Building the future of retail

A few weeks ago, Turnaround Talk focused on a report by British legal firm TLT which discussed their survey findings regarding the future of retail. Their survey pointed out that retailers are currently being disrupted by what the future of their industry will look like and that many retailers are struggling to come to terms with the changes that they face.

This is a trend which is being replicated worldwide. A recent report by auditing giant, PricewaterhouseCoopers (PwC) points out that US retailers are facing the same challenges. The report points out that there are some key ways in which this can be directly addressed. In this article, we will take a look at how addressing the supply chain crisis can benefit a company int their effort to adjust to the future of retail.

Bolstering supply chains towards the future of retail

The report points out that, overall, the consumer goods industry responded well to the supply-related challenges of the pandemic. As Quincey of The Coca-Cola Company puts it, companies like his, with operations around the world, were well-prepared because their global business demands it. “Our people and our bottlers did an incredible job of making sure that we didn’t have any material disruptions, and a lot of it came down to the design of the supply chain,” Quincey says. “We have operations in parts of the world where disruptions can happen a lot, so a lot of it was basic contingency planning.”

Still, the crisis underscored the urgency of making supply chains more resilient, transparent, sustainable and digital. This will be especially important in the future are the future of retail will require companies to be more agile.

The report adds that several of the executives we interviewed noted that digital enablement will be key to providing the real-time visibility into the supply chain ecosystem that global consumer companies will need going forward. Technologies such as blockchain that enable tracing of the exact origin of products will be critical. At Mondelēz International, for example, a more digital supply chain will allow the company to quickly reroute its sourcing of ingredients, if need be, or even build out its direct-to-consumer channel. At the front end of the supply chain, more consumers are making the choice to purchase online, which is also fuel for the digital supply chain. “It’s not just that consumers who are already online are buying more online,” says Van de Put of Mondelēz International. “The crucial thing is that more consumers have realised the convenience and the choice of buying online and are now changing their behaviour.” According to Van de Put, as additional customers adopt e-commerce, Mondelēz International’s delivery systems need to get faster and more sophisticated, causing a ripple effect throughout the company’s whole supply chain. “E-commerce affects how we run our distribution centres, how we pack our products and the range of products we need to make,” he says.

E-commerce is the future of retail. Nike broke its five-year sale target in a single year when it set aside significant finding to improve the company’s online presence.

Reckitt is using consumer insights to help inform some of those same operational decisions. “Technology fundamentally changes the supply curve and what we can do to drive greater productivity, flexibility, responsiveness and better returns. This will be beneficial when adapting to the future of retail,” says Narasimhan. “And so, there’s hope that we have major opportunities on the demand side as well as on the supply side, enabling us to manage the business in a very responsive manner and deliver on the expectations our various stakeholders have.”

The report points out that digitisation isn’t the only answer to improving the supply chain. Just as with food, sourcing more products locally creates a ripple of positive impacts, including addressing local droughts, floods, problematic regulations, and social and cultural inequities. In PwC’s latest CEO survey, 51% of retail CEOs and 55% of consumer CEOs say they are significantly or to a large extent collaborating with supply chain partners to collectively manage risks. Collaboration will be key in the future of retail.

Companies are also adopting numerous other environmentally friendly practices to reduce fulfilment costs and leave a lighter footprint on the planet. These include converting fleets to electric vehicles, using hydrogen-powered plants and adding distribution hubs in order to limit how far goods must travel.

Challenges and opportunities ahead

The report adds that retailers can take specific actions to address the global supply chain challenge:

• Building in greater resiliency. The Covid-19 crisis exposed how fragile supply chains are to disruption, and we’ve continued to see the same issues with other recent events, such as the March 2021 Suez Canal blockage, shortages of important raw materials and components such as microchips, and packaging and logistics problems at ports. Companies will need to re-examine their supply chains to develop a deeper understanding of risk in terms of sourcing and potential disruptions, and they might need to build in redundancies and alternative sourcing practices that promote resilience.

• Resilience also involves people. Even for some of the biggest consumer companies in the world, such as Procter & Gamble, situations arise that are not covered by business continuity planning, so individual employees need to be creative. “Our people have been amazingly resourceful in keeping our plants open. We had container loads on the ship that was in the Suez Canal, and we had raw materials waiting to go through, but you didn’t see our plants shutting down. People reformulated and rerouted and found alternate ways to qualify new suppliers. Some of this had been anticipated in business continuity plans, but there’s just been an incredible level of resourcefulness,” says David S. Taylor, Procter & Gamble CEO.

• Meeting demands for transparency. More than half of consumers (55%) in PwC’s June 2021 consumer survey say they agree that transparency and traceability are important factors when buying products. Migros Ticaret is doing its part to help consumers in this respect. “We mirror what is available in the market to our shoppers and allow them to make their own decisions, giving them fresher and healthier options,” says CEO Özgür Tort. “The product content is digitally available, and especially with our private-label categories, we involve the producers— the farmers themselves—in informing shoppers about how goods were treated during the post-harvest and preharvest periods.”

How will successfully addressing these risks improve the future of retail?

Strategic implementation

Benjamin Franklin famously said that if one fails to plan, they should plan to fail.

While most businesses are run by meticulous planning, there are a lot of reactionary functions that come about in response to a specific challenge/risk. The Pandemic has proven that this cannot occur in the future and that each and every single function within a business needs to have a plan and those plans need to be expertly executed. This is especially important when it comes to adjusting to the future of retail.

This can also be a challenge. Last week, Phahlani Mkhombo pointed out in his thought leadership editorial that there are four very specific reasons why companies fail in their strategic implementation. This can be detrimental to a company whose survival hinges on its ability to successfully navigate the supply chain crisis.

This is where the role of the turnaround professional becomes vital. An independent business review provides the turnaround professional with a 360° view of the business and will show the professional where changes need to be made so that the company will succeed in their strategic implementation.