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RS , T I E S
M E U N I
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G C O O P P
N G I N N E W
C H A
Retail & Consumer Journal
RETAIL & CONSUMER JOURNAL INTERVIEW
Retail & Consumer Journal
3. 4. 10.
Foreword Steve Henig Malina Ngai
Wakefern A.S. Watson
14. 19. 25.
Rui Barbas Gaston Bottazzini Maggie Chan
Nestlé US Falabella Sephora
29. 34.
Ferran Reverter Retail’s Revolution
MediaMarktSaturn How To Navigate It?
© Oliver Wyman 2
RETAIL & CONSUMER JOURNAL INTERVIEW
FOREWORD
Given that 2020 was — to say the least — different, senior executives in Asia, Europe, and the of applause. Food stores are now figuring out the
we thought we’d make our latest Retail & Consumer Americas, working in segments ranging from optimal combination of in-store shopping, delivery
Journal different, too. consumer electronics to beauty to food. services, and click-and-collect.
The COVID-19 pandemic triggered some of the They told us that many of the changes have been In all consumer businesses, the boom in online sales
most sudden changes ever in the retail and accelerations of digital transformations that were has led companies to rethink their interactions with
consumer goods industries. Demand for food already underway. Take health and beauty: Sales customers. That can mean new digital tools or a
and drinks shifted towards at-home consumption were already migrating online, but as stores were differentiation of store types, from flagship centers
and the food retail channel — and away from forced to close during the pandemic, digital orders to pickup points.
cafés, bars, and restaurants. Many of the retail doubled or even tripled in some markets. Those
and consumer sectors more affected by lockdowns retailers and brands that had already invested in In these ways, the pandemic is acting as a catalyst
and social distancing measures faced very online tools and interfaces such as virtual beauty for major, lasting changes, and consumers are now
challenging economics and had to find new ways advisers were better positioned thanks to the looking to see which companies best respond to
to engage remotely with customers. These trends foundations put in place beforehand. their needs in a new digital era. Real leadership
triggered surges in home delivery and direct-to- is especially important in this context: Companies
consumer businesses. Other segments have seen a sudden, unexpected that have taken smart and consequential decisions
tailwind, not only in volume but also in customer quickly are gaining trust and share.
Amid such upheavals, it is no longer enough perception. Many supermarkets and food
just to make incremental improvements and try producers had been increasingly seen by shoppers Before 2020, many of these challenges were seen
harder. Instead, leadership faces big questions as commodities, but the pandemic turned them as tasks for the future. Now, that future has firmly
over both immediate actions and fundamental into pillars of their communities. They provided arrived, faster than anyone had expected — and
strategy. To hear directly about the challenges, lifelines to vulnerable people at a time of difficulty, there is no going back.
opportunities, and solutions, we interviewed and staff in some locations were greeted by rounds
© Oliver Wyman 3
RETAIL & CONSUMER JOURNAL INTERVIEW Wakefern Chief Customer Officer © Oliver Wyman 4
RETAIL & CONSUMER JOURNAL INTERVIEW
How has COVID-19 affected your businesses look and feel of mobile applications or desktop.
and how did customers’ needs evolve during That is something that must take place internally:
this time? moving that sensibility throughout the organization
A BRAND
in a meaningful way so that everyone understands
Honestly, I don’t think anybody could have imagined the importance of digital. We thought we had
VOICE THAT
the far-reaching implications of the virus — how more time to implement the digital move, but
people shop, how they feel about safety and crowds, reality has taught us differently. That’s the
RISES ABOVE
and their embrace of all things digital. We’ve certainly challenge for us as an organization: How do
seen an uptake in many product categories that you accelerate digital engagement across our
allow people to meet their family’s needs. And that’s entire enterprise?
had a huge impact on us.
To your point, whenever I think about digital
Frédéric Thomas-Dupuis, Our ability to deliver the same products has and e-commerce, there are three barriers that
Oliver Wyman’s Retail & Consumer changed: We’ve had to close our hot prepared food come to mind: First, there is the digital interface
Goods Leader, Americas, spoke bars, place produce inside bags, package our bread of the e-commerce site; second, there is the
recently with Wakefern Food rolls when we previously would not have done picking and packing part where automation
something like that. So there’s been a widespread may be appropriate; and finally, the third piece is
Corp.’s Chief Customer Officer
impact on the supply chain in the US as a result of fulfillment — pickup and delivery. Do you feel
Steve Henig. Henig, who oversees
mismatched demand. Consumer packaged goods that COVID-19 has accelerated any one of these
branding, e-commerce, marketing, have been under a lot of pressure to deliver what or all three of them?
and advertising at the member the customer wants.
cooperative, is tasked with creating Due to unprecedented consumer demand, retailers
a single, consistent brand voice for That’s the 30,000-feet, bird’s-eye view. all across the US and the globe are reporting
customers. Their talk ranged from increases of online orders on the magnitude of
What’s been happening and what has stunned 80 percent, 100 percent, and as high as 200 percent,
the far-reaching impact of COVID-19,
everyone is the consumer's embrace of all things depending on who you speak with. Just to be able
to Wakefern’s unique structure
digital, something that under the impact of the to meet that demand and to make yourself available
and how digital will transform the pandemic has accelerated by about three years. to your customers with delivery time slots or pickup
sector. An edited version of their All retailers have had to move faster in their slots in real-time has put an enormous amount of
freewheeling conversation follows. embrace of digital, whether it’s e-commerce, the pressure on all of us.
