2019), it was good business to develop a plan that optimizes your path forward. However, this approach became inadequate after we passed the Holiday 2020 tipping point. Instead of having an optimal path forward, we need a series of options that enable us to be agile enough to shift from one path to another to adapt to the uncertainties of the future. One disruption that occurs almost every year but is often overlooked is adverse weather. Not surprising to anyone, the holiday season in the United States occurs in the fourth quarter of the year, which almost every year is the host of multiple snow and ice storms. The reality is bad weather will impact online shopping every year and that bad weather almost always occurs in the Northern portion of the United States. So while you cannot plan for bad weather, you can certainly be prepared to adjust course when the bad weather inevitably hits.
- Distributed logistics. We have learned that customers want products available to them quickly and inexpensively. Some customers want to buy in store, and some want to buy online and pick up in store, at curbside or via contactless pickup, but all customers want products quickly and inexpensively. While it is easy to achieve one or the other, the only way to meet both expectations is to utilize a distributed logistics network for order fulfillment and store replenishment. This network demands an ecosystem of digitally connected logistics centers that are located close to your customers (and stores). Without distributed logistics, high customer satisfaction is not achievable.
- Robotics. The first three lessons learned—when combined with the shortage of labor—require fulfillment operations to move away from the expensive, rigid, conveyor-based solutions of the past and on to flexible, modular automation such as robotics. For low throughput SKUs, traditional storage should be paired with manual picking support robotics like Locus Robotics or 6 River Systems. For medium and high throughput SKUs, traditional storage should be replaced by batch picking mini-load automated storage and retrieval systems like AutoStore or shuttle systems paired with each sortation solutions like Tompkins Robotics’ t-Sort. These robotics systems will reduce operating costs, increase agility and allow for scalability as requirements grow.
- Control the peak. For years we have obsessed with the three weeks of the retail year that exploded from Thanksgiving Day to Black Friday to Cyber Monday into the middle of December. These three weeks featured midnight madness, doorbusters and holiday specials and a load of 50% off, buy-one-get-one-free and other deals and promotions. Retailers focused on creating a hype that resulted in a three-week peak of business that was very expensive to service. In 2019, many retailers saw that Alibaba’s Singles Day on November 11 offered them an opportunity to extend the three-week peak to a five-week peak. Then in 2020, Amazon moved Prime Day to the middle of October and many retailers started offering Black Friday sales in late September. The result of these promotions gave retailers more control of what used to be a three-week peak to become a three-month peak. In fact, what we have seen is Cyber Monday become Cyber November and Black Friday become Black Fourth Quarter. Going forward, promotions will be dynamic and used to control the peak, not create the peak.
- Customer expectations. Customers have not changed in their overall expectations of price, selection, convenience and experience, but the robustness of their expectations and the “K-factor” have created a much more complex landscape for retailers. As would be expected, customers—having been spoiled by Amazon—continue to want lower prices, a broader selection, more convenience and a more personalized experience. At the same time, the K-factor has translated from a shape of economic recovery to a way of defining customer experience. A K-type economic factor says there are the “haves” and the “have nots.” The haves rebound from the recession, whereas the have nots continue in the recession. In retail, the K-factor does not relate to the haves and have nots, but rather to a point of different customers taking different paths. Examples from 2020 include:
- Casual wear is up, business apparel is down
- 12-ounce size of apple juice for home consumption is up, 48-ounce size of juice for food service (restaurants) is down
- Sales of home office supplies are up, sales of business office supplies are down
- Sales of exercise equipment for homes are up, sales to gyms and businesses are down
The K-factor is applicable to all four customer expectations of price, selection, convenience and experience and so companies must do a better job of understanding not only the customer expectations, but also the impacts of different expectations for different customers.
- Digital supply networks. The traditional batch processing sequential and linear logic of traditional supply chains must be replaced by a digital, real-time, multi-party network to ensure all parties have access to a single version of the truth. Once this network is in place, a control tower can be deployed that allows for predictive and prescriptive analytics that—when combined with artificial intelligence and machine learning—can enable digital autonomous supply networks to achieve minimal costs and inventory while providing excellence in customer satisfaction. According to Gartner, Nucleus Research and IDC MarketScape, the company One Network Enterprises is a leader in providing digital supply networks.
None of these seven lessons learned are optional. All successful retailers will embrace these seven lessons and put in place a plan for achieving an efficient and effective response to each. If you are interested in further discussing these lessons learned, contact me at firstname.lastname@example.org.