Retail Nowcasting

By Steve Johnston

Just a few short weeks ago, I was a different consumer. It turns out that I don’t want or need most of the things I was intending to spend money on earlier this year. And some of the things I did buy recently are now conspicuous in their pointlessness - that new car on the drive being first among them. If you looked at my behaviours earlier in the year, there was no hint of how they were going to change as the year unfolded (jigsaws, who knew?).  Even those organisations who thought they really knew me, don’t any more.

Are these changes for the long term, or permanent? I couldn’t tell you. Like many, I do tell myself that the pandemic has changed me, and maybe forever. I won’t be that person again; I have a different appreciation of the important things in life. But will I live that life when I’m free again? Who knows. Perhaps I’ll simply be lured back into my old consuming ways; right now, so much seems possible.

Businesses don’t tend to do well with change. Rather, they find ‘constants’ helpful; things that don’t change, that are predictable. There have been few truly constant things, in truth, when it comes to shopping, but if they don’t change too much, they can be planned for, bought for, have supply chains set up for and brands built for (and, incidentally, service companies can be created to provide support for, like mine).

Right now, retail businesses have my sympathy, because there is nothing remotely predictable about the way consumers are changing their shopping behaviours. We’ve begun to learn a few things about this new shopping: e.g. people are spending on their immediate environment - their home, their garden, their TVs, the entertainment they consume and, yes, the jigsaw puzzles they do. But these things are anecdotal or too general to help make good planning decisions.

Some categories have got very lucky and seem to be able to sell most of what they would normally source at this time of year, and then some, particularly if you are a garden and outdoor retailer. This is being achieved without any real knowledge of how the needs of consumers are changing because the primary change is simply one of volume. This category has basically tripled in size across the last two months, year on year, and everything is selling.

IMRG Digital Dashboard

Image source: IMRG Digital Dashboard

This sort of good fortune is rare, and is masking a lot of pain elsewhere. A lot. Conventional retailing simply doesn’t work at the moment for most businesses. They are seeing collapses in revenue, uncertainty in what people actually want now, supply chain challenges and irrelevant inventory, among other disruptions. And what most retailers do not have right now is the flexibility and margins for business-as-usual.

I believe that retailers have to find a way to shift to a needs-driven approach, that is sensitive to the scale of change that is happening, and that supports them in the work of aligning efficiently to those needs. This should be an approach that is not based on our past addiction to manufacturing customer need -- you know what I mean, where you’ve been manipulated into ‘needing’ those things you didn’t actually need. An approach that is based, instead, on a deep understanding of real societal need; built on thorough, detailed, information on what people are looking for, and with a proper understanding of how that is changing week to week, month to month.

This understanding can then be used to increase the relevance of online merchandising and the suitability of ranged product, and to take a more strategic approach to online advertising. In this way, a more efficient operational model could prevail. One that is less wasteful and therefore kinder to the environment as well as to the bottom line.

Kaiasm Demand Radar showing peaking demand in product categories

Image source: Kaiasm Demand Radar showing peaking demand in product categories

A low-waste, needs-based transition was the work we were already doing in the retail sector before the pandemic arrived, but we were helping it with a strategic and detailed understanding based on things that were - once you knew about them - predictable (the response to which happened to be very good for retail revenue and margins). They were needs that existed and had been happening the same way for a couple of years or more; needs you could properly plan for.

Today, strategic, historic knowledge of what people want is losing its reliability for building models of the future, as much as it pains me to say so. As a start point, it’s interesting and important, but only if it is matched with some sort of retail nowcasting. Not traditional forecasting, which typically waits too long for its data, and tries to look too far ahead, but nowcasting: the working out of what just happened, what’s happening right now, and then predicting what is just about to happen. This is precisely what retailers need right now. They need near-term predictive models to give them a chance of surviving, and then thriving, as the crisis moves through our society.

Image source: Kaiasm Demand Radar showing retailer market share gains from product categories

So what to do? Kaiasm, like many businesses providing services to retail, is working hard to be relevant and useful in changing times, and we wish all the others the best of luck. We’re focused on finding the ‘now’ in the nowcasting. Pivoting the strategic to be the tactical. Only a fool would pretend today that demand in existing retail categories is knowable six months down this particular line. What we do know is that demand predicts purchase by a few weeks; this doesn’t seem to have changed.

The newly expressed needs of people right now, will be delivering retail receipts in the coming weeks, and they are crying out for nowcasting. Knowing the ‘now’ may not be soon enough to solve all supply chain issues, but it’s going to be a whole lot better than the guesswork we see going on today. If we’re lucky it will confirm choices already made, inventory already bought. If not, a window of opportunity will have been opened.

By Steve Johnston, Founder and Head of Client Services, Kaiasm.

Published 26/05/2020

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