© Oliver Wyman 5
RETAIL & CONSUMER JOURNAL INTERVIEW
And so for us, our goal is to expand our
e-commerce offerings in a more meaningful way:
Retailers all across the US and the globe are
more slots, more stores. We’ve opened up more reporting increases of online orders on the
e-commerce sites in the past quarter than we
have in the past two years and we continue to magnitude of 80 percent, 100 percent and as
open more.
high as 200 percent.
But e-commerce in its current format can’t
continue, and companies will need to embrace
automation in different ways. Also, automation
means different things to different people: to
some, it means full-blown centralized fulfillment
centers; others focus on micro-fulfillment centers; as an impediment to online sales, arguing that When it’s your own business, when it serves the
and to others, it means direct-to-customer. That e-commerce might pull sales out of their stores. community you live in and friends of yours are
said, all retailers are going to have to accelerate However, I think the way Wakefern is structured coming into the store — that is a deep level of
their comfort zone and embrace automation to actually enables members to be competitive. Do engagement. And so our members took their
meet strong customer demand. Because without you do share that view? role of protecting their associates and customers
automation, it won’t be possible to meet the very seriously.
customers’ expectations to have their products I have absolutely no concern about our structure.
in hand in just a few hours. And when you get What is powerful about our members is that all What was the division of labor between Wakefern
above double-digit e-commerce penetration in 50 of them are owner-operators and they’re very and the members during COVID-19? Was it more
your building, it starts to become very disruptive entrepreneurial. Many have seen the future around about headquarters providing support in areas
to your brick-and-mortar customers because item automation. Our structure is not an inhibitor — in that were cross-member challenges, such as
picking is taking place in the stores as customers fact I think it’s one of the key drivers of our success. sourcing PPE?
are going down those aisles and trying to shop. Our members embrace innovation — including
automation. Our structure is that we oversee distribution,
Wakefern is a cooperative group of supermarket logistics, marketing, and procurement. That’s
brands, consisting of more than 50 members who A core characteristic of your business is that your where the power of the cooperative structure
own and operate more than 350 stores throughout members own their stores. How did that structure comes into play. Wakefern is at its finest in a
the Northeast. In theory, the members could act help Wakefern respond to COVID-19? crisis and came together to procure as much PPE,
© Oliver Wyman 6
RETAIL & CONSUMER JOURNAL INTERVIEW
chicken, toilet paper — whatever was needed so that case, obviously, there are implications for assortment. I would imagine that a CFC would
that our members could operate at the highest fulfillment time. skew towards a homogenized offering, with the
level in serving customers. range of grocery products being limited, and
That’s a complex question — the jury’s still out on would have a hard time working with ShopRite’s
Let’s go back to the issue of e-commerce. As it. To answer, I have to step back and ask myself as differentiated offering.
we shift to online and digital, what’s your view the retailer/grocer what’s the range of time that I’d
on whether customers prefer direct delivery like to start with, what can I realistically support, That’s right. Again, it goes back to what’s the role of
or click-and-collect? How do you think that and then to your point, what’s the lead time that perishables in your building and how important is
might evolve? I need. it to maintain that range. Plus, what do you do with
local, because local is not going away. And so if you
It’s a fascinating topic and potentially one that a lot Because when you move into a full CFC (centralized think range is going to be a key differentiator in
is riding on. I think delivery to home for groceries fulfillment center) model, you’re going to sacrifice your communities, then a CFC will be challenged in
makes a lot of sense where you have Zip Code lead time, and you’re also going to sacrifice the range supporting that differentiation.
density — urban areas in other words. In many of products in a traditional store. Companies are
of the rural areas, success may hinge on retailers’ going to have to determine whether they’re going to Will assortments, promotions, and pricing
support of click-and-collect. Remember, most go to market with a CFC or MFC. There are benefits strategies need to be different in an
of America remains a car-centered society, with to each approach. But, again, it goes back to what e-commerce world?
people driving to and from their destinations. So the customer wants, what’s your line of sight on
for rural areas, we’ll see click-and-collect, while in costs, and what experience you want to deliver to Some adjustments will be needed to the marketing
urban areas, it will be more direct delivery. For our the customer. At the moment, however, there isn’t a mix — digital allows for a level of personalization you
members, it will be a confluence of the two. tight logistics model in the US to support direct-to- could never achieve in a store. There will be a shift
customer from CFC with margins to support it. So in how people shop and get information. There will
Let’s assume that we achieve double-digit it’s a jump ball on that one — you have to start with be offers they receive online that they won’t get
e-commerce penetration levels. Do you think the customer. offline: Eliminate the waste to give the best offer
the delivery in urban centers will be fulfilled to the customers who are most likely to receive
from a warehouse, whereas click-and-collect will To your point on matter of range: A winning the message.
