Retail upheaval spurs supply chain bottlenecks

ONLINE SHOPPING, ‘LIFESTYLE CHANGES’ SPUR RETAIL REVOLUTION

As the pandemic continues to radically alter how Canadians spend their money, experts say a second wave of COVID-19 will likely see consumers plagued by shortages — but this time stemming from “lifestyle changes” rather than panic buying.

The early days of the pandemic saw toilet paper emptied out of store shelves and some retailers are running low once more as cases rise, but experts say shifts in consumer behaviour over the past six months mean lengthy backorders are more likely to arise on discretionary items ranging from upscale stationary bicycles to patio heaters.

The retail upheaval is a sign of the ongoing COVID-induced cultural and economic phenomenon sweeping the country, as people work from home, shop online and rethink how they spend time — and money.

But the disruption to usual shopping patterns has led to widespread inventory issues as the industry scrambles to meet changing consumer demand.

“The bottleneck won’t be people buying tons of toilet paper,” said Diane J. Brisebois, Retail Council of Canada president and CEO. “It will be the supply chain trying to adjust to changes in lifestyles and discretionary spending habits.”

Compounding the problem is a sweeping “channel shift” away from brick-and-mortar stores towards online shopping.

Statistics Canada said in July that retail e-commerce sales had soared to an all-time high, reaching a record $3.9 billion in May — an increase of 110 per cent compared with May 2019.

The spike has left many retailers straining to keep up with the trifecta of traditional home delivery, buy online and pick up in store, and curbside pickup.

For many, the rapid pace of change has exposed an inventory management nightmare: Orders arrive on the doorstep or curbside incomplete, delivery dates are revised into the distant future or orders are simply cancelled.

Deloitte Canada’s Jim Kilpatrick said the pandemic has challenged the best practice of using historical sales and consumption data to predict future demand and drive inventory decisions.

“It’s been really difficult to pick up an accurate signal about what products people want and in what quantities,” said Kilpatrick, the consulting firm’s global supply chain and network operations leader.

While retailers and manufacturers are becoming more nimble in responding to shifts in demand, he said the coming months will still be tricky.

“We’ve seen a tremendous acceleration to online shopping,” Kilpatrick said. “That puts a lot of stress on the system.”