One on One With Kearney's Shannon Warner

Consulting: There's been some reporting that lean manufacturing was a factor in why we saw, and in some cases continue to see, certain items out of stock in stores. Is that something you've seen and heard?

Warner: I do think that retailers quickly ran through the inventory that they had on hand, and put pressure on their suppliers to get them more inventory as quickly as possible, but I think that the whole supply chain was operating pretty efficiently based on demand. COVID created an unprecedented set of circumstances that put enormous demand in some places and completely eliminated the demand in other places. We've learned that our supply chains were not nearly as nimble as they needed to be in order to deal with this type of crisis. And I think a lot of companies are now rethinking what they can do going forward to be more resilient. And I think they're planning to take on that challenge. 

Kearney is really focused on a handful of capabilities in that area. We've got a really strong mergers and acquisitions capability, we've got a really strong digital IT operating model capability, we've got the Kearney Consumer Institute, we've got our chain capabilities. So a big part of what we're working on is how do we help our clients, retailers, CPG companies, and so forth to emerge from this crisis stronger.

Consulting: What will you be focused on in your new role?

Warner: Kearney is strong. The retail and consumer practice at Kearney is already the largest practice in the firm and we are well known for innovative approaches. One of the things that I'm going to be focused on in my new role at Kearney is deepening our relationships with chief digital officer the chief marketing officer, the chief customer officer, so that we can go across the enterprise to drive more profitable growth through the use of data and technology and that consumer mindset, really helping our clients to become more digital-first. 

Consulting: How important is that digital piece going to be in the ongoing evolution of retail?

Warner: I think digital is here to stay, although I'm biased because I've been working in the digital space for nearly 20 years. But I think that we have evolved from industry to industry, some adopted more quickly than other industries or some sectors within an industry. But I think that COVID and just the natural progression of consumer behaviors and technology have now put digital at the center of how we drive our businesses and how we transform and revolutionize what we do.

I think it's an imperative, and it's my imperative, to help companies figure out how they can leverage digital to be better. And that takes the form of how did they change how they engage with customers through digital technologies. How can they use digital technology such as automation to take cost out of their operation, to be more efficient and accurate, to provide better services to their customers. Really I don't think that there's a company that is untouched by digital and I think we're at that precipice where the only thing retailers need to question is how fast do they go. It's not a question of do they go, it's how fast do they go. 

Consulting: Did COVID sort of give digital a big push in a direction it was already naturally headed in the retail sector?

Warner: Some sub-sectors within retail have been largely digital or completely digital for a long time. You look at companies like Amazon or Wayfair, they are digital-first companies. Then you look at some traditional bricks and mortar companies in the specialty apparel space and they're very advanced in their digital capabilities. Grocers have been a little slower to adopt digital capabilities, but I think that COVID demonstrated that customer experiences are essential in that sub-sector as well. So I think it's now permeated the entire retail sector, and it's just a matter of how many customers and what portion of transactions are going to be occurring through digital transactions, and of those digital transactions, what will they be? Will they be traditional e-commerce? Will they be curbside? Will they be ship to store? And within that, how will managers manage that shift profitably?

Consulting: Do you anticipate that when the dust settles there's going to be clearly defined winners and losers in the space?

Absolutely. You've seen retailers who have been struggling for a while filing bankruptcy and restructuring what they're doing. COVID is the latest wave, but it's not the first swing, over the last five years there's been a record number of bankruptcies. I think that the merger and acquisition space will become very active in retail as there are a lot of brands out there that consumers trust, and like their products, but their businesses are just not stable at this point. So I think we'll see a convergence in that area. I think those that are stronger are those that have stronger digital capabilities, but moreover they had truly become omni-channel businesses from top to bottom so that they're not effectively operating as an e-commerce business in a bricks and mortar business, but they're operating as one business, serving customers no matter how they choose to shop.

Consulting: The companies that are better positioned to weather this, what will they be doing differently than their peers who won't be as successful?

Warner: I think they'll be looking for the fastest way to shore up holidays and make sure that they have the best health and safety procedures in place to make customers feel comfortable shopping in their stores. I think they'll be elongating their holiday shopping window to try to reduce the density of traffic while still creating that excitement and desire to shop at holiday times. I think they'll be pushing a lot more to digital, and hardening their supply chain and their ability to handle the last-mile delivery that will be required for a much higher proportion of sales online over holiday. And I think that once they get through and have a very strong holidays they'll be better positioned in 2021 to enact some of the longer-term strategies that they're going to have to put in place to serve the new customer.

Consulting: What do you anticipate will be some of the biggest obstacles that clients are going to have to overcome between now and when things return to quote-unquote "normal"?

Warner: Kearney's point of view is that there is no normal. We're not moving into a new normal, it's that there is no normal. What that means is that retailers, and companies in general, can't wait for things to go back to normal or to settle into the next normal because it's a constantly evolving thing and the acceleration of change is unprecedented. COVID gave us a hockey stick spike in change, but the pace of change will continue. Retailers, as they refine their strategies and think about how did they serve their customers, a cornerstone of the strategies needs to be, how do we be nimble? How do we constantly keep a pulse on what our customers need and want and how we're serving them and how our operations are adapting to meet those needs. So that cornerstone of the strategy needs to be flexibility to change to the environment.

One other point that I'll make is that the fact that things are constantly changing shouldn't cause retailers to say, oh well, then we don't need a strategy because there has been enough change at this point that probably every retailer needs to stop and reset what their strategy and what their plan of action is and what their plan of attack is. The need to be nimble is not permission to do nothing, it means you have to continuously reevaluate.

Consulting: Has COVID been the first major stress test of some of these systems in your view?

Warner: I don't think that any of us has a crystal ball to know how COVID has changed consumer perceptions and behaviors in the long run. Even without another crisis or cataclysmic event it's going to be a long time before things normalize.

I think that companies have done a lot of scenario planning to make sure that they were ready for whatever that thing might be that causes a surge in demand or that drop-off in demand. But I am doubtful that any of them have examined a scenario to the magnitude of COVID. And I do think that wise leaders need to reflect on this whole situation and learn from it and figure out how we'll be better the next time.