be done from a store? And will click-and-collect strategy has been for grocers to provide more
take a centralized approach too, with picking differentiation. Do you see a shift in your The biggest challenge for the industry, it seems to
for orders being fulfilled from an MFC (modified marketing mix? Take ShopRite, which has me, is where we are today — that is, we still have
fulfillment center) and dropped off to stores? In moved toward a very broad and differentiated the grocer’s flyer, and at the same time we have
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RETAIL & CONSUMER JOURNAL INTERVIEW
a number of customers using the app or website I find that marketing generally sees where Plus, there are so many offers and ideas that it’s
— and where we want to be tomorrow, which we are headed in the future. Merchandising, a little overwhelming. ROI and technology are
is much more engagement. This interim period however, sees the same future but lacks the evolving every day.
makes it difficult to allocate capital — whether linkages to marketing so as to be effective in
to fund the app, the website, or partnerships this brave new world. Do you see that as a Let’s talk about other players in your market.
that can help with personalization. Is that challenge as well? What do you think of discounters such as Aldi
something that is a challenge for the industry, and Lidl? Does their future depend on digital? Or
or do you feel that is something that needs to It’s a huge challenge. The digital ecosystem is do their pricing strategies protect them from the
be done incrementally over time? complicated: There’s a staggering amount of incursion of digital? Are they formidable rivals or
complexity, vast oceans of customer data and fringe competitors?
This is something we discuss internally all the time. preferences, and all of it overlaid with algorithms.
The world has become an “and world.” We didn’t It’s a level of complexity that makes it difficult for I think the competition in the market is upping
eliminate circulars, we didn’t eliminate billboards, most organizations to wrap their heads around. everyone’s game. What I would say is that
and we didn’t eliminate network television. We That’s part of the reason why digital retailers “digital” is a bad label for what we’re talking
just supplemented our approach with banner have been able to move so quickly: They lack the about. Digital for a long time meant e-commerce,
advertisements, email marketing, social media, burden of a legacy system — digital is all they know. but digital is really so much more broad-based
and YouTube. So we’ve augmented the traditional Ultimately, however, merchants will understand than that. Many retailers have very successfully
mix with a vastly expanded marketing ecosystem. and leverage digital, but it’s a big lift at the moment. leveraged social media to drive sales — they’re
Companies will have to be very smart about
how they go about engaging their customers.
I think it’s a continuum: Customers are going to
move away from some of the traditional means
of engagement. That’s going to free up some
capital for investing in the new digital as a means
I’m confident that when the pandemic is in the
to interact with the customer. That said, I think rearview mirror, people will gravitate back to
companies are going to have to make investments
in the short run, of maybe five to 10 years, to fund getting a prepared meal, rather than making it
that journey so that they can stay connected to
their customers. from scratch.
© Oliver Wyman 8
RETAIL & CONSUMER JOURNAL INTERVIEW
finding the right digital tools that resonate with meal and a way to get in and out, while feeding Do you have a vision of the role of physical store
their customers. their family quickly — fast casual as well as quick in 10 years?
service. What happens with the likes of Uber
Big companies have the scale that allows them to Eats or Door Dash, is more people dialing up COVID-19 has complicated the trend that we see,
look at AI, machine learning, and other innovations. service on their smartphones and getting quick but in the US there was a steady march toward
I’m not claiming that the big companies have an delivery not only from a single food provider, but e-commerce, home-meal replacement, meals away
advantage, but they have more access to funds multiple ones. from home, and better and more refined unique
to find the technology that unlocks some of perishables. Those will be the north stars for
the challenges. Is e-commerce a competitive advantage for organizations for the next 10 years. But companies
the grocery space? will need to think of how to enable e-commerce to
What’s your take on quick-service restaurants? become central to their organization and design
Are they a big competitor that the industry needs It can be: I think there’s a fresh play here that can layout. How do I create the best presentation for
to take on? be very compelling to a customer. If you can have perishables? What are the best options for meal
a fresh heat-and-eat meal without having to drive replacement? I’m confident that when the pandemic
I think so. When I think about QSR, I’m throwing to it — that is delivered to your house and that can is in the rearview mirror, people will gravitate back to
in Applebees, Friday’s, and other restaurants be enjoyed by your entire family after 15 minutes getting a prepared meal, rather than making it from
like that into my definition — not just fast-food in the oven — then I think that is something that scratch. Those are things that organizations will need
operators. Customers are looking for a quick grocers can own. to think about as they consider building stores.
© Oliver Wyman 9
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MALINA NGAI
A.S. Watson Group COO,
Asia and Europe CEO
© Oliver Wyman 10RETAIL & CONSUMER JOURNAL INTERVIEW
How has COVID-19 affected A.S. Watson’s How have health and beauty customer needs
business so far? evolved and changed over the past half year?
