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Transcript Blog – The Global Impact of the Coronavirus Pandemic on Retail Industry

The Global Impact of the Coronavirus Pandemic on Retail Industry with Achim Schneider, Global Head of Retail, SAP.  He discusses on the ramification of the Covid-19 on the retail industry in detail.

Josie: (00:13) 
Hello all listeners and welcome to our podcast industry insights by SAP. And today we’re going to take a closer look at retail and I’m sure it’s an industry that’s being massively impacted by our global pandemic. So I have with me in, in our virtual home studio, Achim Schneider. So Achim, thank you so much for being with us on the podcast.

Achim: (00:38)
Yeah, welcome everyone. Josie, thank you very much. And uh, it’s a pleasure being part of this podcast today. So looking forward.

Josie: (00:45)
same. And so at him, I mean, I set this right before and in my introduction, but so much is going on right now and I’m sure you’re seeing a lot in the retail industry and a lot of impact. So can you tell us a little bit about like what you’re seeing in terms of the impacts of the industry right now?

Achim: (01:04)
What I figured out what we figured. Retail, I would even say as one of the industries with the highest impact from this pandemic and if you look into different areas of what we see in retail, what we have in retail, like there’s a grocery fresh goods, there is a convenience but also fashion or luxury. You see very different kinds of impacts per segment and I think that’s interesting when you go out and you would expect now retail is also going down like other industries as well. You will see, okay. I mean the essential part which is grocery is even growing up on the other side when it comes to fashion or luxury it’s clearly going down and mean. These are locked down for a long time already. I have been knocked down for a long time already and they will be locked also for another time.

Achim: (01:52)
And we just had a discussion last year with a group of fashionists and Burberry guy was there as well. And he said, do you know, even though we were open, if every one is locked down in their own home, there is no need to buy an extreme expensive coat from Burberry and show it on the street because there was no one on the street to show it to. So, I mean, these are the reasons we have there, but when we go into the grocery area and there’s a complete different picture, so you have to use or social distance, uh, regulations, you, you are asked just to go in the store, um, by order. And so there are lots of, I would say, regulations for the end consumers so that the retailers have, not to take care of their own health as well, but also of the end consumers. But on the other side, providing them all that what is needed, um, for the daily life, like fresh bread or other fresh items or whatever it’s needed on food. And I think that makes it very different, difficult. And also for those retailers to handle it in the right way. I’m not sure if you remember lastly, at least in Germany we had this court, um, purchasing wherever you want, jumping into your store, buying a toilet papers and wheat.

Josie: (03:04)
yeah, I think we call it the same thing in German. So we actually, I skipped the introduction part, um, where you, you know, we would love to learn a little bit more about you and I know that you’re located in Germany. I’m in Denmark right now and in Denmark we say you hamster something hamstring. And I think you have the same expression in German, right? That’s essentially what you do when you start compiling a lot of stuff that you don’t need at the current moment, but you think you would need longterm, which is not of course a good thing to do for society.

Achim: (03:34)
That’s what we do. Hamstering. That’s the other side of it. But I figured once you go into the store, even myself happened to myself. You go into the store and you see others buying toilet papers in mass, you think, Oh God, you have to buy it as well because otherwise you will be out. And that’s a kind of a pressure, you know, it’s social pressure even you have when you go into that retail business. Um, yeah. But that’s the current situation. And the question is for me always, how do the retailers now handling that?

Josie: (04:03)
And that is, and that is really because like you said there, it seems like there’s a divide between the essentials of like what do you need as a human to survive and then the luxury goods that like, to your point that you may not go out and buy an expensive coat because you can’t really show it off to anyone. And Adam, before we jump into kind of how retail is responding, um, tell us a little bit about yourself because we didn’t talk about you in the beginning of the interview. Um, you are the head of retail at SAP. What does that mean? And maybe, I mean I revealed your location but we’re in Germany. Can you be found besides from your home?

Achim: (04:45)
Okay, well, um, I’m now with SAP for about 23 years or so and I’m working all the time into retail. So I started in retail as a usual consultant. Uh, in that time it was very easy. We were doing everything consultancy but also um, kind of development and support at the customer. So everything where a support was needed, you were in and we grew up from that time in that license locations and in invert, I’m not sure if you know that which is next to the French borders as applicant. Right. And it’s on the Western side of Germany. It belongs to Walldorf finally, but it’s, I call it the hub for retailers and we have developers there, we have our consultant colleagues there and we have our solution people there and everything. What we’re doing, if it is development, if just roll in, it would just go to market. If it is customer support, it’s always a hand in hand work what we do in that community. And that makes retail, I would say quite unique at SAP when I look at the other 25 industries.

Josie: (05:44)
Yes. I mean I would agree with that. And now let’s talk about how retail is responding because, and I, I have a feeling you’re gonna also divide this answer maybe into two in terms of what, um, more luxury businesses are doing versus the essentials. But what are you seeing right now?

