Kelsie Marian is a senior director analyst with Gartner's CIO Research Group. Marian's primary focus is advising Tier 1 retailers in the areas of the digital workplace and employee experience. Views are the author's own.
Retailers who do not factor COVID-19 into their operations are facing an existential crisis.
Pandemics are an extreme version of business disruption. The new coronavirus strain (COVID-19) is the latest reminder that companies need to plan and prepare for the unexpected in order to be resilient and flexible as a course of doing business.
For retailers, COVID-19 is an urgent threat, in addition to other already existing impacts forcing retailers to radically restructure their business and operating models to quickly adapt to change. The combination of impacts from several factors — including social, economic, environmental, technological, political, legal and ethical — have placed pressure on retailers to transform business models. COVID-19 is now compounding these impacts and exposing already weak spots among all segments and sizes of retailers.
Retailers can minimize current and future business impacts by identifying and executing on controllable activities. In the short term, they must identify and optimize existing technologies and business models. In the longer term, the focus should be on evolving business models and enabling transformational change with new and emerging technology.
Retailers must focus on several areas of impact
Fulfillment and last-mile execution, merchandising and pricing, the workforce and increased organizational transparency are the key areas where challenges are being exacerbated by COVID-19. Retail CIOs must work to address the impacts from them.
Fulfillment and last-mile execution
Retailers — particularly consumables retailers — are experiencing immediate spikes in digital and physical sales as some customers may be forced to stay at home and purchase their goods online. In areas where stay at home orders are not in place, or where online fulfillment is not able to keep up with demand, in-store visits are up. Regardless of the sector, retailers who do not plan for product availability and fulfillment to match unpredictable consumer demand will be placing themselves at great risk of business failure. Retailers must assess their stores' readiness to fulfill a surge in online orders, while at the same time, reallocate staff to support areas experiencing increased customer demand. Technologies that automate inventory management and free up associates to assist with fulfillment are critical for mitigating crisis-related issues and ensure growth moving forward.
To evolve and transform in the long-term, retailers will need to build upon lessons learned from the short-term actions and ensure operations leverage relevant emerging technologies. For instance, implement live commerce technology within digital channels (e-commerce, mobile and social) to link online customers with store or call center associates in the likely event of a sustained reduction in-store traffic. Additionally, automation and robotics applied to repetitive tasks will help to support increases in digital orders and minimize person to person contact when necessary.
Merchandising and pricing
As people prepared for the coronavirus to hit their communities, there continue to be shortages of basic household essentials and wellness items. Seasonal retailers will also feel the pressure as shoppers continue to stay home. Adapting merchandising processes and pricing strategies to mitigate scarcity, waste and price gouging are of paramount importance.
In the short-term, Gartner recommends: setting consumer purchase limits and controls for surging products across channels; identifying excess capacity of surging and alternative products across all stores; and auditing controls of automated pricing systems to ensure it stays within reasonable constraints. The key takeaway is ensuring customers feel that they are treated fairly during these difficult times, even if it’s a manual process.
In the long-term, existing technology can be scaled up or down to meet retailer needs. Retailers should automate predictable consumer actions and create store-specific assortments based on local customer requirements. Moving forward, they must work closely with suppliers to forecast product demand.
Retailers who plan only for the current, expected high level of disruption to the workforce caused by COVID-19 will be at a competitive disadvantage in the long run. The longer-term impacts to the workforce are unknown at this time, but it will be predicated on preventive measures retailers are taking early on. Use the current pandemic to plan not only for immediate business continuity, but also to develop a strategy to increase operational efficiency in the digital workplace for competitive advantage.
Short-term opportunities include extending an employee awareness campaign on personal hygiene and sanitation across a variety of communication platforms. In the near to long term, enterprise collaboration tools can be scaled to allow employees across networks to have real-time communication with each other and headquarters. AI-based scheduling can also be leveraged to predict and plan for fluctuating shift patterns. An increase in the use of smart robots to conduct and facilitate a variety of in-store tasks will likely occur in the consumables segment over the next few years. To that end, COVID-19 serves as a real opportunity to strategize on the optimal person/machine ratio in a hybrid labor model and evolve operating models accordingly.
Ethical implications for data sharing and transparency with customers, employees and suppliers is paramount. Failure to do so could result in permanent brand damage. In the short-term, reinforce the presence of business continuity/disaster recovery teams, procedures and protocols and ensure clear and consistent messaging is coming from a single, authorized source of truth. Timely distribution and targeted messaging for each constituency is essential, therefore retailers must work with suppliers to ensure visibility of incoming shipments is available and accurate. Transparency can be supported between multiple parties via digital business tech platform that enables easy, real-time data exchanges.
In the long-term, the COVID-19 outbreak can serve as a catalyst for proper crisis communications channels to be set up to deal with future, related scenarios. Keep a regular cadence of communication on status updates for staff and customers and be clear on the challenges you are facing when communicating with internal staff and customers.
In short, retail CIOs should be advising the larger organization to leverage existing and emerging tech to ensure as much business continuity as possible. They need to be fast out of the gate with short term adaptations for continuity, then leverage learnings from such to build out a longer-term strategy. The popularity and prevalence of emerging technologies like AI and in-store robotics may start to rise as a result. For retailers, responding to and mitigating the negative impacts of coronavirus can be done alongside coping with changes in consumer buying behaviors and other market-related factors such as deglobalization that continue to occur.
Gartner contributors: Miriam Burt, Max Hammond, Robert Hetu, Joanne Joliet