NEED TO KEEP UP WITH AN UNPREDICTABLE AND EMPOWERED CONSUMER?
AGILITY IS THE ANSWER
Stakeholder management in a COVID-19 disrupted world
Stakeholder management in a COVID-19 disrupted world
The world has been encouraged by recent news on vaccines. Consumer-facing businesses, in particular, are looking forward to a return to more stable normal—even if that is much changed—after a year of unprecedented disruption.
However, between that promise and today, we must negotiate a difficult winter. ECB President Christine Lagarde has warned Europeans to expect a 'start-stop' recovery until a vaccine is widespread, and Fed Chairman Jerome Powell said in congressional testimony that the recovery in the US is slowing. Lockdowns will likely remain a fact of life across many parts of the world into the new year.
This will challenge businesses for months to come.
In this second in a series of articles on the ongoing challenges of managing stakeholders in a COVID-19 disrupted world, we look at that most critical of groups: customers.
Many disruptive trends have been accelerated by the pandemic. One of the most pervasive has been changes to consumer behaviors, particularly their empowerment through technology to demand what they want, when and how they want it. These self-centric consumers have been driving the explosive growth in everything from entertainment streaming to omnichannel shopping to direct-to-consumer brands—growth which has accelerated exponentially during the pandemic. And while we know this immediate crisis will pass, disruption is here to stay.
Retailers, in particular, are struggling to respond. Online shopping nearly doubled in 2020 to 20% of all US retail sales at the end of the 3rd quarter from 11% at the beginning of the year (and double that in some categories like apparel). We’re seeing similar trends in the UK, where online grocery shopping, for example, has doubled from 7 to 8% of sales to about 15%.
Customers have higher expectations from retailers than ever before regarding omni shopping. For example, 37% of customers now use curbside pickup for online orders, up from just 1% a year ago. Our research shows that as retailers’ online penetration grows, their operating profits shrink, given higher costs of online fulfillment and omnichannel investments. As a result, 29 retailers in the United States have filed for bankruptcy this year, and a record 25,000 brick-and-mortar stores are expected to close.
But while the pain has been widespread and all retailers have been forced to transform, some have performed better than others. Those that entered this year further along their transformational journeys, who were already making investments in an enhanced omnichannel experience and digital capabilities, were better placed to respond to this massively disruptive event. Similarly, those retailers who could make predictions and were prepared to move with agility and creativity could respond at speed to rapidly-shifting consumer behaviors and industry trends.
Indeed, this agility is what sets apart all best-in-class businesses this year—not just in retail. Evidence shows that consumer products companies that could shore up supply chains and maintain inventory on shelves were rewarded with increased brand loyalty. In an industry decimated by travel restrictions and virus concerns, Airbnb was able to pivot from its core offering of accommodations in tourist centers to providing rural escapes to locked down urban-and suburbanites. Over the summer, its share of domestic users increased by almost 45%.
The beauty industry, which has historically relied on in-store trials, was particularly challenged during the pandemic. In response, personal care and beauty retailer Sephora acted with agility to predict and respond to consumer and industry changes during this period. It found new ways of connecting with customers, including virtual consultations and an expanded use of virtual reality applications, and new ways of meeting customer expectations for convenience, including its collaboration with Instacart for same-day delivery.
Most companies recognize the importance of agility, but what does this mean in practice? In our experience, there are three major and measurable components:
Obstacles to cooperation, transparency and communication abound. But when incentives are shared and aligned, and teams talk to each other openly, decisions can be made quickly and smartly.
Disruption is accelerating and relentless, which necessitates an equally relentless focus on speed to execution and getting the product to the customer at the right time. Swift execution, coupled with continuous improvement, beats waiting for perfection and being late every day of the week.
Historically, consumer-facing businesses are rich in consumer data but poor in deriving insights and implementing changes based upon them. Investing in predictive modeling, artificial intelligence, and consumer insights are absolute necessities in today’s world. In an environment in which historical patterns no longer predict the future, these have become the essential tools for demand modeling and business planning.
By investing in these three areas, companies can enhance their ability and respond to the rapidly-shifting demands of their empowered customers. Doing so will not only enable you to navigate through the current crisis, but position you for the reality of a disrupted future.
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