An old friend of mine shared a meme yesterday depicting the movie Mad Max and asking, “When do we start wearing these outfits?” For the record, I hope never. But the meme provoked some thought as to how life will potentially change in a post-Covid-19 world.
A colleague of mine shared his thought that it takes 28 days to change consumer behavior. Just about every country around the globe will have some sort of quarantine for an extended period of time, whether 28 days or not, and this will impact consumer behavior over the short term with potential lasting effects over the longer term. There are many changes taking place over the short term - supply chains are damaged, ecommerce/OGP is being forced to increase more rapidly, face-to-face transactions are declining, collaboration through the value chain is increasing, but at the same time there is definitively a growing divide between the haves and the have-nots. Will these changes have lasting impact? Simple answer…it depends.
I spoke with a CPO yesterday who shared with me that much of his supply chain originated in China and was irreparably damaged at the onset of Covid-19. Luckily they had inventory on hand and enough WIP to survive. He has been forced to deviate to other suppliers with stock in locations that are accessible. Luckily, this was an option for him. However, he also shared that his sourcing team had been so focused on cost savings as a KPI that suppliers were reluctant to reengage with his team and they were being forced to switch from distributive to collaborative negotiations - without the skillset to make the switch. He remarked that, “It’s easy to browbeat your suppliers when you have power.”
E-Commerce and Online Grocery Pickup is growing. Quite frankly, it has no choice in an environment where we want to preserve the collective health of all. This will have significant and potentially long-term impact on the world of impulse buying. A number of years ago, I met a friend who works for a large confectionary company at a major coffee chain for breakfast. When I arrived, he was nowhere to be seen and I ordered a coffee only to stand and wait for just shy of half an hour as all of the mobile orders walked in front of me to pick up their orders and leave. Unbeknownst to me, he had been watching me from his car across the street as I stood there patiently waiting for my coffee. He came in, stood next to me and said, “Now you see my challenge. No one waits in line anymore. They never see my products.” If the growth rate of e-comm and OGP are accelerated, will the impulse buys be able to keep up?
With self-isolation and quarantine, face-to-face interaction is diminishing and rapidly. Will the days of the sales call, the line review, or the JBP session ever come back? While it’s certainly too early to tell, there needs to be preparation for the future of virtual dialogue including sales and negotiation. The challenge posed by this change is that the ability to read your counterparty’s verbal and non-verbal behavior needs to change as well. The written word is different than the spoken word and, in the absence, of F2F interaction, the impact of remarks becomes that much more challenging to understand. To understand this dynamic change, we all need to sharpen the saw and be better at this type of interaction.
Collaboration through the supply-chain is definitively increasing. We’re seeing it in the States with vertical collaboration from test kits to treatment to retail involvement as well as in horizontal collaboration between four of our largest retailers for the altruistic goal of improving the health of our people. My colleague shared with me his experiences in the meat industry during the mad cow outbreak and how collaboration was a key driver to the survival of multiple industries. As much as I’m interested in the collaboration today, what I’m more interested in is can we keep that collaboration going over the longer-term as well as understanding if our clients are prepared to handle the prospect of lasting value creation.
I noted above a visible divide between the haves and have-nots and I want to be clear in noting this is from a business standpoint not a socioeconomic standpoint. Over the weekend my 13 year-old daughter and I went to the grocery store of choice - a much beloved regional chain with just over a hundred locations. The shelves there were pillaged. She had asked for a very specific item that my wife insisted was in the frozen section to which I responded, “You don’t understand. There is no frozen section.” On our way home we stopped at another grocery store owned by a large company in the background. This store had full shelves and was just as busy. This is how buying power plays out in the real world. It creates haves and have-nots in the retail environment when supply chains are challenged and allocation begins.
I don’t have a crystal ball to understand what the future looks like post-Covid-19; nor do I consider myself a prognosticator in this regard. What I do know is this - there will likely be some lasting changes across supply chains and we need to be prepared for those changes.
If you are interested in learning more about this topic, please download our report on virtual negotiation, Negotiation without a table, below.