With total U.S. gross domestic product (GDP) expected to contract between a best-case scenario of 3.6 percent and a worst-case scenario of 7.4 percent in 2020, according to The Conference Board, retailers have tough choices to make as they navigate through today’s grim economic reality in an effort to bounce back.
In a recent Riversand webinar, Sucharita Kodali, VP, principal analyst at Forrester, cited curbside pickup, videos and content, promotions, transparent communication of store information and cash preservation as some of the short-term steps retailers can take to ensure they manage through the ongoing uncertainties caused by COVID-19. But for the “long, long term,” Kodali spotlighted the importance of diversifying the supply chain, which she noted a lot of companies had gotten ahead of over the past year as trade tensions between the U.S. and China increased.
“I would encourage companies to think about how—particularly in your own continent, or in regions that are more proximate to you geographically—can you start to encourage production?” Kodali said. “For instance, for North America, can we encourage more production in the Caribbean or in Latin America or in Mexico as a way to not only get products closer to us that could be more quickly produced, but also in a way that is cost-effective for us versus getting things with long lead times from Asia?”
In the long term, Kodali also suggested retailers—specifically those that operate marketplaces—to embrace “eControl” within their supply chain by establishing an authorized reseller program. This is especially important during the COVID-19 pandemic because it ensures that third-party sellers aren’t price gouging their consumers, like in the case of Matt Colvin, a Tennessee man who bought and hoarded 17,700 bottles of hand sanitizer to sell on Amazon. Amazon pulled his items and thousands of other listings for sanitizer, wipes and face masks, while eBay soon followed with even stricter measures, prohibiting any U.S. sales of masks or sanitizer.
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“This is actually about managing supply of brand inventory in a much more careful way so that you can push the inventory toward valid authorized sellers,” Kodali said. “In the age of the internet, we have had a lot of gray market and rogue sellers of inventory. Not only has that been an enormous risk for customers; it’s been a big, big problem for retailers.”
The rise of drop shipping
Other diversification approaches beyond seeking alternative locations included expanding product assortment or shipping from different locations, according to Kodali. Additionally, she noted that fashion and luxury players are responding to supply chain outages in the APAC region by leaning further into marketplaces and drop shipping, as many of them already have that technology in place.
“It’s not necessarily a solution you can turn on in two days if you don’t already have the technology, but if you had something that you haven’t fully taken advantage of, that’s one of the really easy expansions if companies already have it,” Kodali said. “Otherwise, from a supply chain standpoint, in terms of trying to move around to other suppliers or purveyors, that’s more pointed if there are factories that may be offline or are in regions that you can’t think of what to do at all.
“I suspect that’s one of the reasons why some retailers like Victoria’s Secret may have shut off their e-commerce all together,” she said.
Dsco, a distributed inventory platform that delivers services such as drop shipping, recently launched a ship-from-store solution designed to enable retailers whose stores have shut down to quickly start moving inventory again to avoid the cash liquidity challenges and bankruptcy issues that have plagued many merchants. With so many “nonessential” retailers having closed stores during the pandemic, the time is ripe for those stores to be used as fulfillment centers.
As retailers maneuver through the COVID-19 crisis, Dsco CEO Vance Checketts pointed out that leveraging these fulfillment strategies is a decision retailers will have to make not just to keep their heads above water during the pandemic, but also to build a successful business when the crisis subsides.
“Several of our new customers are saying ‘COVID-19 is helping us recognize how we need to move our inventory and we want to implement this as part of our omnichannel strategy,’” Checketts told Sourcing Journal. “One of the big takeaways for me goes back to the Charles Darwin quote: You have to be adaptable. To be adaptable in this environment means you can’t have all your eggs in one basket. Even if you’re a pure-play e-commerce company, there’s still physical stuff that you have to deal with. You want to have strategies that say, ‘I’m going to buy a certain amount of it, and I’m going to outsource or drop ship a certain amount of my products.’”
Checketts noted that many retailers he’s worked with that are having difficulty navigating COVID-19 operate physical stores across all categories but haven’t yet implemented either a buy online, pick up in-store, or BOPIS, or ship-from-store strategy. Without these omnichannel fulfillment operations in place, retailers have no place for employees within the store, and the location is no longer operational.
“They need that inventory to move because inventory is money,” Checketts said. “They’re concerned about their customers—they want to keep those customers—and they’re concerned about their people. If the inventory is stuck, not only are the dollars not flowing, not only are the customers not happy, but their people are furloughed. If you don’t have the solutions in place, your people aren’t working.”