Last Fall, McDonald’s announced it would be offering their breakfast menu all day. It was widely seen as a bold move, but one that had a certain level of risk. Especially when it came to how their supply chain would be able to support the change. We took a cautiously optimistic view of the move – click here for our post. The gamble seems to be paying off for McDonald’s as well as to the detriment of their competitors. Players such as Jack in the Box basically admitted that their competitor’s offering all day breakfast has been detrimental to their business:
“Jack in the Box sales in the last part of the quarter were lower than we anticipated as several competitors began promoting aggressive value offers,” Jack in the Box CEO Lenny Comma said. “We also experienced weakness at breakfast and lunch throughout the quarter, which we attribute primarily to our decision to shift the timing of some of our promotional activity around breakfast to the second quarter as compared to the first quarter of last year. In addition, we believe a competitor’s messaging around its launch of all-day breakfast had some impact on our results, particularly in the 10:30 a.m. to noon period.”
Click here for the full post on McDonald’s breakfast results.
The undertone of this shift with McDonald’s and the positive results they are enjoying, goes back to the rise of the customer. The customer spoke, those that listened are reaping the benefits. The restaurant and food industries are retail sub-segments that are particularly sensitive to customers’ tastes…literally. As we have witnessed customers’ power growing in the relationships with retailers, this is never more apparent than in the food sub-segment. Restaurants and grocers have to be acutely in tune with the changing winds of demand from their customer base. Especially as food has become a fashion extension – foodies of all shapes and forms are abound.
As McDonald’s offered all day breakfast, not based on a whim but due to what they perceived as an unmet demand from their customer base. The lesson to take from these results is not only that McDonald’s has found success with their venture, but they also had the proper basis to make this decision. Weighing perceived customer demand, pent up market need and impacts on margins have to be taken into consideration when launching into a new product and direction.
Congratulations to McDonald’s on finding success with their all day breakfast. But as we all know, success can be fleeting. The Golden Arches cannot rest on their laurels. Not only will their competitors refocus on how they can retake some market share but the customers’ demand will evolve in manners we have not yet thought of. It is up to these entities to try and stay ahead of this wave. Not an easy task.
For an in-depth look at the food supply chain, click here for our latest research.
A few months ago I wrote a piece of research that broached the after market supply chain. Click here for link. This topic continues to grow in importance, especially for retailers. Why? Primarily due to the continued growth of the consumer’s voice within the retail supply chain. The saying “the customer is always right” has taken on a whole new degree of importance. Whereas this statement was limited to a finite number of interactions between consumer and retailer, today this saying carries much more gravitas. Consumer’s have a greater awareness to a larger portion of the retailer supply chain, and with that awareness comes greater expectations. One area where retailers are starting to feel this impact is in the after sales supply chain. Consumers want choice not only prior to the moment of truth, at the point of making a purchase, but also expect it post sales. The notion of “all sales are final” is rapidly becoming a dated concept. So what are retailers to do?
- Make sure you have a strategy…okay this might seem too simple, but there are number of retailers ranging from Nordstrom to Target that offer free returns. In 2015, close to 50% of retailers offered these services, placing a massive strain on their cash flow statements. So have a plan. Providing free returns, just because the likes of Amazon and Zappos are doing it, does not necessarily make business sense for your business. Consider creating a tiered returns policies. Big spenders or loyal customers can qualify for free returns, other customers fall into different levels. Perform some ABC cost analysis on the entire supply chain – figure out the true costs. Because nothing is truly “free.” Then create a logical strategy strategy of how to deal with the reverse supply chain.
- Can you turn the after sales into a strategic advantage? The after sales supply chain should be seen as an extension of your relationship with your customer. Returns are not a negative – the customer is not saying they don’t like your product – rather it is part of the customer journey. Can you learn from why the customer returned the item? Is there something that you could alter to the process? How far back in the supply chain can you change procedures to ensure returns are lowered? And you can make returns another revenue opportunity? There are some retailers that seek to incentive customers to return in store, knowing that over 50% of these will convert on another purchase. Could retailers drive those numbers higher? Viewing after sales supply chain as part of your customers’ journey is crucial to unlocking some strategic opportunities with post sales supply chains.
- Another data source – mine it! Why are consumers returning the product? Wrong size, color, style…the number of reasons is endless. Retailers need to embrace this level of data that could be ingested back into the supply chain. Can the product be redesigned? Is the marketing of the product not appropriate? Was there a better way to promote the item? Was the style just wrong? Retailers must embrace the data and information that the after sales supply chain can render. The ability to take the information, processes it quickly and render better decisions based on this information could prove to be a data lake worth swimming in.
- Don’t hesitate to lean on your solution providers to offer solutions. One theme I saw at NRF was some innovative thinking about how to handle the after sales supply chain. From software players such as JDA and IBM to service providers such as Wipro. Retailers shouldn’t hesitate to look their existing service and solution providers to assist with this journey. Don’t be shy about expecting your software and service providers to become a true partner when it comes to handling the post sales supply chain.
The after sales supply chain is evolving beyond being a cost center and a “nuisance” to retailers. It is part of the consumer journey and consumer expectations. Retailers, service providers and software vendors all have an opportunity in the after sales supply chain. Consumers are already there expecting better post sales service, it is up to the savvy retailers to meet those expectations.