Every element of the retail value chain has had to quickly come up with creative solutions over the last few months. Restrictions on movement of people and product brought unfamiliar hurdles. Consumer preferences and buying habits changed suddenly, leaving retailers unable to rely on historic trends, data, or even their own ways of working. Retail’s response to the problems has been proof that it is possible to make quick, comprehensive, and effective changes to the process status quo.
With economic uncertainty lingering and very real possibility of same or similar future disruptions, it has never been more important for retailers to maintain this kind of responsiveness in everything they do. Through working with numerous retailers and brands, we have identified agility in behavior as the unifying theme among those that are able to thrive through times of both stability and disruption. This framework, which we call AgilityEQ, ascertains a retailer’s ability to be flexible in processes, efficient in decision-making, and skilled in using data to draw insights. This flexibility spans all areas of the business—from design and development to planning and buying as well as marketing, supply chain, and stores management.
To develop AgilityEQ, retailers must create new capabilities and adopt tools that meet the needs of today’s self-centric consumer, particularly in uncertain times. The higher a retailer’s AgilityEQ, the better their potential to be resilient in and outside of a crisis.
In the product design and development process, retailers now know that it is realistic to remove silos among different functions to enable quicker decisions. They know that digital tools can be used more widely and for many more activities, and that consumer insights can answer a lot of questions very well. They know that product and assortment approvals cannot be left entirely to the home office and that the ability to touch and feel multiple physical samples before buying is unnecessary.
To more closely understand how responsive a retailer has been and if it is planning to retain these changes into the future, AlixPartners conducted a global survey in June 20201. Our survey focused on three aspects to assess a retailer’s AgilityEQ across the product-to-market process. Here is what we learned:
Break down silos among teams: Gone are the days when retailers could rely on history to know what customers want and assume that merchants, design, product development, sourcing, and marketing teams could operate independently to execute against a seasonal plan. Teams learned to work more flexibly while remote, rebuilding assortment and development plans collaboratively out of necessity. But has this translated into new institutional ways of working? The data suggests not. We learned that retailers made strides but have still not fully rid themselves of archaic processes such as line reviews that demand several layers of approvals. Flexibility in decision-making will not be possible unless hierarchy is replaced with partnership and the right stakeholders are empowered.
Embrace speed and set up to react quickly: The old model of designing and developing months in advance results in a glut of wrong product decisions and reverses any progress made to address shutdown-induced inventory issues. This means that embracing speed models that enable a fast and flexible development processes is critical. Every day of additional insights and selling data gained will improve design and merchant decisions. Retailers have seen the benefit of developing smaller capsules using speed models. Of those surveyed, 80% used speed for less than a fourth of their assortment prior to the crisis. But 45% plan to increase speed penetration to a fourth or even half of their assortment in the future. This momentum must be maintained, and retailers must stay wary of slipping back into old, damaging behaviors.
Accelerate the use of insights: Because today’s consumers make buying decisions based on their circumstance, needs, and values, keeping constant track of changing consumer preferences in times of uncertainty can be the difference between making or breaking a line. Retailers have seen the benefit of relying on real-time consumer insights to make design and buying decisions. And while more than half intend to keep doing this into the future, this should really be a non-negotiable necessity for every single retailer.
The current crisis has forced retailers to swiftly adapt behaviors, and while some plan to embed these changes permanently into their processes, as we found, many are not. Placing rigor and repeatability around the flexible processes that retailers adopted as a reaction to the crisis must drive the new norm of how they operate going forward. This is a chance to change practices permanently and adopt a new model that consistently helps deliver performance, profitability, and resiliency into the future. This is not easy, as any change to status quo demands grit and persistence.
There is risk of falling back into old behaviors, but any such regression will leave retailers exposed once again. Those that maintain the responsiveness and agility shown over the period of the crisis will be much better prepared for any future uncertainty.
1 AlixPartners Post COVID Agility Survey of 21 global retailers and brands, June 2020