It's no secret that COVID-19 has both been highly disruptive for both commerce companies and consumers that identify with them. Starting with the identification of a new type of virus by Chinese Authorities on January 7, 2020, to a rapid spread (within a matter of weeks) to Thailand, South Korea, Iran, Italy, and the United States, it was clear that the Novel Coronavirus was moving quickly and impacting the health of many across the globe. On February 11, the World Health Organization had labeled the disease 'COVID-19'. By March 11, 2020, as the world grappled to learn about not only about the source of the virus and rapidly began efforts toward finding a vaccine, the World Health Organization declared the outbreak a global pandemic.
This introduced an unprecedented time of uncertainty and concern for the businesses across the United States as those considered 'non-essential' were asked to close their doors for an unforeseen amount of time, with promises of regular communications, reviews and adjustments to re-opening timelines from state and local authorities, and government-backed loans to help with cash flow in the short term.
For nearly two months, the majority of non-essential businesses in the United States have been faced with perhaps the most difficult economic battle of the last century. Needless to say, April was a difficult month as companies tried to stay solvent by allowing their employees to work from home. However, due to limited cash flow and extreme limitations on the ability to sustain business, companies began to furlough employees and many found themselves filing for bankruptcy. According to Marketwatch, the unemployment rate outlook as a result of COVID-19 could end up 'surpassing 25% and breaking the all time record set during the great depression'.
Yet for a number of companies, and in particular those interacting with the consumer directly, this can be a time of growth and change as we battle back with safe, prudent, and strategic approaches. There will be new learnings, new processes to be implemented, and even growth in revenue as states start to open back up. And while it will likely be some time before we return to normality, the rate at which the world bounces back will be based on how committed companies are to moving forward to open, execute, and meet customer and employee expectations with the right technologies and processes in place. In other words, the success of retailers over the next 3-6 months will be directly tied to how frictionless they can make the consumer experience. In consideration of this, we'd like to offer a few strategies that every retailer should consider.
The outbreak of COVID-19 has had an indelible impact on our culture and resulting behavior. How we work, travel, socialize, and shop have all changed – and we are all questioning what the new normal will be as states and businesses reacclimate and reopen for business. In the specialty and department store retail business shoppers have become accustomed to shopping online, however, the percentage of online business – although increasing year over year – still pales in comparison to brick and mortar sales; by NRF statistics, they are only 10% industry wide.
The inventory purchased months prior to the COVID-19 pandemic was meant to support store sales as well as online. Some of this inventory could be delayed in customs, some may not have left the manufacturer, and some could be sitting in the DC meant to be shipped to stores. Much of this merchandise is seasonal. Typically, 80% of merchandise is fashion. By the time the stores open, it will be obsolete.
The retail industry has been one of the hardest hit by the global pandemic know as COVID-19. Retailers have lost significant revenue. The question for many retail executives is how to maintain business continuity and manage the reduction in cash flow while many fixed costs remain. The effects of a shutdown lasting into the summer may mean that stores that have shuttered their doors temporarily may in fact never reopen. This may mean a much smaller store base for many retail chains. Given the future of a smaller sized business, retailers are looking at key steps to improve cash flow or just as important to preserve cash. The key steps retailers are taking include changes in inventory management, furloughing some employees and potentially evaluating the use of their revolving credit facilities to bridge the cash gap until stores can reopen.
Detailed strategies are needed for how to profitably liquidate that inventory and improve retailers overall cash flow. Inventory is one of the largest assets that retailers manage with some of that inventory quickly becoming aged or even obsolete due to seasonality. Retailers need to look at key strategies like potentially pack and hold for next year on goods that are more basic or even seasonal basics that have a longer life or jobbers to liquidate truly aged inventory (with an eye to brand impacts).
On the human resources front, employees in stores are the brand ambassadors for retail organizations and the impact on these employees and their families is truly heartbreaking. Since the shut down began more than 1 million retail employees have been furloughed. Retailers that have furloughed store employees and some corporate staff like inventory allocators include: Macy’s, Gap, TJX Companies, Kohls, L Brands, JC Penny and Best Buy. While furloughs are easing the cash flow problem, most retailers are still covering some benefits to help employees with the transition, which is critical to keeping employees engaged for the day when stores are able to reopen. There are other options outside of furloughs that can also be entertained including leveraging the workforce in store to support fulfillment methods like buy online pickup in store and ship from store (where technology can support these processes). Once the shutdown begins to be lifted, what key HR process will be needed to ensure that returning employees are coming back to a safe work environment? New HR processes and operating procedures will be needed to ensure workers not only are safe, but feel safe as well. It will be critical to not only implement new procedures for cleaning and safety but to communicate not only what is happening but why. Human resources organizations for retailers are one of the most critical parts of the business continuity plans in a crisis of this scope and magnitude.
Many retailers were in a heavily leveraged position before COVID-19 began. These retailers may be hard pressed to access additional credit. For those that have a revolving credit facility, they will likely look to extend the terms and modify the covenants to increase flexibility. The longer the stores remain closed and revenue is limited to online sales the more important it is for retailers to maintain as much financial flexibility as possible.
