Controlling the uncontrollable or creating opportunity in the face of adversity

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Senior Consultant Stoyan Petrov looks at the contrasting ways in which retailers and consumers react to large-scale natural ‘black swan’ events and to the ongoing impact of business upon the environment. He analyses the balance which retailers must strike between serving the public during such events, maintaining their businesses, and seizing the opportunity to profit from crises.

The last few months have shown that the unpredictable and uncontrollable forces of nature can wreak havoc in any aspect of our lives – personal, social and business. But where there is threat, there is also opportunity – and not for profit, but for displaying strong values and innovating at pace. Let’s have a look at how UK retailers are responding to some of the curve balls nature throws at us and how opportunities are created in the face of adversity.

Spamming our news, social media and even meme feeds, COVID-19 (or coronavirus) has made an undeniable impact on our lives over the last couple of months. Different people respond to the threat in different ways – with some considering stockpiling of essentials in case worst comes to worst. Facing potential panic-buying and food riots, UK supermarket chains have drawn up a plan to ‘feed the nation’ in case of crisis. The main move would be to scale back on variety of products in order to maintain a steady flow of the most necessary items. Furthermore, retailers mention no plans to boost prices to make profit at the expense of panic and crisis.  While the bottom line would likely still be negative (the business expects to lose £1.2 billion in case of an outbreak) and it is about keeping business going, it also comes to show the vital role retailers have to play in such possible events.

As mentioned above, business is still business and the lights have to be kept on – which appears to become more difficult as supply disruptions due to coronavirus concerns have started aggravating the already tricky retail environment. The main reason is again the stockpiling of supplies that some who are fearful of an outbreak, have begun carrying out. Naturally, the problems caused by this measure beg the question of the robustness of the plan retailers have put together. It seems executing on it will require significant flexibility and compromises in the supply network of retailers as well as most likely sacrificing even more margin.

What can further erode margins and sales is almost half of retail shoppers (49%) considering purchasing more online due to the virus threat, as one report states. As if online wasn’t a threat enough, now it seems that nature herself is accelerating its march. Still, online retailers like Ocado and Amazon are not immune to supply chain disruptions themselves with this new demand influx becoming a reality. E-commerce platforms like Amazon will even have to become more vigilant in order to filter out opportunistic resellers aiming to profiteer amid the looming crisis by increasing prices for some of the high demand products like masks and sanitisers. Tackling such an out-of-the ordinary event will prove to be a tricky balancing act for all retailers alike – physical or online.

Finally, let’s have a look at another threat/opportunity related to nature – namely, the impact business has on the environment and how retailers are working to minimise this while improving their customers’ quality of life. In light of their carbon reduction pledges, M&S and Sainsbury’s  are venturing deeper into their in-store refilling station trials, aiming to reduce package waste as research suggests that more and more customers are looking for retailers that offer refilling options. While quite significant store ops and supply chain changes will be required to execute such an initiative at scale, the first steps in the right direction have been taken with more and more relevant product ranges being tested and many of them outselling their packaged counterparts! Another slightly different approach is John Lewis’ ‘hand-me-down’ clothing drive aimed at reducing baby and childrenswear waste through re-use. This will help relieve some strain on the environment by limiting waste, water consumption and carbon emissions, hopefully this initiative will soon be expanded into other ranges as conscious consumers start seeking alternatives to their normal buying patterns – similar to what is happening in the grocery area. Such models and initiatives represent a new venue for smart thinking and innovation impacting the whole value chain surrounding retail businesses – from production through supply all the way into marketing and reselling!

 

Author


Stoyan Petrov

Senior Consultant,  Customer Engagement

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