The Candid Voice in Retail Technology: Objective Insights, Pragmatic Advice

All Retail Is Local: Technologies Will Be Critical Over The Coming Year

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Here in the US, the economy is re-opening in most states and for many, the first great COVID-19 lockdown is ending. While we can expect more than a few retail bankruptcies, particularly among those that were already “on the bubble,” we can also expect continued robust activity in grocery, mass merchants and home improvement retailers. Activity at apparel retailers and other segments is yet-to-be-determined.

But re-opening creates a lot of other implications. There are a lot of factors to consider, and these factors will drive retailers to think about technologies needed to stay safe, sane, and profitable.

We have been told that we can expect COVID-19 flareups in communities around the country for the foreseeable future. Either we will find a safe vaccine, a cure that doesn’t also kill you, or we will continue to see localized outbreaks until we achieve herd immunity (epidemiologists say that equates to approximately 60% of the population infected).

Further, since the national government has issued “guidelines” rather than mandates for re-opening, different states, and even counties are re-opening in different ways. For example, while the county I live in, Miami-Dade, Florida is starting a Phase 1 reopen on May 18, rules around restaurant, mall and store capacities differ from each other and from other counties

Yes, it’s complicated, and this is why there are some technologies the industry must implement broadly. If you want to comply with local regulations, stay safe, and squeeze maximum top and bottom lines during this long period of uncertainty, there just isn’t a lot of choice.

Here are a few technologies that are imperative.

Sophisticated Workforce Management: It’s important to keep track of where outbreaks are happening and manage the workforce in those locations differently. Some retailers may choose to give their employees hazard pay. Others may choose to extend personal time off requirements, to insure those who are sick actually stay home. Unlike decisions made over the past 3 months, this will not be a blanket set of decisions across the country. Each store and distribution facility within each region must be treated separately, without an army of home office or work-at-home personnel doing the work.

Compliance Reporting: In some ways, this is an offshoot of workforce management, but really talks more to task management, which again, will have distinctive local requirements. Some states will be in phase 2 (no masks required), while others will be in phase 1 (masks required for everyone). Social distancing may or may not be in place. Again, this is just too much for humans to keep track of in a chain with five hundred stores or more. Technology is an imperative enabler. Is testing happening as per local requirements (temperature checks, etc.)? If an employee tests positive, has the facility been cleaned per regulations? Are social distancing guidelines being followed? Compliance reporting is critical.

Planning, Budgeting, And Analytics: As we’ve discussed in our most recent benchmark report, “The New Retail Model: Becoming Agile And Efficient,” we can expect retailers to accelerate the trend of trying new types of stores – from dark stores for fulfillment only to pop-up stores, to stores with broader assortments to facilitate one-stop shopping. Not all these models will be successful. It seems very important, especially in times where earnings and revenue are likely going to be scarce, to identify as quickly as possible how well these formats are working and either abandon or expand them.

Location Analytics: This is a topic we’ll be covering in a benchmark soon, but the overarching need seems pretty clear. Where is a store or distribution center drawing its associates from? How close is it to an outbreak? Given traffic patterns, which adjacent areas can be expected to experience their own challenges soon thereafter? Even better, can retailers anticipate an outbreak based on traffic patterns? There are subtle traffic patterns that may not be intuitive a half a country away. And if a grocer is going to turn a store into a fulfillment/pickup location only, what’s the best location for it?

Picking Automation: In all likelihood, the trend towards grocery BOPIS and home delivery isn’t going away any time soon. People have become habituated to it. Given the low margin available in most grocery items, finding the most efficient way to pick product is critical. An industry that depends on turn to make its money, rather than on gross margin, really must find ways to become ever more efficient. There just isn’t that much money on the table.

Supply Chain Planning And Execution: Speaking of money on the table (and leaving money on it), the entire grocery ecosystem MUST do better at fulfilling demand than it did during the first lockdown. Singularities happen, and when they do, turn is not your most viable metric. It does not capture the opportunity cost of missed demand.

Instead of living in terror of the bullwhip effect, or being forced to choose between taking up a lot of space with low margin, low dollar value products like toilet paper and paper towels, retailers and their suppliers could have been more creative and judicious in their buys. Frozen vegetables were almost impossible to find. Why? Quite simply, forecast engines were not sophisticated enough to manage singularities. And absent the location analytics mentioned above, neither retailers nor their suppliers could figure out regionalized holding areas for product that would be sold, nor could they figure out the optimal number of store deliveries that made sense per day.

This also begs the question, have consumers, who were forced to buy substitutes for many of their favorite products decided they like the substitutes better? Is your forecasting solution smart enough to help you figure this out?

This is just a partial list of technologies that are truly imperative now. It’s not a small ask to say, “You really need to buy new technologies” to retailers that might be worried about survival. But it’s also fair to ask, “Will you survive without them?” I have never seen anything like this in my lifetime. The one thing I am clear on is that it’s not over yet. It’s important to think about the implications of our decisions now.

We are entering what my friend Georganne Bender of Kizer & Bender calls the “Next Normal.” We do ourselves a disservice calling it the “New Normal” because whatever we’re doing now is going to change. And that will change too. We may not see a true “new normal” for two years. Until then, we’ll be seeing mini-normals - that come and go. I generally don’t believe in killing a business problem solely with technology. This time it’s different. Along with compassion, empathy and compliance, the industry really needs to get faster and smarter. Economic survival demands it. And technology can most certainly help.

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Articles & Opinions May 19, 2020
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