The global economy has been hit hard by the We conducted a global survey in more than
HOW CARING
pandemic, and it’s been a very tough time for 20 markets in Asia and Europe, asking 22,000
retailers. But our mix of business, geographical customers about their shopping intentions post-
BRANDS CAN RISE
diversity, and strong financial foundation has COVID. One hundred percent of respondents said
enabled us to be very resilient. they will go back to physical stores for shopping,
ABOVE COVID-19
especially the Gen Z cohort. One-third of those
In February, 95 percent of our Watsons China surveyed said they will even shop more often in
stores were closed temporarily, which certainly stores while 80 percent said they will continue to
affected our business. But as restriction measures shop online.
gradually eased in Mainland China and as our
After excelling as a track and field stores began to reopen at the end of April, we The pandemic underlines the desire among
saw a robust sales recovery. customers for human connection. Our customers
star and a rower who represented
really want to get back to the physical stores to
Hong Kong at the highest level,
In Europe, footfall on high streets and shopping have the human connection again — touching,
Malina Ngai moved to the executive centers was severely impacted by lockdown trying the new products, and seeing the friendly
suite. Today, she is Group COO and measures. But because our major businesses are faces they know and trust.
Asia & Europe CEO of A.S. Watson, the considered “essentials,” most of our stores could
world’s largest international health and remain open during the lockdown. In the survey, more than 70 percent of our customers
beauty retailer. We asked her about told us that their income has been affected by the
In the first six months, our revenue dropped by pandemic. When asked about how their lifestyle
the impact of COVID-19 on A.S. Watson,
11 percent, but stepping into the third quarter, would change post-COVID, over 90 percent said they
looking specifically at the evolving
the decline recovered to low single digits. We’ve would take part in outdoor activities, followed by
health and beauty consumer needs and prepared well and are determined to get back to cooking at home and doing DIY beauty treatments.
what lessons she has learned from growth in the last quarter of the year. This means we will have to adjust our assortment
the crisis. swiftly and continue to enhance the online and
offline experience to serve customer needs.
© Oliver Wyman 11RETAIL & CONSUMER JOURNAL INTERVIEW
How did you react to the changes and to the We also tripled production of digital content to moving in that direction, where do you see your
operational challenges? What changes to your keep our customers engaged on social media. business and business model evolving? And what
business model did you introduce or accelerate? capabilities are you investing in?
And what are your key lessons learned? With respect to these changes, how much do
you anticipate returning to business as usual? Due to the pandemic, people had no choice but to
There is no instruction manual for how to lead at a If and when will we begin to get back to a more shop online. This saw our global e-commerce grow
time like this. We are fortunate that what we believe normal world? by more than 90 percent in the second quarter
in — loving our people and customers and the online of 2020. People have become more comfortable
and offline strategy we have been driving — plays its No one has a crystal ball on when the pandemic with e-commerce and are likely to stick with
most critical role during the crisis. will end and what the new normal means. Some online shopping in the future, which in the long
behaviors will stay, while some are short-term term will give online sales a boost. To stay close
We believe in loving and caring for our people. We COVID driven. One thing we are certain about is with our customers, we developed 30 to 50 percent
have 140,000 colleagues globally, and a majority that customers would want to associate more with more digital content for social engagement during
of them work in our stores. At the beginning of brands that care for their people, their customers, COVID-19. In a survey of our customers, more than
the crisis, we prioritized our immediate efforts on and the communities. The COVID pandemic has 75 percent felt that we had managed to stay close
their health and safety, proactive communications, reinforced our purpose to put a smile on customers’ with them in the midst of the pandemic.
and most importantly providing security. This has faces, on everyone’s face.
helped to keep our people together to fight the Online and offline continues to be our core
pandemic in high spirits. In this context, many retail businesses are business strategy and model. As mentioned, our
accelerating the shift toward online and direct global survey reveals the customers’ desire for
Operationally, we immediately adjusted our business models. With health and beauty human connection, and we believe these bonds
assortment to ensure we served the customers’
most urgent needs. We also accelerated our online
and offline capabilities.
We use digital to stay connected with our
140 million members globally. We enhanced our
One thing we are certain about is that
cloud technology to handle the surge of traffic to
customers want to associate more with brands
our online stores. We mobilized the organization’s
resources to handle order picking in stores in that care for their people, their customers, and
addition to our warehouses, so that delivery could
be completed within the shortest time possible. the communities.
© Oliver Wyman 12RETAIL & CONSUMER JOURNAL INTERVIEW
will become even more important in the future.
