How to Adapt to Shifting Customer Behavior
Arjun Shivanna, VP of Merchandising and Planning at The Bay, explores the challenges of—and strategies for adapting to—shifting customer behavior.
The Challenges of Meeting Holiday Demand During a Pandemic
The holiday season has always been a challenging time for retailers, with the surge in demand and the need to line up inventory. However, the COVID-19 pandemic and preceding supply chain disruptions have created a unique situation where retailers are facing both excess inventory and out-of-stocks in the same channels at the same time. According to Arjun Shivanna, this is a challenge that is unique to retail and requires innovative solutions to overcome.
"We have too much stuff, and not enough of the right stuff"
Arjun Shivanna -
VP of Merchandising and Planning at The Bay
While the holiday season has always been challenging, the COVID-19 pandemic has made it uniquely different. Shivanna notes that the pandemic has created an asymmetry between supply and demand, resulting in excess inventory and out-of-stocks in the same channels. Retailers are struggling to keep up with shifting customer demand and supply chain disruptions, which have made it difficult to maintain the right inventory levels. According to Shivanna, it's a unique situation where "we have too much stuff, and not enough of the right stuff."
The Proliferation of Business Models and Shifting Consumer Behavior
The pandemic has accelerated the shift towards e-commerce and changed consumer shopping behaviors. Retailers need to adapt to these changes and evolve their capabilities to remain competitive. Shivanna notes that one of the challenges is the proliferation of business models, which has created new challenges for retailers. Retailers need to go beyond pre-pandemic capabilities and evolve to meet the new demands of their customers.
Strategies for Adapting to Shifting Customer Behavior
To remain competitive in the evolving retail landscape, supply chain leaders need to adapt and transform their operations. Shivanna shares some strategies for adapting to shifting customer behavior:
1. Embrace Technology, but Be Mindful of its Limitations
Shivanna notes that technology is both an enabler and a challenge. While technology can help mitigate supply chain disruptions and improve assortment visibility and planning, it can also create its own set of challenges. Retailers need to be mindful of the limitations of technology and its impact on people and processes. Shivanna advises retailers to choose technology that is agile and can adapt to changing demands quickly.
"For every dollar you spend on enterprise software, you spend up to $8, trying to fix things that never got implemented. On one hand, we have enterprise software that often is out of date, the moment you deploy it, because your business is constantly moving. But at the same time, some of the challenges are self-inflicted. So think proliferation of visualization tools in every enterprise. Each of those essentially creates their own version of truth or their own lens that we will look at the truth. Those are some of the technology creative problems, those are in people a process. That's just because you have so many tools deployed."
2. Focus on Omni-Channel Capabilities
Shivanna notes that the concept of "omni-channel" has evolved over the years and has become more complex. Retailers need to focus on building omni-channel capabilities that are agile and can adapt to changing consumer behavior. Shivanna advises retailers to focus on localizing inventory and predicting demand in a more efficient way to meet the challenges of the evolving retail landscape.
"Digital could be in our case, we have our own brands that we keep inventory for that we sell on our own website, but at the same time, we also have a marketplace, which is akin to when Amazon within the Bay. That is also e-commerce. Now, those are very, very different ways of running the business. And not to mention the unification of bricks and digital. So there's a lot of interplay between how we run the stores that is dependent on e-commerce, and how we run the e-commerce that's dependent on how the stores are performing. So there's that interplay that has really upped the game in terms of what omni means."
3. Elevate Your Game in People, Process, and Technology
Shivanna advises supply chain leaders to focus on elevating their game in people, process, and technology. While it's important to be good at all three, Shivanna notes that the key is to choose one area that you're really good at and excel in that area. Retailers need to focus on building their strengths and elevating their game to remain competitive.
"So when we talk about future roadmaps and evolutionary goals for these for company Nice as a whole, it is to elevate your game so that you are at least good, or at least good enough on people, process, and technology.”
1.The COVID-19 pandemic has drastically changed the retail landscape, accelerating the shift towards e-commerce and changing consumer shopping behaviors.
2.Meeting holiday demand during a pandemic is uniquely challenging, with retailers facing both excess inventory and out-of-stocks in the same channels at the same time.