There are still many unknowns for the industry today. When stores do begin to reopen, will social distancing disappear? Has consumer behavior changed permanently? Ecommerce was expected to represent 12.4% of retail sales in 2020 according to Statista Research, that number will likely increase significantly as a result of COVID-19. We think the changes retailers need to make now require implementing the processes and infrastructure that support a true unified commerce model. Likely retailers will come out of this with a larger ecommerce business but the need for fewer stores as consumers shift their purchase behavior to more online than prior to the pandemic. Now it is more important than ever for retailer to make the investments needed to set up the future business and operating models that will ensure strategic success and survival.
If there are other topics that you would like us to help with, please reach out to me directly or to our team at firstname.lastname@example.org or by contacting us at 801.660.2901. We hope you stay safe and healthy as we all work to “slow the spread” through social distancing.
The Ascent team is acutely aware that retailers are now striving to cope with unexpected and unprecedented disruptions across People, Process, and Technology in their businesses. One segment that has been hit particularly hard is the Fashion Retailer, who judiciously times merchandise arrivals with meeting seasonal consumer demand, then has an urgent need to transition out of product as the next season commences. These companies are now faced with unique challenges as a result of the impacts on their supply vs. demand by the COVID Pandemic.
A call to action for resuming "the new normal” within Fashion Retail business necessitates adoption of short-term steps, such as:
In order to emerge well-prepared for post-COVID growth in the evolving economy, retailers should look to refine future state processes, systems, and people, improving efficiencies in a fluid yet stable way. We hope you stay safe in your businesses and with your families, and we will be here to support you as you work to bring your supply chain into "the new normal". For more information, visit us at www.ascenterpsolutions.com.
Donna Lekites and Claudia Ferrell
Ascent Enterprise Solutions
Many organizations are currently running in a mode that is utilizing at least some, and in many cases, quite a number of the components of their Disaster Recovery / Business Continuity Plans. For Retailers, however, this time the typical DRP/BCP scenario has been flipped. The data center, cloud platforms and network are intact, but in most cases, the brick & mortar selling locations are closed or restricted to pick up only. The supply chain is disrupted. The network, online transactions, eCommerce/BOPIS fulfillment, and related security and performance issues, are primary concerns. Some of the DRP/BCP components implemented may have worked better than others, and now is a good time to identify the components that need to be updated in the plan, based on the lessons learned.
Internet and web site traffic is increasing for shoppers now buying online as stores are closed for shopping, which is placing higher demands on the platform to provide the throughput required. Having a cloud-based solution in a data center backed by GCP, Azure or AWS provides for efficient scalability. As the online channel begins to represent a larger share of the business, network performance management and security detection and response solutions are required to protect both the consumer and the business.
Efficient and responsive order management solutions will require a robust, low code / no code, reliable integration platform to implement process automation, identify inventory availability, process payments, provide order status visibility, and ensure end-to-end data integrity for online orders, whether shipped to the customer from the fulfillment center, drop shipped by the vendor or picked up at the store.
With important health and safety regulations around COVID-19 impacting the Retail industry, many Retailers are struggling wondering how to mitigate the impacts they are seeing to a limited supply chain, store closures, changes in consumer demand and behaviors, and furloughs and reductions in force. Many are concerned about business continuity, and are having to put strategies in place as quickly as possible. Some are turning to government loans to create cashflow for payroll. Others are doing their best to continue with limited channels and budget cuts. It’s both an uncertain and difficult time for most, and we are here to help with ideas and ways to generate revenue and not only stay viable during the crisis, but also have a strong infrastructure with the ‘new normal’ post-COVID-19.
We see both the confusion and the concern, and want to help. That's why we've offered free consultations through the month of April to help our friends in the industry get technology and processes in place immediately to see them through the crisis. Along with our offer of a free consultation, you’ll see our team at Ascent building out a series of thought leadership products over the next few weeks, including:
I remember when I was young and would wait by the mailbox during the month of November for the Sears Wishbook to arrive. My brother and I would grab it and promptly run inside, racing through the pages to see the gifts to select from. We'd even go as far as earmarking pages in the Wishbook for our Santa letters to guide the big man to the toys were at the top of our lists. The Sears Wishbook was, after all, the source of truth for all holiday gifts.
Fast forward 35 years, and it's incredible to see how much has changed. We have entered the age of digital transformation for commerce, where the old Wishbook has been replaced by online catalogues, augmented reality on social media platforms, and personalized experience-based shopping in many stores today. What hasn't changed, however, is that the customer is still the King (or Queen), and companies are using new technologies to engage and entice the inner child in all of us.
As a partner in a leading consulting company (www.ascenterpsolutions.com) in the commerce industry, I am constantly engaging with our partners, customers, and other industry specialists to stay connected to key trends and changes in technology each year, and I wanted to share some of the things we've seen at Ascent that are making a difference for commerce companies in their holiday strategies.
