By Dr Kyle Alves, Senior Lecturer of Operations Management and Information Systems, Bristol Business School
A year ago, we watched as many customer behaviours changed dramatically. Demand curves spiked and then dropped. Traditional customer engagement channels were rapidly left unused while new digital channels were hastily constructed. Necessity was once again the mother of invention. Behaviours changed because there was no other option; forcing business models to rapidly adapt to the new ‘normal’ associated with lockdown commerce.
What emerged from all the shaking was a good picture of how important it is to have the correct alignment between customer, channel, and the organisation’s delivery system.
As customers were shifted to online shopping, virtual customer channels had to keep up with the sudden surge of heavy traffic. This is one of the benefits of using Cloud-based systems that can rapidly adjust to record-setting change. Research by market researchers Gartner showed that customer-acceptance of online grocery shopping advanced a decade in only six months.
While customers piled into online channels, the operations structures for many companies struggled to keep up with that surge in demand. In the food supply chain, resources became sparse, mostly because they were committed elsewhere. In many cases, inventory and logistics resources were focused on supplying restaurants and hospitality, where demand had disappeared. Those operating the food supply chains knew there was enough food, but simply couldn’t get it on the shelves fast enough. However, some quick thinking helped correct this misalignment in a few cases, and this is where a simple, effective lesson can be learned about when to break with tradition.
While workers in food service, hospitality, and entertainment were languishing with little to do during lockdowns, an opportunity was spotted. In Germany, a deal was struck between McDonalds and Aldi to temporarily redeploy the restaurant’s workers to the grocery chain in order to keep shelves stocked. This was a brave and practical deal, made possible by employers and the employees who were able to see the bigger picture and address the bigger problem.
In other areas, existing operational delivery systems were rapidly changed and repurposed to align to the new demand: distilleries making alcohol for sanitisers, taxi/uber drivers and vehicles delivering groceries instead of passengers, and B2B suppliers pivoting to become B2C retailers among many others.
Many of the issues that escalated during the pandemic, such as the fading of the high street and the availability of labour in some sectors were already issues beforehand and must be considered as part of the changing landscape. Bearing this in mind, what are some of the lessons learned about business models from the past 18 months?
First, market behaviour is still changing. As we emerge from the pandemic, challenges like Brexit are forcing a review of long, global supply chains. Nationalistic, re-shoring approaches will continue to gain traction, impacting supply chains and ultimately product availability as we learn to adjust. Supply chain disruption is not ending in the near-term. This begs the question… is your supply network robust enough to withstand multiple possible outcomes?
Second, it is obvious that customer behaviour is still open to change. Many customers are much more comfortable with online channels of engagement, more willing to veer from ‘traditional’ business models. Customer segments that might have previously avoided online channels are now much more accessible. Ask yourself… is that online channel available, dependable, and secure for your business? Third, the shift away from cash has accelerated and digital payment methods are now much more accessible to smaller businesses. This will have a knock-on effect to those businesses that rely on cash (such as charities that rely on spare change jars) as well as affect those customers who have little trust or faith in mainstream finance (older customers and those who’ve chosen not to use banking). Another question … are your customers able to use digital payment approaches?