5 Trends Supply Chain Professionals Will Continue to Monitor

The pandemic has had a sweeping effect on e-Commerce, supply chains and warehouse operations over the past few years. Rising customer demand and changes in consumer behavior have affected how customers buy, why they buy and what they buy. The following trends show that demand will continue to grow, and customer behaviors and attitudes will continue to change.

Monitoring these trends as well as including them as part of an overall operational strategy will be critical to ensure that operations will be ready to meet consumer demands as well as be flexible enough to adapt to market and other challenges.

Trend 2: Brick and Mortar is Growing Again

In a recent story in the Wall Street Journal³, for the first time since 2017, US retailers are on track to open more stores than they close in 2021. While some major retailers have contracted or consolidated store locations, new brands and companies that were born and grown online have found physical locations produced greater sales and an expanded customer experience. Allbirds, which recently went public, is on track to open hundreds of stores in the near future. Also, Untuck it, another online store, had originally no intention of opening physical locations; however customers requested sites that allowed them to try their unique shirts. They noticed after opening a store, online sales grew significantly in the surrounding area.

Other trends in storefront growth:

• Closed spaces transformed into fulfilment centres and customer pick-up sites – Buy online, pick up in store (BOPIS)
• Storefront inventory availability
• Short-term lease offerings

Trend 3: SKU Proliferation will Continue with the Growth of Personalisation

As the consumer experience becomes more digital and personalized, SKUs will continue to grow. A recent Deloitte consumer survey⁴ found:

• 1 in 5 consumers are willing to pay a 20% premium for personalised products
• 22% of consumers are willing to share some data in return for more personalised services or products
• 48% of consumers responded they were willing to wait longer for personalised products or services

Personalisation means more products in inventory and continued growth in SKU counts. Companies will need to implement inventory management systems with transparent data, and a dynamic capacity strategy to manage the growing demand for personalised products.

Trend 4: Environmental, Social and Governance (ESG) Becoming More Important to Consumers

In a 2021 ESG Consumer Intelligence Survey from PWC⁵, the survey found that an overwhelmingly majority of consumers are more likely to buy from a company that shares their values across the various elements of ESG. The survey found:

• 57% of consumers feel companies should be doing more to advance environmental causes
• 48% want companies to show more progress on social issues
• 54% expect more from companies on governance issues

Consumers have shown that they are willing to turn away from brands that do not meet their standards for sustainability or ESG. In a recent sustainability survey from LEK consulting⁶, they found that over the past 3 years there has been a noticeable increase in the number of people who care about sustainability.

• 54% of consumers report having switched away from certain brands or products due to sustainability or ethical reasons
• 51% of consumers state they are willing to pay more for sustainable products
• Consumers accept 24-40% more in pricing for sustainable products over regular products

As the Securities and Exchange Commission (SEC) begins to propose and enact stronger disclosures and reporting on ESG⁷, companies must start to prepare to track and record their efforts and document them in their public reporting process.

Source: PWC 2021 Consumer Intelligence Survey

Trend 5: Acceptance of New Brands and Products

The pandemic has affected e-Commerce and the supply chain in numerous ways, but perhaps one outcome less thought about is the effect on brand loyalty. During COVID-19, consumers tried new shopping behaviors (buying online; including mobile devices such as phones and tablets) and those behaviors are likely to continue. These new buying practices will fuel online competition for customers between legacy and new brands. A recent survey on US buying behavior from McKinsey & Company⁸ found that 36% of consumers have tried a new brand AND 25% have purchased from a new private-label brand.

The survey also identified the main drivers for trying a new brand:

• Availability of products
• Convenience
• Value
• Quality/Organic
• Purpose Driven (ESG)

Gen Z and Millennials are the main segment showing a willingness to experiment with a new or unknown brand. These emerging brands are beginning to push established brands to update their customer experience and satisfaction for growing demographics or face losing market share.

What do these trends mean for warehouse and supply chain operators?

• Distribution Centers (DC) must continue to innovate, automate, and expand as e-Commerce sales grow and customer demands change.
• Managing DC costs, complexity, SKU proliferation and effectiveness will become a strategic advantage over competitors.
• Brand reputation and ESG efforts will begin to matter more and for many companies begin to be measured by the SEC.
• Business intelligence, data analytics and technology will be vital in order to enable partners, employees and managers.

FORTNA Can Help

By partnering with our team of experienced experts, we work with you to leverage the FORTNA Framework and our proprietary software and tools to help guide your warehouse operations through these trends and other disruptions.

FORTNA experts will begin with an initial assessment to measure your current operation, work with your team to develop an operational design to maximise capacity and throughput, conduct the project implementation and provide Lifecycle Services to maximise daily operations. Visit www.fortna.com to learn more and schedule time with an expert.