September 10, 2020

Navigating the New Normal: A Guide for Merchants and Planners

Navigating the New Normal: A Guide for Merchants and Planners


Summer Stewart
VP of Sales

Next arrow

It’s been over six months since Covid-19 brought the retail industry to a crashing halt in March 2020. Lockdowns and tight restrictions kept people at home and forced retailers of all shapes and sizes to close stores, lay off hundreds of employees and completely rethink end-to-end strategies and operations. Even as restrictions have lifted, retail stores have begun to open up, and discretionary spending is increasing, it is clear that consumer behavior and the retail industry is changed forever.

Back in May, we made some predictions on how the effects of Covid-19 would shape the retail landscape for years to come. Many of the trends we discussed were not necessarily new, but we believed they would be significantly accelerated by the pandemic and swiftly become part of the “new normal.” These trends touched all parts of the retail ecosystem - how you plan, design, produce, supply and sell. 

Since then, things have changed on a daily basis and a lot is still unknown. We’ve observed how our customers react and talked to countless c-level, merchandising, finance and supply chain executives to understand how they’re managing the current landscape and planning for the future. Based on what we’ve seen and heard, we’re confident these trends are here to stay, and the retailers who can adapt to this “new normal” will be the ones to succeed in a post-Covid world. 

Looking back at our predictions and the strategies we’ve observed from our customers, we believe retailers, and more specifically, merchandising organizations, should focus on these five actions to build more resilience and emerge as leaders in the next-generation of retail.

1. Double down on real-time data to make smarter merchandising decisions

Post-Covid Retail Prediction: Planning will be more complex as retailers tread uncharted territories. Historical data will be harder to decipher and fast changing macro economic forecasts will bring uncertainty. It will be critical for retailers to build comprehensive merchandising plans and implement strategies enabling them to make fast, real-time, data-driven decisions. (See our full post on these increased retail planning complexities here.)

Key Takeaways:

Update plans, re-forecast inventory flows and play out different scenarios on a daily basis. As the country continues to reopen in states with varying restrictions, we gather new information on trends and external influencers. There is also always the risk of subsequent waves and another crash in demand. Because of all these uncertainties, it’s critical to develop dynamic merchandising plans that give you the flexibility to learn and react in real time. 

Slice, dice and decipher your data to analyze performance and plan for the future. When planning during and after Covid, high-level historical sales information is irrelevant. Understanding granular, attribute-based and relational data of past seasons, products, channels, and categories will be critical to successfully analyzing performance, developing new product assortments and chasing opportunities as they arise in season. 

Adopt true omni-channel planning strategies. In the post-Covid world, ecommerce will make up a much larger share of the overall transactions, stores will be reimagined to support more omnichannel shopping experiences, and fulfillment operations will be redundant to safeguard against future shocks in supply or demand. Planning stores and ecommerce in siloes will be ineffective and risky, so the most successful merchants will develop a comprehensive plan for their categories, assortments and lines of businesses across all channels. 

2. Develop more evergreen designs, timely seasonal collections and frequent product drops to improve margins by reducing markdowns

Post-Covid Retail Prediction: Product assortment and delivery will be optimized to limit markdowns. Brands will develop more evergreen products within smaller collections that have a more targeted delivery cadence. (See our full post on how product assortments will change here.)

Key Takeaways:

Carefully analyze and introduce more core products into your assortment to increase percentage penetration to total products. While the fashion-forward seasonal products are typically the traffic drivers, brands make most of their profits from seasonless products in their permanent collections. Focus on creating seasonal products that could potentially be moved to core collections to increase gross margins and the bottom line.

Align product launches with your customers’ expectations. For far too long, the fashion industry has been on a delivery calendar that is out of sync with actual seasons -- sometimes making consumers wait months before they can buy looks from the runway. To avoid the risk of old trends or stale inventory that lead to high markdowns and low margins, deliver seasonal collections to customers closer to real-time. 

Replace seasonal collections with frequent product drops. Deliver your seasonal items through smaller, more frequent drops or product launches. Doing this will help you: stay relevant to your customer through curated and timely product storytelling; reduce inventory risks for new ideas; and quickly identify winning products that you can move into core collections.

 3. Diversify your supply chain to optimize for stability, flexibility and speed 

Post-Covid Retail Prediction: Supply chains will no longer be optimized just for cost, but for stability, flexibility and speed. Retailers will forgo margin for increased inventory utilization and redundancies and speed in manufacturing and fulfillment. (See our full post on how supply chains will be optimized here.)