3.The pandemic has created an asymmetry between supply and demand, resulting in excess inventory and out-of-stocks in the same channels.
4.Retailers need to go beyond pre-pandemic capabilities and evolve to meet the new demands of their customers.
5.Supply chain leaders need to adapt and transform their operations to remain competitive.
6.Technology is both an enabler and a challenge. Retailers need to be mindful of the limitations of technology and its impact on people and processes.
7.Retailers need to focus on building omni-channel capabilities that are agile and can adapt to changing consumer behavior.
8.Retailers need to focus on elevating their game in people, process, and technology.
So like you said,
I'm the DVP of merchandising and planning at the Bay, also known as the Hudson's Bay Company. So we are a three and 50 year old retailer primarily in the fashion apparel and home goods space. And yet prior to the Bay, I've spent several years in the technology and consulting space with companies like IBM, Motorola at some point and o9 Solutions as well, and the Nielsen Company. So my area of focus has primarily been digital enterprise with retail and apparel footwear as areas of focus.
And thank you so much for making the bank that we seem to be. We are really thrilled to have you here. And one of the questions that we had is that we see supply chain and logistics disruptions becoming a common occurrence. What are some changes that you're seeing or that you have experienced within the supply chain space that are creating disruptions, especially during holidays?
Well, holidays have always been challenging, right? So
the surge in demand and need to line up inventory has always been there. What has made it uniquely different and done some challenges this year is that because of the COVID and the preceding supply chain disruptions, we've ended up with problem of excess and problem of not enough. So we have too much stuff and not enough of the right stuff.
So it's a unique situation where we are having out of stocks and excess inventory in the same channels at the same time. So that is very unique to retail. That typically doesn't happen. But in terms of other challenges as being the proliferation of business model, so the retail consumer behavior has obviously shifted.
All of us are very, very familiar and even look forward to shopping online. And some of those behaviors haven't really reverted to pre-COVID characteristics. So for retailers, we need to not just go back to pre-pandemic in terms of our capabilities, but we also need to evolve. So those are some of the challenges that are coming out of retail, which wouldn't have happened if not for the preceding couple of years with COVID and the supply chain disruptions.
Yeah, absolutely. And also mentioning these changing behaviors. I think many companies are also trying to transform fast to overcome their own challenges. And this brings companies on board several different softwares and platforms.
So what role is technology playing in creating those challenges and how can they overcome supply chain challenges leveraging this very technology? I like the way you wanted it. It's it's technology
not as the saving grace, but also sometimes creation of creator of challenges. Right.
So let me start there. So the reason I see technology as also a challenge is because, like the old saying goes, for every dollar we spend on enterprise software, you spend up a $8 trying to fix things that never got implemented, right? So the outcome of that is what didn't get implemented causes problems. On one hand, we have enterprise software that often is out of date the moment you deploy it because your business is constantly moving.
But at the same time, some of the challenges are self-inflicted. So think proliferation of visualization tools in every enterprise. So walk into any big enterprise and I'll show you four or five, six different visualization platforms and tools that they use. And each of those essentially create their own version of truth or their own lens, that viewing of the truth.
So those are some of the technology related problems. Those are in people a process that's just because you have so many tools to play. So from that perspective, technology is also enabling some of these challenges to occur. But at the same time, I like to think of it as three, and I'm going to be showing my age here.
I use an iPhone 13 now, but I've used iPhone one, two, ten, 12, the whole evolutionary part of iPhones. But if I look at my kids now or the teens now, they probably started with iPhone 12 when iPhone 14, right. So they didn't have to go through the evolution. That is that is very telling because that paradigm can be applied to enterprise software also.
So if we need to bring in a new technology, we don't necessarily have to go through the grind of what we did five years ago. A lot of new generation platforms, much like online and few other companies, don't really need that heavy, rudimentary and very, very rigid foundations to be laid. First, we can jump in and bring up a system, bring up a value adding report quite fast. Right.