Achim: (06:01)
I mean the luxury part is something I’d like to start with that one. Um, where they have to know to figure out, okay, how can we handle this, this overstock, what naturally came out in the stores and into DCS can be even sell it anymore because the season is over already and summer season, we don’t know even know it is opening up in that way that you can really sell as expected. And what would it mean for the entire supply chain and the manufacturers at the beginning of the supply chain. So all the things are extremely complicated now for these quality fashion business. And they have to rethink and they have also to reorganize the entire supply chain. So it’s not just you know about um, building a demand driven supply chain based on what you haven’t said state and now we need to really to figure out, um, what do I have to do to um, provide even fashion products to my end consumers knowing that there is, as I said at the beginning with the example of, from burglaries that there is a different kind of fashion behavior, let’s say out there on the market.

Achim: (07:04)
And I think that’s a very um, challenging process now for these guys. And here, um, they have to start out a complete rethinking on that. And I know from fashion companies they were locking down globally the stores, but they are also thinking, okay, how can I sell it now either online with standard products or what can I do in providing easy ways to where is needed. So I mean that’s, that’s something where, which is a long lasting process. If I look into the grocery model, essentially area, I see here the immediate need for action, call it this way because now as you said, we have this hamstring behavior, but on the other side we might have out of stock situations in the stores and there are other products which are still part of the grocers but they are not essential topics. Um, so how to handle out all that store stock and also the warehouse stock in the grocery area.

Achim: (08:00)
So it’s now about how can I plan my replenishment in a different way. So I mean if you look in normal times you had a typical replenishment plan based on forecast, based on sales database based on stock information, inventory information, sales information and so on. And you could model it quite easily. Now you have this kind of peak coming up. There are extreme essential products like toilet papers and there are Zimmy essential products and lower Accenture products and they have to be handled in a completely different way and they have to figure out, okay, what information they need to collect. So things like getting real time information on the inventory is becoming very important for the retainer so they can react and make decisions simply on hand. And if you want to support these things or to know with solution capabilities, it’s important that you offer, I mean it’s something that we see us.

Achim: (08:55)
I want you to answer that. We offer our, our retailers, uh, methodologies or capabilities, they with easy changes or for example, the algorithms for the replenishment plan so that when times are becoming more normal, again, what does it mean for my replenishment? That and how is the current time be considered for the future replenishment. You cannot take this as a moment of peak, like a seasonal peak, right? This is something completely different and you have to clean it up again and to make this happen also need a bit of different consultancy work. And here we did already some of that, maybe it’s simply provided customers in note they can play, play in or be plated in for them so that they can make this clean up of these forecast methodology algorithms, for example, in an easy way. And we got very good feedback and results on that side. So I think there are easy pieces we can provide to support are our crochets explicit.

Josie: (09:57)
So let’s talk a little bit more about, um, the role that technology plays and we’d love to get your kind of expert advice. Now let’s imagine that I’m a CEO of a real retail company. You pick which one if it’s essential or if it’s a more luxury. And what advice would you give me? What should I be doing now to better my chances of making it through this pandemic?

Achim: (10:21)
Yeah, I think when we look at it technology side and the solution sides, um, what can SAP do here to help our retailers moving forward? Um, potentially would think first. Well, SAP is a European company, so everything what you could provide is a quite complex thing and which might take a long time to, to realize and implement. Um, I’d like rather to focus a bit on not on that side of it because that’s the essential part of a typical core business. I’m talking about what can I do for short term requirements. And here I talk differently about technology, like cloud technology, collaboration capabilities and things like that. And that’s what I would suggest a retailer to look at. So what can I implement very quickly within a couple of days, for example, to get information about my inventory. So real time data to be able to react quickly on that information.

Achim: (11:12)
That’s can only work with cloud solutions, right? And here we have capabilities to make exactly that happened with our analytic cloud or when it comes to the collaboration thing. I mean I mentioned the supply chain and beginning in the fashion area where you have your manufacturing, the supply chain with all the warehouses, the logistics in between at and finally the store. How do you want to leverage all that and integrate it again, I mean here we talk about collaboration where you need to think differently when you talk to your vendors and to your manufacturers. So here we have, and I think that’s something SAP provided right at the beginning as a free choice, free, um, countability with Ariba sourcing. And that’s exactly what you can already make use of an easy way to build collaboration capabilities with your vendors and suppliers. I mean in today’s time when you have situations where your supplier is breaking up because of the lockdown, so there is no capability anymore on that side to provide the product in time or even to manufacture the product in time.

Achim: (12:15)
You have to source differently. You have to find other vendors and how do you do it? Normally it might take a longer time so you have to come up with capabilities and that’s exactly what you would do with that way. So that’s what I say is the key thing. Okay, what is it, what I can do very quickly. Also, I mean the other point not to forget that is um, do I know at the moment how my employees are feeling in my stores, for example, because they are, you know, captured and, and, and addressed with so many things around with unhappy end consumers or with auto stock situations or with the, the healthy pressure they have now on their shoulders. And it’s important to get that information as well. And how can I do that? And also here SAP provided the Qualtrics capability to make this kind of pulse check on the employee side, but also on the customer side. And how easy can it be to get that information together and make the right decision in saying, okay, what is it, what I need to provide on health protection or what kind of need in regard of different stocks in my stores or on different ways of processing in my warehouses. These are things I can only figure out when I have the easy capability to collect the information. That’s what, what we are providing here for the shirt and obviously also for the midterm.

