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Archive for the ‘pandemic’ Category

More on shifting shopping habits and how firms are responding. Specifically, we are again looking at the growth of online grocery sales. The Financial Times has a really nice story examining why the pandemic hasn’t necessarily been a boon for supermarkets (Why supermarkets are struggling to profit from the online grocery boom, Jul 22). On the one hand, stay at home orders have limited the options for dining out; that should be a good thing for supermarkets. On the other, those orders and general pandemic concerns have made people nervous about going to the store. That has led to a boom in online orders either for delivery or for pick up. According to the article, it took 20 years for online sales to account for 7% of UK sales. That percentage jumped to 13% in two months. The problem is that online sales are just not as profitable.

Sainsbury’s chief executive Simon Roberts summed the situation up, saying Covid-19 was “moving sales out of our most profitable convenience channel and driving a huge step-up in online grocery participation, our least profitable channel”.

For some numbers to back up that statement, checkout this eye candy:Screen Shot 2020-08-06 at 10.24.33 AM

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To state the obvious, it’s bad when your brand gets associated with a phrase like “modern slavery.” That is just the situation that British retailer Boohoo finds itself in.

To backtrack a bit. Boohoo is an online fast fashion firm. We wrote about them a while ago. Their schtick is super fast product launches. They offer lots (as in over a thousand) of items each week and quickly replenish those that capture the public’s attention. As the Guardian reports, this served them well as Britain started to shut down because of the pandemic (Boohoo booms as Leicester garment factories are linked to lockdown, Jul 4).

It was a Friday, and usually the fast-fashion brand’s irrepressibly bouncy Twitter account would be pitching dresses and shoes to its followers ahead of a night out. But this was the first weekend of lockdown, and the company made a decisive pivot.

Instead of bandage tops and tapered trousers, it posted a “night in” thread, helping followers choose “that perfect movie for the weekend”. It advertised an everything-must-go flash sale, with 70% off all stock and 50% off 500 dresses.

And it started selling loungewear – that is, clothes for the sofa. A knitted lounge set, a cropped sweatshirt, and “Disney+ binge outfits” were all on show.

So a quick pivot from date night to night in. But how were they able to so quick adjust their offerings? By producing locally and relying on flexible suppliers mainly located in the city Leicester (How Boohoo came to rule the roost in Leicester’s underground textile trade, Financial Times, Jul 10).

Abandoned by big retailers three decades ago, Leicester’s industry splintered into 1,500 mini-factories, typically employing fewer than 10 people. …

Leicester’s flotilla of small workshops competed with rivals in Bangladesh and Turkey by offering an ultra-flexible service, handling small orders in quick time. It helps Boohoo test almost 3,000 lines of clothes every week and ramp up production of trends that catch on, be they brassy bodycon dresses or lockdown loungewear.

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Some interesting images from the Wall Street Journal (From Flour to Canned Soup, Coronavirus Surge Pressures Food Supplies, Jul 12). First up a look at supermarket out of stocks.

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Note that this graph starts in late May — well past the initial surge of lockdown panic buying. What we see is that we still have persistent shortfalls even as producers have reduced the variety they offer.

If we look at specific categories that surged as states imposed stay at home orders, we see that the peaks go pretty bad but that the likes of toilet paper and canned goods are within the realm of general goods that we see above.

Screenshot 2020-07-13 09.41.53

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Screenshot 2020-06-27 16.13.04A recurring theme in how the pandemic has changed operations has been that firms are limiting variety. If a firm is having a hard time keeping up with demand surges and shifts, then a basic step is to drop the low runners and focus on the products most in demand. Now the Wall Street Journal has some data on just how significant the impact has been (Why the American Consumer Has Fewer Choices—Maybe for Good, June 27). The graph above shows compares several weeks in May and June this year with the same span last year. The average across all categories is down 7.3%.

There is a similar story at restaurants, where firms have limited their menus to simplify operations,

Screenshot 2020-06-27 16.13.45

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One of my favorite examples I have learned from doing this blog is Chronodrive, a French chain specializing in pick up groceries. Specializing in the sense that this is all that they do. It makes for a nice example since it allows for a contrast between a firm that has tailored all of its operations for one niche against conventional supermarkets that have tried tacking on pick up or delivery onto standard stores.

Of course, in the current environment, lots of firms have had to tack on pick up or delivery options onto their existing stores. To paraphrase Don Rumsfeld, sometimes you have to serve customers with the processes you have, not the processes you might want or wish to have at a later time. But will pick up — some form of click and collect — have legs?

The Wall Street Journal reports that for both restaurants and grocery stores, pick up has been a good business and has been holding up even as states have reopened (Pickup Gains Ground Over Delivery, June 25).