Key Takeaways:

Build supply chain resiliency through diversification. Supplement offshore operations optimized for cost with nearshore manufacturing optimized for speed and flexibility. This will help deliver on the new product assortments discussed above: a strong foundation of core items complemented with frequent product launches. Offshore operations with longer lead times should be dedicated to core items that have predictable demand. Nearshore operations with shorter lead times should support seasonal product launches that are harder to plan for.

Enable flexibility through just-in-time and onshore manufacturing. As we continue to face unpredictable levels of demand, it will be critical to reduce your inventory risk by minimizing inventory levels and developing dynamic strategies that allow you to chase opportunities as they arise. Consider shifting your supply chain towards operations that support just-in-time manufacturing or have locations closer to customers with shorter lead times. This enables you to launch new  products with less inventory and adjust production based on sales signals.

Safegard fulfillment operations by leveraging multiple centers at various locations. Move fulfillment centers to states close to but outside of large population clusters. During the Covid-19 lockdown, fulfillment centers in California and New York went from being a strategic advantage to a disastrous bottleneck. Also having only one fulfillment creates risk of a single point of failure. Build resilience in your fulfillment operations by having multiple fulfillment centers, each at a location with a different risk profile.

4. Grow and gain more control over your omnichannel strategy by exploring more DTC distribution channels 

Post-Covid Retail Prediction: Brands will take control of all distribution channels and points of sale will proliferate. Wholesale will morph into new formats, such as leased spaces and online marketplaces that offer increased ability to reach new customers. (See full post on how brands will leverage distribution channels here.)

Key Takeaways: 

Invest in innovative omni-channel strategies.  Brands that continue to implement omni-channel strategies and tools that blend physical and online customer experiences will be the winners. Ecommerce sales will continue to grow, but keep investing in pop-ups, open stores and expand into new channels to aid in growth and customer loyalty. Also explore innovative ways to leverage traditional wholesale channels or collaborations with pre-internet companies to aid in brand discovery.

Transition wholesale relationships to concession models. Covid-19 hurt brands with large wholesale businesses the most as retailers cancelled orders or implemented heavy sales and liquidation strategies to move stale inventory during the height of the pandemic. Brands with wholesale strategies should fund in-store brand managers or implement shop-in-shop strategies with concession models. The goal with each is to increase control over your customer experience, gain direct management over your inventory and offer flexibility for your wholesale partners with reduced appetite for inventory investments.

Expand digital distribution via marketplaces. Brands once looked to multi-brand sites that operated similarly to brick and mortar retail, but marketplaces offer the benefits of multi-brand without the downside of wholesale relationships. As CAC continues to rise, expand distribution online by selling through marketplaces that allow you to reach your customers in a more cost-effective way. Determining which marketplace (Amazon, Farfetch, Orchard Mile) is right for you is full of nuances, but the need to leverage marketplaces as a distribution channel is not. 

5. Adopt modern technology to improve accuracy, productivity, collaboration, visibility and speed in planning and decision making

Post-Covid Retail Prediction: Retailers will increase productivity and efficiency using software and automation. Distributed workforces will be more welcome and the ability to collaborate remotely both internally and externally will be a part of the norm.

Key Takeaways: 

Evaluate tools that can help you quickly gather insights from your data. Having easy access to real-time information to make fast data-driven decisions will be critical to future success. With less time and human resources to comb through and decipher raw data, adopt technology to help you aggregate and transform data into actionable insights so you can focus more time on strategizing and executing.

Implement technology to improve remote collaboration (internally and externally). While some companies have returned to the office, many are completely rethinking what their workforce will look like in the future. Some companies are even considering working from home forever. Speed, data integrity and centralized communication will be key to effective remote collaboration. This is true for both internal collaboration among teams and external collaboration with partners. 

Adopt automation to help you do more with less. As you’re forced to produce the same level of output, operating with leaner teams in a more competitive landscape, automation will be crucial to your scalability. Implement technology to automate manual processes so you can focus more of your time and effort on revenue driving activities. 

More than many disciplines, these changes to the retail landscape will have a large and lasting  impact on the responsibilities, strategies, and day-to-day activities of merchandising professionals. As competition and complexity increase, demand remains unpredictable, retailers have less appetite for inventory risk, and cash flow means life or death, ensuring you have the right products, and the right place, at the right time, price and amount will be more important than ever before. In addition, as retailers look to run leaner operations with smaller teams, roles will blend and responsibilities will balloon. In order to succeed, merchants and planners will need to make fast, comprehensive, data-driven merchandising decisions, and technology will be critical to that success. 

Next arrow