While we continue to invest in offering a seamless
As e-commerce continues to grow in every
online and offline shopping experience alongside market, brick-and-mortar stores will increasingly
industry leading technology, we’ve also been
working to build a lasting and close relationship serve as a “third space” — a place that is not
with our customers.
only about transactions, but also about human
Customers are more emotionally demanding for
relevance, care, and personalization, so we need to interaction with customers.
show them that we understand, we care, and we
want to stay connected to them. All technologies
are designed to enhance the customer experience,
but they can never take the place of quality service,
strong relationships, and personal connections
with customers. Customers want in-person service they can’t wearing facemasks, they can virtually try on any
get online. And they want to be able to touch lipstick product they choose. In addition, Watsons
And, how do you look at the role of your physical the products. Taiwan and Thailand introduced a virtual hair color
stores going forward? What will a store look like? tool in the mobile app to help customers choose the
To keep customers coming back to the physical right hair colorants in the store.
Physical stores and online stores are perfectly store, experience-based technology will be
complementary in our business model. As introduced in the store to appeal to customers. We recently entered the Gulf Cooperation Council
e-commerce continues to grow in every market, Apart from the debut of WatsonsGO, the recently market by opening our first Watsons store in Dubai,
brick-and-mortar stores will increasingly serve as upgraded ColourMe service has also been launched offering both the online and offline shopping
a “third space” — a place that is not only about in the Watsons app in Hong Kong, Malaysia, experience to customers in the Middle East, one
transactions, but also about human interaction Thailand, Taiwan, Singapore, and Indonesia. It uses of the world’s fastest growing markets for beauty
with customers. It is just as much — if not more — augmented reality technology to instantly and products. We view this opportunity to unleash the
about the customer experience, customer service, virtually show customers how they would appear potential of the Middle East market as an exciting
and creating a unique, engaging environment. with different looks. Now, even if customers are and important future growth engine for us.
© Oliver Wyman 13RETAIL & CONSUMER JOURNAL INTERVIEW Nestlé US Chief Strategy Officer © Oliver Wyman 14
RETAIL & CONSUMER JOURNAL INTERVIEW
The past months have been full of challenges for and eating at home more than ever before, which
NAVIGATING THE CPG companies. How has COVID-19 affected your
businesses so far and how did consumer needs
we have taken to calling the “at-home revolution.”
The consumer has been reintroduced to in-home
PRESENT AND evolve during this time? How are you looking
at 2021?
cooking and baking, and I think there is a structural
component in this, not just a cyclical aspect.
TRANSFORMING For a large food and beverage company like Nestlé,
People are evolving their habits, and we believe
this is an evolution brought on by the pandemic
FOR THE FUTURE COVID-19 had a tremendous impact on business,
and it is still affecting us.
but one that in many ways is taking hold for the
foreseeable future.
First, when you consider the massive spike in Nestlé and other CPG companies are also being
demand for in-home CPG products, across most challenged to fill in the void left by the loss of out-of-
Consumer packaged goods (CPG)
of our categories, you can imagine the impact home experiences available to them right now: How
companies have been severely tested that had on our supply chain. Supply chains are do you get that out-of-home experience in home?
during the pandemic, as shutdown not necessarily built to cope with sudden massive Now that you cannot go out to your favorite coffee
orders upended long-standing patterns increases. Our biggest challenge and commitment shop or bakery, how do you replicate those powerful
of eating and consumption. To has been: How do we continue to ensure our experiences indoors? Consumers are becoming their
understand the impact of COVID-19 on products are on store shelves and we are serving own baristas; they are trying new coffee recipes
our consumers, while keeping our people safe and and trying to reproduce the café experience. Our
the sector, Hunter Williams, partner in
supporting the communities in which we operate? Starbucks At Home site has seen increased traffic
Oliver Wyman’s Retail and Consumer
Our teams across the company, especially in our since the start of the pandemic as consumers are
Goods and Pricing, Sales and Marketing factories and distribution centers have come increasingly searching for recipe content, and we are
practices, along with Sirko Siemssen, together to deliver on these challenges. supporting them on the website and via social with
Global Retail & Consumer Goods ideas, recipes, and techniques to try.
Practice Leader, spoke with Rui Barbas, Second, the needs of the consumer have evolved
Chief Strategy Officer at Nestlé US. under the impact of COVID-19, with both structural Another profound consumer-driven impact was the
and cyclical effects on food and beverage companies very significant acceleration in grocery e-commerce
The conversation covered the massive
and CPGs at large. For example, at Nestlé, a vast and direct-to-consumer (D2C) penetration, which
changes that have taken place as a
majority of our US business is in-home products, more than doubled two or three months into
result of the crisis, as well as the long with a much smaller percent representing the COVID-19 and continues to hold. In some categories,
lasting impacts Rui expects to continue out-of-home business. Since the beginning of the it almost tripled. I wouldn’t call it a trend — it
into the foreseeable future. pandemic, we have been seeing consumers cooking was more of a speeding up of a shift that we were
© Oliver Wyman 15RETAIL & CONSUMER JOURNAL INTERVIEW
already seeing on the horizon for the industry. The engage consumers, but also in the way that you and the pandemic has not and will not divert our
immediate challenge was dealing with the reality run your supply chain and backbone. attention from it, neither in the US or abroad.
of exponential growth essentially all at once.
