How the pandemic has impacted the physical space.

By now we most of us are used to working from home, shopping almost exclusively from home and for the most part limiting our exposure to others to a bare minimum. Granted as more of the United States and Europe start to open, and Asia has already reopened to some degree, we are moving to another phase of dealing with the pandemic. But one aspect that is worth watching, is the usage of physical space within our supply chains. From the factories to the distribution centers to the stores and of course the offices, the physical assets in our supply chains are constantly being reassesses as to how they will be leveraged moving forward. So what should we expect?

• Working from home – once the pandemic hit, many of us were forced to work from home. Unfortunately others lost their jobs, while many essential workers did not have the option to work from home. So what does this mean with regards to office space? Do we need to be physically “together” to work? Reality is – digital has made remote work much more viable well before the pandemic. I remember working at Forrester Research in the late 1990s when we first started looking at remote work. Our first remote worker, set up a video meeting room in his home. It was a large, bulky and expensive set up. But it worked. Fast forward to 2020, as I sit here writing on my MacBook, I have a camera looking at me, my iPad next to me has a front and back camera as does my iPhone. No shortage of tools for video conferencing. We also have Slack, Google Meet, MSFT Teams, Skype to name a few tools to allow communication and collaboration. Oh yeah…and email. Will we go back to the office? Sure. For important meetings, client visits and the free trail mix. But being tethered to a desk from 9-5 was going away prior to Covid, this has just accelerated its demise.
• Going to a store. Much like the office, the physical store has seen traffic slow down to a halt in many cases. Granted, when the government shuts down in person shopping for all but essential retailers – grocery and pharmacies – it is easy to see why stores go dark. The reality is prior to Covid-19, the role of the physical stores was already in question. With eCommerce approaching 20% of overall retail, it became apparent that physical stores and malls had to be redefined in their role within the retail supply chain. Yet it was also clear that physical stores were important, as digitally native retailers such as Bonobos, Warby Parker and the grandfather of all eCommerce, Amazon were all opening up locations. So what will stores look like once we emerge from this pandemic? Experience centers? Inventory hubs? Returns nodes? All of the above. While some might completely abandon their physical presence – see Microsoft. Most other retailers will continue to look to modify their stores. Arguably they will look to enhance the experience portion of their stores, and keep a keen eye towards ensuring safety and hygiene. Some stores will be turned into micro-fulfillment centers or return hubs, allowing for BOPIS, BOPAC and BORIS. The store is not going away, it will change, and it was changing before Covid 19. The pandemic has just accelerated that change.
• Factories and warehouses. At the heart of our supply chains we still have the facilities that have to produce and move our goods. These, for the most part, involve a wide array of people to ensure they function properly. And at times these environments call for people to be physically close to one another, so now what? For example, when it comes to picking in a warehouse operation, humans remain vital to the process. Automation has become an integral part of the process, but the human operator remains key. We have seen evidence of this as through the early stages of the pandemic, large fulfillment operations from the likes of Amazon and Walmart were looking to add to their staff rather than reduce them. The challenge is how to ensure the safest working environment? This is where automation can also play a role. There are device manufacturers who have added features to their equipment personnel leverage in these environments to monitor how close people get to one another, warning them if they stand to close for too long. Automation solution providers can ensure the picking robots keep employees a safe distance from one another. The idea of a dark warehouse or dark factory may still be dancing in the minds of some supply chain professionals, but these might not be feasible nor desired in the long run. But how we ensure our labor is safe within the factory and warehouse is not simple with regards to the machinery and objects but now with regards to their fellow workers. Supply chains will have to take this into consideration in a post-Covid 19 world.

How we start interacting with one another, once we have found a way to manage the pandemic is still “tbd.” But we know that one aspect will be how do we handle the physical spaces that make up our communities. Clearly this will change.

The unintended consequences from our shelter at home time.

For many of us, across the global, we have been dealing with Covid 19. Some of us are in different places when it comes to how our governments, both local and national, are handling the pandemic. But one thing is universal, humanity is in this together. Even thought we sometimes forget this! So what could be some unintended consequences from this current situation?

