Preparing retail for the new normal

Marcella Larsen, Industry Executive, Microsoft Australia 

The COVID-19 pandemic has forever changed consumer behaviour, accelerating the shift to embracing e-commerce. Consumer demand for safe and easy shopping experiences is opening up new possibilities for retailers to innovate more quickly, better understand their customers and address supply chain challenges – through innovation and partnerships around Artificial Intelligence.  

Navigating through uncertain times 

Speaking to our Australian retail customers, many of which have experienced economic slowdowns before, the shock rippling through the retail world is clearly daunting. Spend is down as much as 50% in some non-essential retail categories which are pivoting to digital while closing physical stores. Meanwhile, demand is pushing essential retail to its limits. Analysts forecast 56% growth at the end of 2020 for Australian supermarkets, putting unprecedented demands on e-commerce, supply chains and last mile options. 

We are finding McKinsey's three-pronged approach to COVID-19 is a helpful framework for setting a course through uncertain times:  

Navigate the here and now: Establish a crisis response centre, while protecting customers and front-line employees. Reorient the business to amplify digital, optimise inventory and strengthen supply chain. 

Plan the comeback: Formulate a solid recovery strategy based on a mix of financial resilience and operational ramp. Keep a tight handle on cash, while evaluating market opportunities such as mergers, acquisitions and consolidations. 

Shape the new normal: Assess shifts in consumer sentiment and behaviours which may stick post-crisis. Put digital at the centre of your relationship with consumers and ideate how to evolve products and services – including new business models and partners. Plan for the long-term implications for stores and supply chain. 

Microsoft’s recent whitepaper "How Artificial Intelligence is powering Australian Retail in 2020 and beyond" showcases how data-driven retailers are raising the bar in terms of personalised service and new business models to meet these challenges. 

The whitepaper offers business-focused insight and steps for success for Australian retailers embarking on their AI journey. It takes a comprehensive ecosystem perspective, based on the insights of 20 business leaders, to bring together global insights and best practices with local opportunities and issues. Spanning retailers, start-ups, tech partners, academics, analysts and advisories, it includes Coles, Morrisons (UK), Harvey Norman, The ICONIC, LumaChain, Black.ai, Blue Yonder, Adobe, EY and Kellogg Business School. 

Meeting today's challenges 

Here in Australia, the majority of retailers are currently navigating the here and now, with discretionary spending down significantly in some categories while other categories are booming. 

This has thrown forecasting and supply chain planning into chaos. Panic buying began with immediate essential needs such as groceries and hygiene, then moved up Maslow's Hierarchy of Needs to encompass health and wellness, as well as home office supplies. 

This upheaval makes it difficult for businesses to reconcile current retail buying patterns with historical data in order to accurately manage supply chain. Applying the AI concepts raised in our paper can help you through this period, such as effectively managing adaptive pricing while selling off excess inventory, while drawing on external data sets such as local infection trends and consumer sentiment analysis. It can also assist with determining which retail outlets to close, when to reopen them and where to allocate inventory and resources in the meantime. 

When embarking on your AI journey, you can hit the ground running with some of Microsoft's partner solutions best-suited to tackling COVID-19 at speed. For example Blue Yonder, formerly JDA, can support customers in addressing supply chain challenges through AI-based modelling based on COVID-19 infection trends data. 

Likewise, AI-powered chatbots such as the "concierge bot" adopted by Harvey Norman can scale up customer service while call centre staffing levels are impacted, meeting today's challenges while maintaining customer satisfaction. Meanwhile, using existing camera networks instore, EY has demonstrated that retailers can quickly pivot to understand foot traffic and shopper density to ensure safety. Preparing for what comes next 

Looking to the future requires considering longer-term investments which not only support recovery but prepare your organisation for the new normal. 

Once customer spending returns to your category, AI can help manage inventory and pricing, identifying pent-up demand in some areas and saturation in others where panic buying saw consumers bring forward purchases.  

Online sales as a total percentage of all retail will rise during the pandemic and most likely never fall back to pre-COVID-19 levels, With that shift, expectations of online customer experience and home delivery will also rise. China will offer insight into this retail transformation, as it enters the final stages of the pandemic ahead of the West. 

Retail organisations which miss the opportunity to use AI to adapt to the new normal will be left behind in their sector. Part of planning the comeback may involve taking advantage of enforced downtime for skilling, training and retooling to prepare for what comes next. 

Learn more 

If you would like to continue to learn how we're working with customers and partners, check out Microsoft's "How Artificial Intelligence is powering Australian Retail in 2020 and beyond" whitepaper, along with the resources in responding to COVID-19 together.