Despite all the transformation going on, in a crisis Finally, so much has changed in this year. I hope
Looking forward, most of the consumer trends and it is crucial not to lose sight of the future and of that some of the new ways of addressing and
impacts will persist into 2021 and potentially into your long-term strategy and goals. For example, embracing change, including the empowerment
2022, with some consumer behaviors shifting for take sustainability — at Nestlé, our purpose is to and agility in decision-making, will remain in the
the long term. unlock the power of food to enhance life today and post-COVID-19 landscape.
for generations to come and being a sustainable
In addressing those consumer changes and trends, company is a key part of that. It is also a core Zooming in on the out-of-home trend that seems
which adjustments and priorities would you element of our long-term strategy globally, both to have been disrupted, and the D2C trend that
highlight for the consumer products industry? from a business perspective and the point-of-view you highlighted: Will out-of-home dining see a
of the consumer. Throughout the pandemic we rapid comeback? And how does your investment
There is a health crisis and an economic crisis. have not only kept focused on our commitments, in Freshly (a service that delivers direct to the
We need to create products and solutions to help but actually advanced the efforts we have been consumer fully prepared, fresh and healthy meals
consumers get through both. We are committed to making across our markets. For instance, in the US ready in under two minutes) fit in?
meeting the needs of financially fragile consumers, we have announced industry partnerships to reduce
as well as the needs of those who are not able greenhouse gas emissions and made great strides Out-of-home dining will come back, but it will
to leave their homes because of shutdowns, yet in packaging innovation. These elements are very continue to face some challenges. Right now, there’s
at the same time want to have the out-of-home relevant for the planet and consumers expect it — a lack of comfort among consumers about eating
dining experience.
Also, certainly, e-commerce, D2C, omnichannel,
and other trends are here to stay. We at Nestlé
were talking about those trends and our approach
to them long before the pandemic. The priority of
embracing a truly omnichannel approach — of
There is a health crisis and an economic
bringing offline and online together — was obviously crisis — and we will need to create products
reinforced and accelerated as a result of COVID-19.
Also, the pandemic has accelerated the much- and solutions to help consumers get through
needed digital transformation across all aspects
of the value chain — not just in the way that you those twin crises.
© Oliver Wyman 16RETAIL & CONSUMER JOURNAL INTERVIEW
out that will take a bit of time to wear off. In the
long term, we believe part of the consumption that
Consumers have gotten reintroduced to the
shifted in home will stay — people will slowly start
to look for out-of-home experiences when they
enjoyment and comfort of staying and cooking
feel comfortable, but their habits and preferences at home and that will factor into how we as
as to how they balance in-home and out-of-home
time may have shifted. Consumers have gotten people come out of this period.
reintroduced to the enjoyment and comfort of
staying and cooking at home and that will factor
into how we as people come out of this period. Also,
many operators in the out-of-home dining sector
are potentially struggling financially. All in all, it will business we started more than 20 years ago, long and digital at large because we had to run business
require a lot of partnerships between out-of-home before the term D2C was coined. We also recently much more digitally and dynamically during 2020.
operators and others to work together to rebuild acquired other important D2C players such as We will take those learnings and experiences and
and reimagine the out-of-home dining sector. That Mindful Chef in the UK and Persona, a personalized continue to run even more efficiently looking
said, some of the out-of-home channels are starting nutrition business. In a nutshell, investing in D2C ahead. As for understanding where consumption
to bounce back, which is great to see. is a continuation of a path we have been on for was headed during the pandemic, we were guided
a long time and a structural trend that we see to a great degree by digital enablement, which
Freshly is indeed a D2C meal-solution proposition continuing in the future. Today, there’s both the helped shape how we planned demand and supply,
and fits nicely with our focus on delivering a wide consumer demand as well as the required level of how we operated, and how we engaged.
variety of delicious food to consumers when and preparedness from a supply chain standpoint to
where they want it — be it directly in their home, make these D2C business models effective. In this context, how have you approached the
in retail stores, or online. We want to provide issue of not being able to fully rely on “like for
unbeatable convenience, choice, and ease to our Moving on to digital preparedness: It seems to be like” comparisons that are so central planning
consumers wherever they are and however they the big differentiator between the “sheep and the and running to the retail and CPG supply chain
choose to shop. goats.” A key factor in that preparedness, in terms in 2020/21?
of infrastructure, is data analytics. How has 2020
We had taken an equity position in Freshly back accelerated that agenda? Look, the past nine months and the foreseeable
in 2017. This is not simply something that we are future have been anything but business as usual.
doing in response to COVID-19. Our interest in Across the entire value chain we relied upon Like-for-like comparisons were difficult in 2020, and
the D2C business model predates Freshly. If you analytics — be it consumer-driven analytics, will be difficult in 2021. That forces leaders to think
think about the Nespresso business, that’s a D2C production analytics, demand-signal analytics — through the expected impact of COVID-19, both in
© Oliver Wyman 17RETAIL & CONSUMER JOURNAL INTERVIEW
terms of the elevated consumption, and the future company in a localized way: Global frameworks have been humbled by their response. It helped
as the vaccines are rolled out. Because of this you of operating, but agile ways of executing locally. maintain consumer confidence in the food supply
need to approach financial budgeting in a much And this in a sense helped us navigate the chain and reassured the consumer that the shelves
more dynamic way and with a great deal of scenario pandemic — because our local markets had their were not going to be bare, thus reducing panic
planning — of course leveraging a lot of analytics own local supply chain versus a global supply shopping. There’s no playbook for that and it will
and digital tools. Also, this is where the role of the chain, which during the pandemic became stick in my mind forever.