1. Companies are leaning into holiday shopping with earlier sales. 2019 has been an interesting year to see the growth of shopping holidays like 'Singles Day' and more major brands offering 'Pre-Black Friday Specials'. We've seen industry giants, like Walmart, Amazon, and Best Buy sending out daily specials throughout the month of November. In fact, the industry is showing larger percentages of consumers (even up to 40%) starting their holiday shopping even before November, and while it's (admittedly) difficult to see holiday sales starting before Halloween, consumers are willing to spend earlier and earlier to get that best price on those gifts that their loved ones are hoping for.
For years, I struggled with the industry's separation of digital and physical commerce. As a project director for a leading commerce-focused technology company, I remember struggling with the concepts around purchasing online or purchasing in-store, and why the two couldn't work together. In 2007, I remember spearheading an effort to introduce what was then the very first version of our OMS, which incorporated the concept of purchasing product when it wasn't physically available for fulfillment from an alternate location, whether it be a store or a warehouse. Little did I know that the world of omni-channel retailing would explode a few years later, driving new technologies that would balloon and scale immensely in functionality compared to the application that I worked on many years ago. Which bring us to today. The modern Order Management architecture has become the backbone of the omni-channel commerce industry. While many software companies brand this with different names and titles, the goals of omni-channel commerce are the same: to improve and enable customer experience through different channels or touchpoints (both physical and digital), and ensure that they can acquire products and services seamlessly (without friction).
But how can a company support this concept without the right technologies in place? How can they ensure that inventory is available and exposed across all of the different sales channels where their customers shop? How can they track sales regardless of where the customer purchases? How can they ensure that the orders are consolidate, and routed logically to the lowest cost fulfillment centers? The truth is...they can't. While an eCommerce system, a Retail system, a B2B system can all connect directly to an ERP or WMS systems for fulfillment, the logic to prioritize, consolidate, route, and track customer orders across different channels simply doesn't exist in the traditional ERP and WMS platforms. And thus, the OMS does the heavy lifting for all of these elements.
Whether orders are placed from a mobile device, a laptop or macbook, a call center, or within the four walls of a store, the modern order management system (or OMS, sometimes also referred to as a DOM) provides the framework to receive, prioritize, consolidate (or deconstruct) and route the order to the appropriate fulfillment center for rapid delivery to the customer. It can satisfy fulfillment requests for B2B and B2C product, and stands as the primary source for status from time of order placement through delivery of the product. Salespeople and Call Centers rely on Order Management systems to provide updates to customers, and also handle returns. Distribution centers rely on Order Management systems to consolidate orders and initiate picking requests from within their Warehouse. And the end consumer can rely on the Order Management system to expedite the fulfillment process to ensure they're able to pick up or receive the product even up to the day that the order is placed.
The IT challenges of today are complex and can be daunting as they appear to change focus quite often, Today’s news and buzzwords become tomorrows forgotten dreams. Keeping pace with evolving business needs requires IT to move quickly and deliberately. Use of an agile, measurable benefits delivery model has become common but can in-and-of itself be confusing for an organization to implement. Understanding the core interactions and benefits across technology, process, and people (especially when a solution is a seemingly stand-alone) is not only prudent but is necessary for the business to succeed.
A formal and managed process to system alignment will ensure that the business and IT teams remain in lockstep and can agree on the benefits realization expectations. Formally driven “change” also helps to ensure understanding across the organization, the core stakeholders, and the ultimate stakeholders, the customers. All too often IT is viewed as an island and the business carries on running the day to day, with limited understanding of what each of the groups is truly doing.
As a leading practice, each leadership team should set and measure the speed to benefit expectations of each project within an overall program. A “quick win” can turn out to be a stepping stone to short-term benefits realization, however they need to be weighed against the overall vision in order to ensure it is not viewed as a “throw away” exercise from which the business sponsors see little benefit.
If someone told me years ago that I'd be a partner at a leading consulting firm in the Commerce industry, I'd have probably either laughed or stared in disbelief. From an early age, I fell in love with business and technology, but wanted to be a cog in the wheel, supporting a large corporation, and contributing to top line revenue numbers. And so I jumped in early to the world of technology in financial and commerce-based systems. And while the ride was exciting and profitable, I found that, as many have, working models compromised my integrity standards and posed risk to quality delivery of business benefits over speed of implementation. At times, I heard comments like 'You side with the customer too much', 'Good is good enough', and 'You are too forward thinking and assumptive'.
These values didn't resonate with me and after 14 years serving other people's objectives in leadership roles, I decided that there MUST be something better. A higher plane, so to speak, to ensure quality and integrity in efforts to help our customers scale their systems, and a better way of bringing relevant and meaningful value to our customer base. So in 2010, I took a huge leap and stepped out of my comfort zone to chase this dream, and shortly after, founded Ascent Enterprise Solutions. Our core values are simple: CUSTOMER First. QUALITY and VALUE in EVERYTHING that we do. FAIRNESS to our associates. And most importantly, EXPERIENCE to ensure that the DELIVERABLES that we produce will stay with our customers long after our projects are completed, and they will be able to stand on their own when we exit. And with these values in tow, we have spent years developing a proven methodology that focuses on these values to produce the best implementation results possible with systems and processes that truly deliver benefit to our clients.