Covid-19: How retailers are responding to coronavirus

Coronavirus has turned the way we work, shop and live upside down in just a few weeks. In some cases, the retail landscape appears completely unrecognisable. For example, French luxury goods group LVMH is to start producing hand sanitiser at three of its perfume and cosmetics factories for distribution to French hospitals.

Both B&Q’s owner Kingfisher and clothing chain Primark have issued trading statements aimed at reassuring investors after having to temporarily close stores in France, Spain and Austria due to the virus.

Meanwhile, the news cycle is replete with images of the aftermath of panic buying, with aisles of empty shelves resembling Cuban supermarkets.  

But while there’s no denying we are in unchartered territory, retailers are finding ways to navigate the strains placed on their supply chains.

Dutch convenience store Hema has experienced a huge spike in some of its products. Jan Daan van Erven Dorens, head of supply chain management at the retailer says items such as hand gel and tissues have been “flying” off the shelves. The company is using Blue Yonder’s Luminate Demand Edge and Fulfilment software to recalculate a new forecast every day. By giving the supplier a fast projection of the new demand, it is able to get ahead of the queue for new shipments. 

“This will really help to improve stock availability on all products,” he says. The automated system can look at the impact of pricing and promotions and suggest ways to optimise margins, he adds. 

Wholistic view

Those retailers using tools get a transparent view of their supply chain are best placed to make decisions quickly, agrees Emile Naus from BearingPoint, a supply chain logistics consultancy. 

The last thing a supermarket wants is for there to be a peak in customer demand, combined with a fall in capacity because staff are off ill. That could lead to perishable goods going off in storage. “Supermarket supply chains are actually very dynamic and they have good ways of dealing with contingency planning.” For online ordering, they can quickly limit the amount customers can purchase to prevent that scenario from happening. Ocado, meanwhile, is prioritising existing registered customers over new shoppers to manage demand.

The bigger problem is dealing with small suppliers who may be affected by cash flow problems, he says. That issue was recognised by Morrisons, which announced it would pay small suppliers immediately to help keep them afloat amid the crisis. Naus notes it is not supermarkets’ interests for them to go out of business. “They need to view it in terms of the whole supply chain and not just [a single] supplier-customer relationship.” He hopes more supermarkets with follow suit. 

Naus was previously head of logistics strategy at Marks and Spencer between 2008 – 2014 and was there during the aftermath of the financial crash.

Despite the crunch on spend, people still wanted to treat themselves and instead of going out, they were ordering more items such as the dine in for £10 deal. “So there were opportunities,” he points out. Spotting the items people might want more of to ease the limitations imposed by social distancing could help boost sales in certain areas.

Managing demand

But that is not the same as the current short-term panic buying, which should not be viewed as a long-term change in customer habits, warns industry expert Andrew Blatherwick, emeritus chairman of retail software company Relex Solutions.

“Consumption isn’t changing, all that’s changing is people’s buying patterns. What will happen is massive spikes, and then things will tail off. So retailers are having to cope with that short-term increase, but they have to be careful you don’t pile stock into stores thinking this is going to last. Otherwise you’ll have a lot of wastage.”

Rather than act as a boost to sales, the situation actually puts a lot of cost into the supply chain, as retail as having to ensure stores are restocked quickly. One example is John Lewis, which have moved 400-500 staff into Waitrose to try and meet the current unprecedented demand in food stores.  

“But if you don’t do that, then people will panic even more and you almost create a feeding frenzy, because people think they have to grab everything they can.”

“So it is in retailers’ interests to try and normalise things as soon as possible, such as the letter that was [jointly] sent out on the weekend which urged customers not to panic.

Meanwhile for other bricks and mortar businesses such as Apple and Nike, the decision to temporarily close stores could show how many people are willing to simply shop online instead. “That will tell us a lot about the future of how retail will develop…. And provide an indication of the level of the number of people who don’t want to go online no matter what.”

Brexit benefit

But for many smaller online businesses this is a time of great uncertainty. Oliver Bridge, CEO of online toiletries and pharmaceutical company Cornerstone, says the company is in the fortunate position where demand has remained steady.

“I know lots of other eCommerce businesses in a more difficult place,” he notes. Such as online meal kit businesses for busy commuters, who now have more time to cook with home working.

Bridge also hasn’t had to worry too much about stock, thanks to the unexpected benefit of Brexit. “We had stocked up anyway in case of disruptions in the event of a no deal. That will carry us through quite nicely,” he says. “If it hadn’t been for Brexit, we may have been in a bit of a pickle.” 

For Bridge, continuity is the biggest concern, with the company’s team already working from home ahead of the government’s advice. “We are a very small team and if one person gets ill, the entire team gets wiped out. All of our customer service, tech, operations, it’s all in one room. For me that is the scariest thing, making sure the team is safe and the business can keep operating.”