CFO and heads of strategy become paramount. problematic for many.
They will need to keep different planning scenarios Witnessing the massive acceleration of e-commerce
in mind as we navigate this unprecedented period Finally, is there a moment that stands out that in just a few weeks also stood out: The expansion of
in a very agile manner. you’ll remember 10 years from now? the food and beverage e-commerce infrastructure
in the US practically happened overnight. It was
You are one of the most global companies. At There are a few memories that I feel will be lasting there previously but not to the extent that we see
the same time, there are different approaches to ones. The first is looking at the numbers early on today. And it’s not transient demand: We’re seeing
COVID-19 across regions and countries. Does this and realizing the enormity of the coming challenge a new plateau. And so, we also have to quickly
create new challenges between global ambitions for our supply chain. The fact that there was not evolve our business model and projections to
and local reality? a material interruption in the food and beverage sustain that.
supply chain in the US really speaks volumes
What you’re saying is valid. Having said that, food about the supply chain resilience. Of course, there Lastly, I am so proud how we at Nestlé came
and beverage is very local: The large majority of are always issues here and there, but generally together for our communities. From partnering
our products sold and consumed in the US are speaking the industry held firm and rose to the with the Red Cross globally to feeding seniors in
also produced in the US and that is the case with challenge. The agility of retailers, manufacturers, New York City with Freshly to donating more than
almost all our regions and markets globally — the and suppliers to cope with the spikes in demand 2 million meals to Feeding America and more than
products are produced close to consumption. was simply unbelievable. Seeing the front line 4 million bottles of water to relief organizations,
I would also add that the balance between local coming together to help the country and world get we mobilized in the US and around the globe to
and global hasn’t changed for us. We are a global through the crisis has been amazing to me, and I support our consumers and our communities.
© Oliver Wyman 18RETAIL & CONSUMER JOURNAL INTERVIEW
GASTON BOTTAZZINI
Falabella CEO
© Oliver Wyman 19RETAIL & CONSUMER JOURNAL INTERVIEW
Falabella is a diversified food and non-food retail comfortable with us continuing operations in
organization, operating in major Latin American our distribution centers.
economies. How has COVID-19 affected retail in
Latin America? Have you seen customer needs And the final challenge was to find a way to shift all
evolve? Has the effect been across-the-board, or of our efforts to a demand that was moving away
has it varied by segment and country for you? from the stores to the digital channels.
How has food versus non-food been affected?
Those were the four major areas of impact.
The impact has been very different by market, and Initially, most of our stores were closed, which
also by the sequence of events. But there are some meant that the volume of home deliveries really
common denominators: First is the effort that we’ve exploded. So while until the beginning of 2020,
had to make to keep operations going. And given home delivery was something we mostly did
that we operate in very different segments — from internally with our resources — our own distribution
ACCELERATING
food to home improvement, electronics, and fashion centers and contracts with independent transport
— we’ve seen each of these segments impacted companies — we now had to adapt ourselves to
ADAPTATION AT
differently. Second, there was a permanent focus on work with third-party logistics companies to carry
how to maximize innovation while minimizing the out this operation.
PANDEMIC PACE
level of risk for our team.
To circle back on the split between the food and
Initially, we focused on securing supply: Our main non-food business: In Europe, we saw a major
concern in February was not whether we would be difference in the impact of COVID-19 on the
able to operate, but whether our supply chain from economics of grocers and non-grocers. Grocers
Gaston Bottazzini is Chief Executive China would be interrupted throughout the year. actually did very well, once the issue of the supply
Officer at Falabella S.A., one of the chain was settled. We saw a shift towards major
largest South American omnichannel Another area of focus was to ensure liquidity in all “shopping mission” shops, rather than everyday
our operations. We prioritized this when it became convenience stores. Within weeks, a new model
retailers. Jim Bacos, a senior partner
clear that this coronavirus was a global pandemic had emerged for in-store shopping that seemed
with Oliver Wyman, sat down with him
and not something that would remain within Asia, to work.
to discuss the impact of COVID-19 on as was the case with previous coronaviruses.
