For hundreds of years, competition among retailers was driven by activity on the sales floor. Retailers differentiated themselves based on product assortment, merchandising, customer service and store operations. Macy’s versus Gimbels is a classic example of this bygone model.
In the last two decades, however, competition moved from the sales floor to the supply chain, where process optimization became the new mantra. Process optimization — with its philosophy of continuous improvement — was the new approach to drive sales and maximize profit through incremental change.
Target, Walmart and other industry giants have been leaders in process optimization by employing supply chain programs like Collaboration Planning Forecasting and Replenishment (CPFR) and Just-in-Time inventory (JIT), supported by a rigorous program of data collection and analysis.
Supply chain optimization has been followed by the era of online retailing as the industry’s new field of competition. This channel offers vast product assortments, ease of use, convenience and a level of service that was abandoned by store native retailers. But it was met with skepticism by these legacy retailers, who discounted the degree and rapidity with which consumers would embrace this new level of convenience. Their initial dismissal has resulted in playing catch-up ever since.
Safety over convenience in the age of COVID
The COVID-19 pandemic has infused the need for safety into the concept of convenience. As recently as 12 months ago, the thought of consumers intentionally not venturing out to shop was incomprehensible. Suddenly, customers were forced to change well-established shopping habits with breakneck speed, and a new normal set in.
Responding to COVID’s impact has proven particularly difficult in the grocery sector. Legacy grocery store operations were constructed on the assumption that the final assembly of an order would be done using the free labor provided by the customer as they shopped in store. Additionally, the shipment of the customer’s order to its final destination was done using the same free labor and free transportation provided by the consumer as they returned home. Now, grocery store consumers consider multi-channel options for safety as much as convenience, and parse their purchases based on perishability.
It is reasonable to anticipate that in a post-COVID economy the desire for this convenience will remain, despite reduced concerns over safety. Just a few months ago, consumers perused aisles in the supermarket — making frequent trips often lasting 40 minutes or longer. Consumers continue to think that the best place to shop for their perishables and frozen items is at the grocery store, but even that is not a given. The emergence of rapid home delivery services have proliferated in the past few months, making possible the safe delivery of perishables. In addition, customers have already started to change the way they buy all their non-food items. Everything from pet food to paper towels can be easily delivered to their front door.
Consumers are also venturing out to shop less frequently due to safety concerns. Trips through the store are completed in significantly less time. Now, the farthest that consumers want to travel is the store’s parking lot to pick up the order they created virtually.
Eliminating the need to go out at all is also gaining in popularity. Home grocery delivery has been accepted with great enthusiasm, assuring its continuation as safety issues abate. But how to execute the activities formerly done by the customer — at scale and profitably — is the challenge that began in grocery but has set consumer expectations for every retailer to meet.
A new playing field
Competition will now be played out in the reimagining of both logistics and store operations. This challenge must define how the physical store will be configured, merchandised and operated. The reimagining extends to all aspects of operations, including employee roles and responsibilities throughout the organization — not just to customer-facing activity.