And that is a big enabler wherein you don't necessarily have to fix what's broken underneath, but you could bring it together in a technology agnostic way so that these newer platforms can can get to that value point sooner. Now, that doesn't mean you're fixing what's broken underneath it, just mitigating the problems they cost. So yeah, I think that's how technology created the problem in the past. But in some sense it could also mitigate those very problems by using different kinds of technology.
One thing that was really interesting that you mentioned in our previous question was this asymmetry between supply and demand. So, for example, visibility is a big issue. How can technology improve assortment visibility and planning, especially when you're doing them openly or multichannel? Oh, good question.
I get cracked up whenever people use Omni because it's it's a matter of what is omni, right? Because five years ago omni would have meant bricks merging with digital
or e-commerce, and that's your omni. But in today's paradigm there is bricks and digital. But digital can be in our case, we have our own brands that we that we keep inventory for, that we sell our own website.
But at the same time, we also have Marketplace, which is akin to an Amazon.com, but then the Bitcoin, right? So for which we don't keep our inventory, and that's the long tail of vendors who could sell on the dot com, right? That is also e-commerce.
Now those are very, very different ways of running the business. And also we have a lot of fusion channels. So think Instacart. So is Instacart bricks, is it digital, Is it e-commerce?
And some some might argue it's both because we can order it on the phone. It gets fulfilled from us from any other store. Right. So a lot of emerging business models are coming in and not to mention the unification of bricks and digital, Right.
So there's a lot of interplay between how we run the stores that is dependent on e-commerce and how we run the e-commerce that's dependent on how the stores are performing. So there's that interplay has really upped the game in terms of what Omni meets. Now, I'm not touched on the consumer side of it at all. So the consumer also is evolving in its in its perception of Omni.
So we could we could have the consumer shop online, but at the same time walk into the store the next day while in the store, she could pull out her phone and explore our own website or our partners website, right? So it creates stickiness to do both well and it creates stickiness to do both interconnected both on the enterprise planning side, but also the consumer experience side. So the Omni experience has really wide and has become. I would say a beast of its own, because not only are we having to manage all the challenges that I mention now, but at the same time we are looking at BRICS as a savior of e commerce in some sense because e commerce is so proliferated with the consumer that we need to maintain certain price points, we need to maintain certain certain margins and so on.
Whereas BRICS is a little more rigid model. So we sell what we sell and BRICS and you can't really change the inventory or the planet gram or the price points as quickly. But it does have a little more stable consumer base. So we know what the footprint is.
We can predict that and so on. Right. And Brick, the digital part, most of us are still figuring out because it's so dynamic. So there is a lot of interplay in terms of taking the digital demand and shaping it into bricks and vice versa.
So there are opportunities that on the omni side that and we could do this interplay so much better. What are some some things that you think could be done better just for fundraising on this question? So especially in terms of excitement. So we like I said, the BRICS was a lot more rigid.
Playbook. Historically speaking, certain, like the old saying goes, the first time you walk into a retail store, it's overwhelming, right? Second time you walk into it, it's boring. How do you fix that?
Right. So you could fix that by bringing in freshness from your e-commerce site. You could bring in freshness from the social media site and at the same time, you could use bricks as an exit channel for e-commerce that you couldn't really sell or e-commerce or that it was a channel fire for bricks. So the assortment management has really grown up in terms of how you manage between the two on the complement side of it.
On the inventory side, we all started with one central inventory catering to two channels. Now you still need some part of that, a common inventory pool that these channels can pull from. But also you need to be able to predict which channel would need what a lot more in a lot more efficient way. So so that you can localized inventory because your stores are not just stores, they're also micro fulfillment centers.
And stores are also fulfilling Instacart. Your stores are also exit channels for online. And also similarly online is getting this plethora of brands from Marketplace site. So you may want to change your brand that are selling as your own brand in the marketplace and something that is selling really well on the marketplace you may want to bring in as your own.
So there's a lot of almost like a juggle that you could do in a very quick time fashion. So the ability to react quick and the ability to be willing to change, which is a wmt that like you don't you move fast, but you don't shake the foundation. Now you need to do what the speed of retail needs to be there. But at the same time, you should be willing to change things that were sacrosanct.
