The retail industry — especially the grocery sector — has witnessed unprecedented shifts in consumer behavior in the wake of the coronavirus pandemic. According to data from AlixPartners, as many as 65% of U.S. consumers said they tried new brands while sheltering in place.
Over a quarter of survey respondents said they would stick with the private label brands they tried during the crisis. Clearly, this is a moment of opportunity for store brands to continue the momentum and ensure they stay ahead in the game. However, what may be less clear is the fact that a major player in the game is backstage — supply chain operations. In fact, agility in the supply chain may become a key consumer selling point by responding to these new — and ever-changing — consumer demands.
Why? Let’s step back a moment. How did national brands lose their grip on customer loyalty? The obvious answer is that people around the world caught a virus. But that virus didn’t just infect humans. In a manner of speaking, it also “infected” the supply chain. Roughly eight out of 10 respondents in the survey said they purchased a store brand or private label product because their usual product was out of stock. That’s why this is a supply chain issue.
Supply chain executives are the experts in riding the highs and lows of a demand-driven economy. The ability to pinpoint how, what, when and how many items will reach the consumer has become newly essential data. Store brands that meet the challenges of online ordering will find a ready audience among shoppers whose behavior will remain focused online instead of flocking back into stores when the “coast is clear.”
The first step is to take a holistic view of the supply chain and adapt to new consumer behavior and expectations. That’s because the traditional B2B supply chain may look very different in a post-COVID world. The shift in direct-to-consumer goods combined with decreased national brand loyalty is an opportunity for store brands to step up and take leadership. In the grocery retail sector alone, online sales increased 100% in the month of March alone, per Adobe Analytics.
How can store brands step into the gap left by waning interest in national brands? Significant investment in technology and automation will be necessary to meet the direct-to-consumer movement. With more than 40% of essential items now being bought online, store brand executives need to partner with their supply chain operators to accommodate much higher volumes in direct-to-consumer shipping.
Technology that enables end-to-end traceability and automation to optimize supply chain operations will be the most efficient means to deliver a higher volume of packages to the end consumer, who now cares more about availability of the item, rather than the brand of the item.
The starting point will be to enable end-to-end inventory visibility — which will allow the supply chain — encompassing manufacturers, DCs, and retailers — to quickly respond to the ebbs and flows of consumer demand without additional labor and resource allocation. For store brand supply chains, technology offering end-to-end visibility throughout the supply chain will be able to continue to grow their own consumer loyalty.
Several key elements have become evident during the pandemic. Online ordering has significantly spiked and taken on new prominence. As a result, logistical adjustments have been made on the fly and those adjustments now need to evolve into a permanent sustainable operating model — and agility is the key to that model’s success.
Agility in logistics is a key component to empower supply chains to flex with the demands. It is most successfully accomplished through the digitization of goods through technologies such as RFID and bar code. By giving products a digital unique identifier at the origin of the supply chain, full transparency of inventory at the product-level is possible. This is vital to meet the new rise in direct-to-consumer expectations.
For store brands, mastering the increased need for direct-to-consumer fulfillment is a strong opportunity to develop their own "brand" of loyalty.
Ryan Yost is vice president/general manager for the printer solutions division (PSD) for Avery Dennison Corp. In his role, he is responsible for worldwide leadership and strategy of the division, focusing on building partnerships and solutions within the food, apparel and fulfillment industries.