By Andrea Leigh, VP Strategy at Ideoclick, and KC Madock, Sr. Manager at Accenture
In a few short months, brand-manufacturers and retailers have been under enormous pressure to change not only their channel and advertising strategies, but their entire philosophies on how to get goods to consumers who need them.
Wondering how companies might be thinking differently after the vaccination takes hold? Read on.
- A diversified approach to planning
As we saw with Amazon in March and April post-pandemic, when all eCommerce sales occur through a single channel, it can create an enormous bottleneck. Similarly, when all warehousing occurs in one location, all manufacturing in one facility or with one partner, or all revenue streams tied to one product, you’ve got major risks in your business model.
For example, one client warehoused all product out of a single Ohio facility. Due to a COVID-19 outbreak, purchase order fulfillment was halted. Another client’s manufacturing facility flipped their manufacturing line to make face masks, leaving him with no inventory to ship. Lastly, and possibly most importantly, many manufacturers are increasingly uncomfortable about the power Amazon now holds over their business, allowing Amazon to call the shots, oftentimes at the expense of the brand.
Diversification is important in any business, and eCommerce is no exception. According to Accenture, 94% of Fortune 1000 companies saw supply chain disruptions from COVID-19. Brand manufacturers have learned the importance of diversification in everything including retail partners, fulfillment methods, and revenue streams.
- A bias for action and innovation
Within weeks we were able to do things like buy alcohol online, restaurants were able to create dining rooms in the streets, entire stretches of urban streets closed to encourage physical fitness. Schools and companies shifted to virtual environments. Local governments quickly changed rules and regulations. Businesses pivoted. Individuals and communities stepped up quickly to help those in need.
Overall, an impressive amount occurred in a short period of time. Most executives I speak with cite faster-decision-making since the onset of COVID-19, and many state they’ve sped up internal proposal and approval processes.
For example, many manufacturers were empowered to push through business decisions they’d been delaying making for years. Many others found greater acceptance and approval for new ideas and innovation. As one client said, “this is not the time to be in maintenance mode.”
The ambiguity that businesses were forced to operate under inspired new cultures of collaboration, fearlessness, and speed. This bravery and bias for action will continue.
You won’t win if you don’t try. And try they did.
- Scale and automation-first projects
There is a greater burden of responsibility on brand-manufacturers in marketplace models (like Amazon) versus value-added retailers (such as Kroger). eCommerce, for many brand-manufacturers, is a highly manual channel. Brands are responsible for everything from item-level data (sometimes up to 100 fields per product), inventory levels, marketing, and even retailer profitability on marketplaces. These inputs are critical to eCommerce success—if they aren’t managed properly and well, sales will suffer and hungry new brands will step in and steal share.
In addition, brand-manufacturers now have a multitude of advertising platforms—and often corresponding digital advertising agencies—to strategize and execute on. In the absence of automation and scale, manufacturers will struggle to maintain eCommerce profitability.
On the retailer side, human workers get sick, can be variable, and during a pandemic, can also be contagious. They’re also often slower than machines, which hurts speed and profit margins. At the same time, consumer demand for things like contactless payments, self-checkout, click & collect increased explosively. According to Nielsen’s Director of Intelligence, Nicole Corbett, “this may be the unforeseen catalyst to assert broader, longer term adoption of technology platforms and solutions.”
Lastly, retailers rush to strengthen their supply chains to accommodate a shift to eCommerce, including innovations such as Walmart’s foray into driverless trucks and dark stores and Amazon’s vertical supply chain integration.
In order to manage the explosive growth of eCommerce, many manufacturers and retailers alike are prioritizing automation and retailer-tech efforts. Expect budgets this year to be focused on automation, retailer technology, database management, and scale-related efforts.
- “Consumer engagement” budgets and teams (vs. advertising budgets and teams)
The consumers have spoken, and they want more digital engagement. Salesforce’s State of the Connected Customer report states that 54% of consumers say that businesses should “expand customer engagement methods”, and 69% say they want companies to “offer new ways to get existing products and services.”
As consumers spend more time engaging with digital experiences and less time driving to and from the office, their media consumption patterns change – and advertising budgets are changing accordingly. According to Statista, advertising spend on Outdoor and Cinema advertising saw a decline of 25% in 2020. Digital advertising, on the other hand is expected to increase by 12% in 2021.
In addition, the pandemic “accelerated the shift away from physical stores to digital shopping by roughly five years.” With so much commerce shifting online, how do we engage consumers in new ways digitally? On the flip side, how do we re-think the purpose of the store? How do we make the physical environment more dynamic and flexible?
In addition to budgets shifting to eCommerce advertising and related platforms, such as Amazon, Facebook/Instagram, Google, Instacart, Target, and Tiktok, expect budgets that were formerly focused on traditional advertising to shift–and fast–to new digital engagement budgets. We can also expect organizational structures to follow.
Several years of change have occurred in a few short months, and both brand manufactures and retailers alike have adapted and evolved their approaches accordingly. A diversified approach to business planning, a bias for action and innovation, scale and automation-first projects, and a shift towards new Customer Engagement budgets and teams are in store for us in 2021 as brand-manufacturers come out of the worldwide pandemic with new learnings, preferences, and priorities.