Pickup grocery sales were up 81% in the week ended June 13 from the start of this year, according to Nielsen, while delivery sales rose 33% in that time. At restaurants, carryout accounted for 42% of orders by dollars in May, according to data from research firm NPD Group Inc., compared with a 13% share of sales for delivery. Carryout has maintained its share of restaurant sales since dining rooms began to reopen in May, NPD said, while drive-through and delivery have lost some ground to dine-in orders.

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An interesting story from Reuters. What should retailers do with all of the inventory they had for the spring season?

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5000The novel coronavirus have impacted many business as governments imposed lockdowns and consumers were just generally reluctant to spend. But in a global economy, those effects are not just local. As shops close down on one side of the world, suppliers on the other side also take a hit.

Take the case of Denim Expert Ltd and its founder Mostafiz Uddin who were featured in a recent Guardian article (‘My life became a disaster movie’: the Bangladesh garment factory on the brink, Jun 21). Denim Expert is a Bangladeshi based apparel producer that makes jeans for a number of brands. When the UK went into lockdown, a number of brands cancelled their orders. Between jeans that had already been produced with materials that had been ordered for anticipated future orders, Denim Expert was sitting on over $2 million of stuff it couldn’t convert into cash. The hit they took was just a small part of the toll imposed on the overall industry.

In Bangladesh alone, fashion brands have cancelled an estimated £2.5bn of orders at more than 1,150 factories, with the country’s garment industry seeing an 84% decline in orders.

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Much like Tom T. Hall, I like beer. And much like other industries, brewers have had to adjust as consumers habits and tastes have changed as bars and restaurants closed. As the Wall Street Journal reported a few weeks ago, this has largely meant a shift from smaller craft beers to the watery, American lagers your grandfather drank (Coronavirus Brings Beer Drinkers Back to Bud Light, May 18).

Beer drinkers have turned to box stores and grocery stores, and they are buying beer in 24- and 30-packs so they can make fewer trips. Shoppers are experimenting less, gravitating to brands they trust and looking for healthier, lower-calorie beers. Some people, out of work or watching their budgets, are trading down to cheaper options. And distributors and retailers, looking to simplify their supply chain, are trimming the number of products they carry.

All of those factors are hurting small craft brewers, which make most of their sales in their own tap rooms. Many craft beer brands aren’t distributed in retail stores. For most craft breweries, on-site sales were down by more than 70% in early April, and sales of craft beer to bars and restaurants had evaporated, according to a survey by the Brewers Association, an industry group.

So craft brewers are in many ways like lots of other firms during the pandemic. They had a business model built around sending kegs out to bars and when that demand dried up, they had limited ability to switch to other channels. Even if they could switch to bottling beer, they did not necessarily have the distributional muscle to get their beer into supermarkets and convenience stores.

But that also raises the question about what happens to the kegs. It turns out the breweries own the kegs. When a keg leaves your local craft brewer for a bar, it is supposed to go back to the brewery eventually. This video from Brewbound (a trade publication covering “the beer space“) gives a bit of background.

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OK, another story about pandemic driven lines. But this one has a twist. Yes, the virus is forcing lines to form outside of stores, but what would you give to be able to see the line before you left the house? Apparently, if you live across the street from a Trader Joe’s, your friends pester you enough about the current line situation that you set up a web cam or just tweet regularly (Is There a Line at Trader Joe’s? Social-Media Spies Are Keeping Track, Jun 12, Wall Street Journal).

The die-hard fans of Trader Joe’s may be waiting the longest. The grocery chain is known for its specialty items, cultlike following and ubiquitous lines that were bad enough before the pandemic. Now, even as the economy reopens, queues at several locations can stretch for blocks beyond the entrance.

Coming to the rescue is an informal network of Good Samaritans who are quarantined with prime views of a local Trader Joe’s. As a public service, they regularly tweet or broadcast updates on the lines outside.

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Two stories today. Both revolve around operating strategies that complicate adapting to the pandemic. One’s about IKEA, the other is about sex toys. Yes, sex toys. We have almost 900 posts on this blog and I think we have never discussed the supply chain for vibrators. But I also never expected The Old Gray Lady to run a story titled “Sellers of Sex Toys Capitalized on All That Alone Time” (Jun 7).

The article starts with the not too surprising revelation that sales of sex toys have spiked during the pandemic but the benefits have been uneven across retailers.

But while big, corporate sex toy retailers seem to have thrived, the same can’t necessarily be said for brick-and-mortar sex shops. As consumers rush to buy sex toys from websites, businesses that usually rely on foot traffic and interpersonal connections with customers are suffering.

Sid Azmi, 37, the owner of Please, a store in Brooklyn that’s been open for roughly six years, explained that despite having an accompanying online shop, she can’t compete with bigger online retailers.

Ms. Azmi said that small businesses often charge more for sex toys: They don’t get bulk-buying discounts from distributors, and they can’t afford to have huge sales on their products. Customers are usually willing to pay more, she said, because of the friendly service and education stores like Please can offer.

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