Historically speaking. Speaking about this ability and willingness to change. Do you see digital transformation as a priority for supply chain leaders? I don't see how it can not be, primarily because there's already challenges created that they need to solve so that we dozed off front and center just to protect the bottom line.
But at the same time, if you want a better margin, if you want to be able to enter new areas, like in our case, you would have seen this in the market trying to create a little bit of a buzz lately. We are bringing back Zellers, which is a very, very near and dear brand to Canadians, which was sunset
about 15 years ago, and I think the stores were all sold to Target at the point and then subsequently the stores were closed by Target as well. So we are bringing that back in in a refreshed digital fashion. Now for large companies like ours to do something like that, as well as corporate challenges right now caused by supply chain and opportunities that present itself in the new consumer behavior.
How do you not do a massive transformation? Right. So that's that's pretty much the only way forward. But I would say that transformation is almost a misnomer.
Unique transformation, because, yes, it is a one time massive change, which is the definition of transformation. But at the same time, retail needs to evolve on a continuous basis because our vendors are you talk to Escalade or Nike or companies as such, they are moving and evolving at a much faster pace than most retailers. And at the same time, consumers, ourselves, we change phones, we go to new stores, we are on social media. So we are evolving in such a rapid fashion on the consumer side as well.
So retailers to just to keep up. Yes, we need to transform as a one time leapfrog from where we are, but we need to evolve at a much more rapid pace going forward as well. So it's definitely a top of the mind for supply chain executives. But I would argue that even for the CXOs.
Supply chain is your new currency. It's becoming the differentiator. It's almost stable stakes and say not even differentiator. You have to be top of the game.
So it is very interesting that you mention, are you? Because right now many organizations are considering supply chain as one of their top priorities going forward. So what would be your advice to supply chain leaders that want to implement that transformation in their organizations? So the way I see companies in my personal lens, so this is totally subjective, is that we talk about people process and technology when it comes to companies, right?
So the good companies are good at all three excellent and one often they are good at people process and bank but rarely really industry leading in one of those. Whereas companies that are struggling are struggling at
all three. I'm good at maybe one of those. So when we talk about future roadmaps and evolutionary goals for these four.
Companies as a whole. It is to elevate your game so that you are at least a good or at least good enough on people process and tech. But choose that one area that you really, really want to be good at and excel at that. Right.
So it's not it's not a matter of benefiting and levelling up on one silo. It's a matter of rising the tide of companies that are struggling right now or any company for that matter. Make sure that your game is good enough across people, process and tech. But one of those really need to be industry leading.
So whichever that is, I think most people would know what it is for them. Like in our case, our brand is really, really strong. With in Canada, they could stop in to make an old saying that I think it was. Our former CEO who said this on stage died a few, but she met a Canadian consumer once in the store and she said that, look, I haven't been shopping at the Hudson's Bay often now, but if the brand were to go away, it would make me sad.
And that's a very, very compelling brand equity that you have with the consumer. So that is that is our that is our value prop, right? So every company would know what it is. It could be a product.
It could be your time to market or whatever it is. So across this people process and deck, there's one thing that you're already doing good at, but either way, if you're bad at all, three would be out of business. So you are probably doing one really well, but you need to have at least two of those to level up. So make sure the tide is high.
You are good enough on paper process and tech, but and you're already good at one. So pick that other domain that you can be better at and elevate that. So if you are good, at least two out of three of these, it's really hard to be good at all three. I frankly can't think of a company that does people process and tech as a best of its class across all three, but do at least one.
Well, that'll be the easy part. Pick that other domain and elevate that, but at the same time, make sure the third aspect is at least good enough. So that's what I would I would state. And within the enterprise itself.
And that needs to percolate within the enterprise. It needs to be part of your culture. So often there is a there's tremendous value embedded within the rigidity of people, process and tech, because we don't allow each of those to get out of its way of the other. So we don't do certain things better in the people side because the technology prevents it or the process doesn't allow for it.
So let them get out of each other's way. And sometimes technology can help, but a lot of it is because executive downward guidance as well as just execute a strategic outlook that just as well understood across the company. Thank you so much, Jim, for these valuable insights. We were really happy to have you back here.
And yeah, looking forward to the next time. Thank you so much for coming. Thank you very much.
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