• Work from home, will make us close. What? Doing all these Zoom, Teams and Hangout meetings will bring our work forces closer? Yes. While some of us have not been able to physically meet and see one another for close to 6 weeks, we have been getting more “personal” in our meetings. Think about it, we are doing a number of video meetings all from our homes, allowing our coworkers into our personal space. We are having virtual happy hours and trivia nights. Many of us are seeing certain coworkers that we might not have interacted with when we were going into the office! Coming out of Covid19, expected work to be very different, but expect that many of us who have been forced to work from home to actually have a stronger bond with our coworkers. (Of course we need to recognize we are fortunate to be able to work, from home or wherever for that matter as Covid19 ravages the ranks of the employed.)
• Retail will have a thinning of the herd. Much has been written and spoken about with regards to retail taking a massive beating during this pandemic. Looking at stores shuttering, unemployment figures and announced bankruptcy, and it is evident that retail has taken a beating. Are we witnessing a bolt of the blue with regards to retail, or has the pandemic simply provided a catalyst to what was already happening in the space? I believe it is the latter. I have spoken to some in the industry who have said – what has happened in the past 6 weeks is what was expected to happen over the next 3 years. A shock to the system indeed, but not a bolt from the blue. So what does this mean? Expect an accelerated thinning of the herd. But expect retailers that emerge from this to have become stronger and more resilient. Much like nature, the weak and the sick from the herd will not survive. Look for those retailers that had a holistic retail strategy to emerge from the this pandemic stronger.
• Certain business “norms” will be turned upside down. I had a recent discussion with a colleague who was interviewing for a new executive role. However the role was in another city from where she lived. That was a sticking point. The employer emphasized that they believed that the teams should all be geographically together, but during this pandemic they were all working remotely, successfully. Hmmm. I also spoke with a graduate school professor who made the point – people are realizing that the excuse of “oh we can’t do that” has been thrown out the window. Companies have found a way to accomplish tasks faster and with more urgency. No time for red tape and politics. This pandemic has forced businesses to rethink how they do business and is training the next generation of leaders to believe they can do something, rather than allow the excuse of “that’s not how we’ve done things” to deter them.

No need to reiterate that we are living in unprecedented times. But there are some positives that will come out of this pandemic. As we focus on how to emerge from this shelter at home environment and how to operate in a post pandemic world, let’s focus on some the positive we have learned.

eCommerce’s moment to shine, but what about post-Covid 19?

Much has been written and discussed about the current state of retail during these unprecedented times. Like many of us, I am staying at home, venturing out only to get groceries or to the pharmacy. Other than that, when we do leave the condo it is to walk the dog or get some exercise. No more excursions to stores or the mall, no more date nights at restaurants or meeting colleagues at coffee shops or bars. Our retail muscle is atrophying before our very eyes!

Of course not all retail is suffering. Online grocery ordering has been skyrocketing in this era of social distancing. The most recent data showed a 37% increase in April online grocery sales from March.

What’s interesting is the number of customers only grew by 1% and spend per order by 3%, but clearly the order number jump by 33%. So those that are leaning on online grocery are placing more orders. Another interesting data point – 26% of homes that had not purchased online groceries in the past 30 days are highly likely to do so in the next 3 months. Interesting numbers to say the least.

Of course not all categories are enjoying such a bump. A recent New York Times piece looks at the categories that are doing well, and those that aren’t.

No surprise that travel has taken such a beating during this time…we aren’t suppose to leave our homes!! So not sure how we are suppose to get on planes and trains. But what is even more interesting is to see what categories have spiked in terms of online sales. Disposable gloves have seen a 670% increase year over year sales and bread machines 652% increase in online sales. Some of the biggest categories that have dropped? Luggage -77%, Men’s swimwear -64% and Bridal clothing at -63%…no surprise there either. Click here for a more complete list. So coming out of Covid-19, do we expect to see disposableglove.com as the new go to ecommerce site and all of grocery shopping being done on line? Of course not.

Online Retail peaking at 22%?

But what do the numbers show us? That eCommerce, in terms of “percentage of change” has slowed down before the current pandemic. In our current state the categories of eCommerce that are peaking, are not necessarily those that will be sustained post Covid19. But what should we expect?

