A defining year for the retail industry, 2020 has been replete with significant challenges and tremendous resilience. When the history books are written about this year, retail’s story will be one of rising to the occasion and helping to keep America going.
Back in February, when retail supply chain executives gathered at RILA’s annual LINK Retail Supply Chain Conference, the developing threat of COVID-19 was just becoming apparent as more than a China-specific issue. From that point, the dominoes fell rapidly as COVID-19 quickly became a global health crisis.
Throughout the pandemic, retail workers have been on the front lines, from the store associates continually restocking shelves to the distribution center workers packing and shipping items ordered by parents desperate to keep quarantined kids busy. The retail industry found ways to operate while prioritizing the health and safety of their teams, customers, and communities.
As retailers adjusted to new demands, some common themes have emerged: adaptability, collaboration, and a laser focus on the customer.
While supply disruptions, mandated store closures, and sudden, dramatic changes in buying patterns created extraordinary challenges, retailers responded by quickly pivoting their operations to meet the needs of the COVID‑19‑era consumer. Omnichannel strategies that had been plotted for three to five years out were suddenly accelerated and implemented in a matter of weeks. Almost overnight, retailers deployed contactless options like app-based shopping, same-day last-mile partnerships, and curbside or in-store pickup that were immediately — and widely — adopted by customers. Flexibility and responsiveness have always been hallmarks of top-performing retail supply chains, but 2020 put those supply chains to the test and challenged retailers to adapt faster than ever before.
And retailers with the best pulse on their customers were the ones most able to respond in tune with the dynamic needs of shoppers during the pandemic. Stores saw trip frequency decrease while basket size increased, and savvy retailers adjusted product assortment to increase convenience for their customers. Retailers anticipated customers’ desire for frictionless, contactless shopping, and customers have shown their appreciation of these -developments with increased loyalty. Research by McKinsey & Co. found that 75 percent of shoppers have tried a new shopping method during COVID-19, and 73 percent of those intend to continue to use that method in a post-pandemic world.
While many retailers have experienced demand spikes of anywhere from 20 percent year over year to more than 400 percent, retail supply chains remain plagued by a rogue’s gallery of obstacles. Production disruptions, blanked ocean sailings, port congestion, an uncommonly tight trucking market, and a strained parcel shipping landscape have given supply chain practitioners more than enough puzzles to solve to ensure that goods continue to flow efficiently into the hands of consumers. Succeeding in this environment demands an even closer level of collaboration and interdependence with partners in the retail supply chain ecosystem, including greater data sharing and collaborative planning.
What will 2021 bring? The disruption is far from over, and uncertainty remains the norm. That uncertainty is perhaps the biggest challenge for retailers and their supply chains — it’s made traditional static forecasts a thing of the past, and retailers have instead been looking to scenario planning, AI, and new data models to be able to quickly recognize and react to consumer and economic trends.
Indications are that e-commerce volumes will remain at elevated levels for the foreseeable future, and retailers are continually reevaluating their networks to be well positioned for that future. The shocks of 2020 underscored the need for greater cargo visibility, which may fuel increased investment in solutions that connect the end-to-end supply chain.
With e-commerce growing and store traffic at a plateau in many cases, significantly more retailers are leveraging stores for forward-positioned fulfillment in the network. That move has workforce implications as well. Despite record unemployment in the US, many industries are finding it harder than ever to recruit and retain frontline labor, and retail is no exception.
And there are still plenty of unknowns, from whether population movement and changes to how and where people work will drive long-term shifts away from urban centers to whether constraints and added costs in last-mile and parcel shipping will cause a significant shift toward new or regional players. On the sea and on land, one thing that is known is that retailers will continue to deal with tight capacity and cost pressures throughout their networks.
While COVID-19 has changed many things about the way we live, work, and shop, the fundamental imperatives of retail remain the same: meeting customers’ needs where, when, and how they desire. Don’t expect this to change, even if everything else does.