Now that we are a year into the COVID-19 pandemic, we can more effectively analyze the outbreak’s effect on the consumer goods sector. From purchasing channel changes to retailer ordering patterns, many of the present trends before last March have accelerated, condensing happenings, which would have needed years to take hold into 12 months.
The way in which CPG brands should view both their retailer relationships and end customers has shifted. No longer can CPG brands thrive—irrespective of size or sophistication—relying on the same paradigms that brought them success in the pre-COVID world.
Retail customers and consumers alike have established new expectations for brands to meet. As things have come into focus, more attention has been put on the supply chain.
The enterprises that stand to emerge as winners in the post-COVD consumption reality have prioritized supply chain strategies constructed to meet retail realities to avoid out-of-stocks, increasing exposure, eliminating fines, and ensuring their retail relationships are strong.
Let’s take a look at some of what brands need to do going forward.
Out-of-Stocks Gain Attention
Out-of-stocks have drawn the attention of retailers for the better part of the past couple of decades. It is estimated that retailers are “missing out on early $1 trillion in sales because they don’t have on hand what customers want to buy in their stores,” according to a study of about 600 households and several retailers
According to a Grocery Manufacturers Association study, common retail CPG brands average an 8% out-of-stock rate. That equates to one item out of every 12 that is not on the shelf during every store visit. This rate has likely only increased since the outbreak of COVID-19, an event that will be remembered partly by bare store shelves and supply chain challenges throughout the country.
The phenomenon has been exacerbated so much during this period that a lobby of consumer goods manufacturers has looked to the federal government to help address supply chain issues that lead to out-of-stock items.
What Happens When a Product is Out-of-Stock?
Beyond the obvious empty place on a store shelf, there are deeper-than-surface-level issues that can come from out-of-stocks. When a product is not in stock, consumers often jump online or find substitutes elsewhere, damaging to a brand both at a retailer and end-customer level.
The common occurrence known as out-of-stocks has led to retailers upping their requirements of suppliers. Programs that encourage timely delivery were largely not relaxed even during a global pandemic. In fact, Walmart increased its expectations of suppliers in 2020, now expecting shippers to meet a 98% OTIF fulfillment rate.
While some suppliers have used this as just another example of the difficulty of delivering to retailers, others have used the event to increase shelf space by meeting the store’s fulfillment standards. Forward-thinking brands that understand the importance of a retail optimized supply chain have viewed this increase in standards as an opportunity to gain more market share at retailers. They realize that many will be unwilling or able to meet the new expectations, meaning increased out-of-stocks and chances to dominate a product category.
Changes to Consumer Ordering—A Noted Retail Trend
A notable trend that has been widely publicized is the change in the way people have shopped during the pandemic. Consumers—once wary of heading to crowded stores—are still ordering online even as the population becomes increasingly inoculated.
According to an article published by the Washington Post, “Contactless shopping and the elimination of free samples. Less browsing and “product discovery” and more focus on the expediency of repurchasing” are here to stay. Others estimate that online ordering in the grocery category—an area previously slow to go to digital—has increased fivefold since the start of COVID-19 and will likely not retreat even as things return to normal.
These shifts have permanently changed the way consumers interact with a brand’s product. Because of these changes, retailers have also adapted to meet the shifting realities of shopping.
Fewer SKUs, Choices in Stores
As a response to less foot traffic and the need to accommodate higher velocity sales, retailers have tightened their selection of products in various categories. In the past, where you might have seen ten different flavor choices, you will now see five or fewer.
According to an article published in the Wall Street Journal, “In grocery stores, the average number of different items sold was down 7.3%.”
That translates to more efficient supply chains for retailers. It also changes the way suppliers create and market products.
The piece goes on to state that “executives at Kraft Heinz Co., Coca-Cola Co., Hershey Co. and other food giants have said they are trimming less-efficient and less-profitable products, while shelving some in development.”
With fewer product lines purchased by retailers, suppliers must ensure that those still regularly selling to big box stores are not subject to production or transportation issues. Manufacturers must meet retailers’ growing expectations to ensure that their more limited selection of products stays on the shelf.
Omnichannel Fulfillment is a Continuously Growing Retail Trend
With more spending happening digitally, retailers have turned toward an omnichannel approach—integrating their various channels into a singular experience.
Click and pick options are becoming more popular, combing multiple purchasing channels into one transaction. Aside from added convenience for shoppers, this equates to more emphasis on a retailer’s supply chain and attention to out-of-stocks.
To effectively manage a successful omnichannel approach to commerce, retailers need products on hand for shoppers. That means increasing the stringency of compliance programs to incentivize suppliers from late or incomplete delivery.
Emphasis on eliminating out-of-stocks will not subside in the coming months, nor years. The conversation around them will likely grow in intensity as more retailers adopt an omnichannel approach to accommodate consumers’ changing expectations.
Work with a Specialized Logistics Partner to Succeed in the Face of New Retail Trends
As the supply chain becomes an increasingly more prominent part of the recipe for success in the CPG world, it will continue to pay to work with specialized providers to help brands strategize to meet retailers’ expectations.
Zipline is comprised entirely of retail logistics experts who work with suppliers on a consultative level to exceed the expectations of retail customers. Brands that have a retail optimized supply chain can leverage their successes to increase exposure and facilitate growth.
Want to see what Zipline can do for you? Reach out to discuss our retail-driven brand transportation strategies today.