• A bit of an acceleration of eCommerce growth continues – I realize I have stated that we cannot simply assume that eCommerce trends will continue, but I am not naive enough to believe things will go back to “normal.” I certainly expect a number of consumers who have been forced to try eCommerce will see the utility. That utility will continue post Covid19. Specifically in having grocery and other staples delivered.
• Rushing to brick and mortar. Wait…what? Yup. I expect a burst of consumers rushing out to physical retail locations. Think about it, we have been stuck in our homes for close to 6 weeks now, we are itching to get out and do something! Retail is part of that activity. There will be a resurgence of retail-therapy…in the store. Savvy retailers will look to creating in store experiences that not only excite consumers to be in the store but also provides a safe and healthy environment. Those retailers that offer such an experience might find a new loyal customer.
• Increased fulfillment experiences. Before Covid19 we had already started to see new fulfillment methods: BOPIS, pick up lockers to name a few. Of course we are now seeing BOPAC (buy on line pick up at curbside) becoming pivotal for retailers. Look for more fulfillment options from retailers to meet customer needs. Expect the consumer to start demanding these as well! For example, I wouldn’t be surprised if consumer pressures force legislation to loosen up regulations that have grounded drones for last mile distribution.

Let’s all hope we go back to a new normal soon, meaning we can slowly start to interact with one another, leave our homes, go to church, have a dinner in our favorite restaurant and yes shop in stores. Of course things will never go back to “normal,” then again I would argue what was that normal you speak of? Haven’t we seen retail undergo constant change since humans first traded from our caves?

The pandemic has made some of our retail muscles atrophy, while building up other muscles. Stay healthy everyone, stay strong. We will emerge from this and so will retail. It is much more resilient than we realize.

My hope for our supply chains post Covid-19.

Our planet has been engulfed with combating the spread of Covid-19 for the better part of 2020. There have been some glimmers of hope and some harsh realities. We are all looking forward to the days when we can once again leave our homes, attend social events, go shopping, go back to work, see our friends and return to some “normal.”

So what will that look like when this happens? Here are some ideas of what we can expect, maybe these are more aspirational, but a blogger can dream.

• Retail gets knocked down…but gets back off the mat. No surprise, but retail is taking a beating during this global pandemic. Retailers such as Macy’s and Ross Stores are having to furlough a large number of their employees. Even eCommerce giants such as Amazon are struggling to keep up with demand…I just ordered some toilet paper that is scheduled to be fulfilled early June! Of course grocery stores cannot stock their shelves fast enough, especially when it comes to items such as toilet paper, cleaners and pasta to name a few (plenty of pineapple frozen pizza available, however). So retail is really dead? Not at all. My hope – retail shows how resilient it is, it has shown this the past few years even as pundits have decried the “retail apocalypse.” Retail will find a way to bounce back, some will go out of business, no doubt. But that void will be quickly filled by existing brands ready to pivot or new entrants. Brands such as Bonobos and Ministry of Supply emerged from the 2008 financial crisis. Adversity will see some retailers not be able to keep up, while it will create opportunity for other.
• Supply chains have a new “normal” to now prepare for. Humans are resilient. While we have our faults, we have proven to have the capability to overcome numerous hardships. And supply chains are at their core run and managed by humans. History has shown us that disruptions have impacted our supply chains since the dawn of time – natural disasters, wars, labor issues and the list goes on. Of course Covid-19 is a black swan event, a global disruptor of our supply chains. My hope – we emerge from this stronger and better equipped to handle the next disruption. Some questions we will have to ask ourselves: do we need to revisit safety stock strategy? The financial world has hammered supply chains for as long as I can remember to reduce waste, to remove inventory from the supply chain, to embrace just in time. Make your margins and working capital, look good. But what happens when that 1 month of buffer gets consumed in a week? What happens when your policies to squeeze every last dime from your suppliers means their shortages slows down your ability to produce your goods? A new normal for supply chains might start with rethinking our supply chains and the way measure their financial success.

Maybe I am too optimistic, but I believe that both retail and supply chains will emerge from this okay. Granted there will be some battle scars. But retailers and supply chains need to reassess how they can better prepare themselves from the next disruption. And there will be another disruption. Whether on the global scale we are experiencing today, or the more “traditional” ones such as labor strife, natural disasters or macroeconomic driven ones.

For now we all need to focus on being safe, washing our hands and staying 6 feet apart while in public! Of course keep first responders, doctors, nurses, scientists, grocery workers and all those deemed essential in our thoughts. Be safe everyone.