Josie: (13:35)
Yeah. And I think this is such an important time to show empathy, um, to, to anyone including of course your, your employees. And I think the Qualtircs offering is a really good way to do that. To understand how are my employees doing? Do they need anything to cope better, especially the ones that are out, um, in stores right now, serving customers in a really, uh, at a high risk. Um, do you see any, do you have any examples of companies in the retail industry that are doing things successfully to better respond?

Achim: (14:03)
Yeah, I mean if you look around this every, at least in the grocery area, every retailer from right at the beginning, we’re trying to protect their own employees in a very first step, but also to the customer so that you have protection both sides, um, at the POS system or for example. And that’s something also in, in re-imagined how you run your processes. For example, in Germany it was always important to have cash with you when you go into a store different to Denmark and all that. But there’s a kind of traditional thing to pay with cash. Now with this situation, retail has said, we, we’re not accepting any cash anymore. We want to have our end consumers paying with credit card or with Apple watch or whatever. But please do it without any contact. And I think there is already a change in that. You know, we’re getting a bit of cash machines and having only the cashier-less, POS stations, I think it’s definitely something where retailers immediately changed that what they were doing over the last years. Right.

Josie: (15:03)
Hmm. And it’s interesting what you’re hitting on now is really how, and I think this applies to all industries to different degrees of coordinates. Maybe retail being one of them that’s going to be reimagined the most. But COVID 19 is happening right now impacting industries. But the results and the um, effects of it on industries will be way more longterm. And I think that somebody said that COVID 19 is the force that speeding up digital transformation for businesses, maybe the most of what we’ve ever seen. And also showing that as a business in any industry, there are things that you can implement digitally that actually works much faster than you thought. So if you could pick up your crystal ball and look into the future, what would you say that or what do you think we would see in terms of how businesses are going to be reimagining their business models as a result of coven 19 and to also better prepare, maybe digitally for to be better equipped?

Achim: (16:01)
So in retail I would say again, especially now in the grocery area where it’s not really happened in the last years, it’s a must that every retailer is able to run a real Omni channel business in the future and it has to run seamlessly. I think it’s very important that you can now easily activate scenarios like order online, having either pick up in a store on, on on a, how is it called, um, curbside pick up, um, you know, things like that have to work also in the future. And now it’s not time to change. It has changed already in this direction and now is even very important for our retailers to make this also happen for the future. So we have to rethink what our fulfillment processes I need to have to have these capabilities available. And it should simply work out of the box, you know, not that you start doing it again and again. It has to really work out of the box and you have to be being enabled here with the right capabilities and technologies. And then we are really talking about the intelligent enterprise, which is, has all these embedded pieces like machine learning light, the typical automated processes like realtime analytics. All that has to be in there to be prepared also for the future in the right way. And that’s one of the key things now retailers need to follow.

Josie: (17:20)
Hmm. So lots of longterm impacts. Businesses are going to have to become intelligent enterprises. So embedding intelligence into the business processes to run more effectively. And then of course also to understand how to better use, um, the experience data you touched on Qualtrics to understand how employees and anyone else, uh, engaging are doing. Um, but then of course you have two very different parts of retail, luxury and um, essentials that are going to also be impacted very differently. Um, so as Jim, it was so great to have you in the studio. Uh, do you have any final, I, I don’t know, advise or anything you’d like to say to anyone listening right now and maybe to a retail owners who might be struggling a little bit in, uh, during this, this pandemic?

Achim: (18:12)
I mean, besides saying as everyone is saying that stay safe and healthy. I mean that’s the key thing. It’s important to, to keep your employees in a health situation. I think that’s still, that’s the force of the retail. And for me, these people are all heroes and a big thank you. I mean, I can use this challenge also to say that a big thank you to all my heroes out there because the retailers and their employees doing so great things out there to fulfill that what everyone else needs to have. It’s an essential part of the food. And I think we need to keep this stable and we have also, it’s our duty to protect it as good as we can with the right capabilities. And um, that’s for me the focus and everything. When we talk to our retailers where everyone is asking for what is it, what can I do to keep this up? And I think focusing on that makes it happen also in the short and mid term and for the future, I think our retailers should always count on us because um, it’s important for us that retail is running. Yeah. Safe.

Josie: (19:14)
Yeah. Yeah. Stay healthy and symphony completely echo that and you know, African him, you mentioned some of the offerings that we have that are for free. So if you want to learn more, you know, you can go online and check it out and see what you can take advantage of us, um, to better, better cope in today’s unprecedented time. So ask him, thank you so much for coming on the podcast and on our show and sharing about how retail is being impacted and to all of those who listened to this episode. Thanks so much for tuning in. We’ll hopefully see you on the next episode.

 

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