Falabella and the economies where it On the other hand, non-food consumer
operates — and lessons Gaston has The third area of focus was how to implement the electronics, DIY and fashion in particular were hit
learned from the experience. right safety protocols so that the authorities felt with downturns of 90 percent, and many non-food
© Oliver Wyman 20RETAIL & CONSUMER JOURNAL INTERVIEW
retailers were forced to close for long periods. And finally, home improvement, where we Department stores is where we were impacted the
Was that mirrored in Latin America? command a high market share, was a line of most in terms of margins, because demand shifted
business that did extremely well. People allocated to electronics and away from fashion.
Again, it was an evolving story. For food, we had more of their incomes to improving and renovating
a shift in channels, not a decrease in demand. their homes, partly because they‘re spending more There was the increased cost of delivery, which
Quite the contrary, sales in general were above prior time in them, which made them more aware of placed major pressure on margins. This meant we
years, as consumers no longer had the alternative the wear and tear that’s happened over time. The saw stable sales, but our results and margins were
of going out to restaurants. combination of seeing the issues and having a greatly affected.
lot of time at home to take care of them created
As for non-food segments, it’s hard to generalize. substantial demand for home improvement. So Did you cover a lot of the increased online volume
Fashion was hit very hard and continues to struggle. that‘s one sector where we saw online demand through third-party logistics (3PL) providers?
People reverted to basics, such as underwear and and home-improvement needs creating activity
shoes, and felt less comfortable buying higher- in our stores. We had to increase capacity fast. So to supplement
ticket fashion items online, such as dresses or our delivery capabilities, we had to integrate two
fashionable shirts. What happened to the share of online purchases or three major 3PLs in the countries where we
in your businesses — did it explode? operate. That will shape our thinking on direct-to-
In electronics, the demand contracted initially, consumer logistics going forward, allowing us to
but then expanded due to home-office needs, To generalize, online sales represented about mix our own solution and 3PLs.
entertainment, and communications. In this 12 percent of total sales in the previous year. This
segment, good online channels sustained increased to almost 40 percent in the second And if we look at the food side: Was that home
themselves very well. However, if your business quarter of 2020. So in terms of sales, the online delivery or was that mostly click-and-collect?
was very dependent on physical stores, it didn‘t channel almost completely replaced the offline
do well because people were uncomfortable channels. That led to a major explosion in home Food — which was both click-and-collect and
going into stores and interacting with delivery volumes. home delivery — is the one segment where stores
other people. remained open throughout the pandemic. Stores
In terms of margin, the story is very different, continued to present a large proportion of total
Another of our strong segments is health and though again it differs by segment. In food, sales and online also grew substantially. Another
beauty. Sales in that business decreased and the margin was stable. In home improvement, distribution system that saw rapid growth was on-
were hit, particularly in beauty. margins varied. demand delivery. On-demand delivery had already
© Oliver Wyman 21RETAIL & CONSUMER JOURNAL INTERVIEW
been emerging in these markets even before
COVID-19. But the pandemic gave a huge boost to
Online sales represented about 12 percent
on-demand delivery: Demand for delivery of food of total sales in the previous year. This
orders within 45 to 90 minutes grew substantially
in all of these markets. We had a very fast rate of increased to almost 40 percent in the
adoption by our consumers: We went from zero
to 10,000 orders per month in Chile in a matter second quarter of 2020.
of months.
A colleague of yours in North America said that
one of the overlooked benefits of COVID-19 the past three years — and how far and fast will it Do you see a talent issue developing?
was that it provided volume for direct delivery. be changed?
However, the problem with direct delivery There are two things at work here. It‘s a talent
traditionally has been that it costs too much We feel the need to move at a fast pace, and not issue, of course, but it’s also a cultural issue that
money per unit to be delivered. But with rates just as a result of the pandemic. What is happening you’re trying to overcome.
of adoption having now doubled or tripled, he’s is that as the whole market is moving toward better
of the opinion that the economics of delivery solutions from a technological and logistics point Thinking about talent: There’s a shift in the profile
have fundamentally changed. Do you see of view. The consumer has become more willing to of the talent, you need to create engines of growth,
that happening? adopt these solutions. such as app development, direct marketing tools,
and business intelligence. We’re in the process of
The efficiency of on-demand delivery is driven both But the most relevant driver is the improvement recruiting those types of talent. In some cases, a
by the delivery and the picking economics. We are of the solutions. I see the solutions growing at a region like ours has a limited number of people
not seeing delivery economics improving much very fast rate and the competition becoming more that have that type of training. So, for example, we
as a result of volume. But the picking economics efficient, aiming to make shopping more consumer created a development hub in Bangalore, India,
have really improved as a result of the spike in friendly. Any players who are not moving at this which complements our technology organization in
volume, which has allowed for the construction of pace will be left behind. Chile, and helps us move much faster in terms of
dark stores. Without the volume, you cannot build developing technology solutions.
dark stores. In my own experience, one of the challenges
that retail organizations struggle with most as But that‘s only one capability profile where we have
How different do you think your channel structure they move in the direction of data analytics and been able to recruit the right type of talent. The
will be in three years compared to what it was in digitization is the profile of their workforce talent. other is cultural: The whole organization needs to
© Oliver Wyman 22RETAIL & CONSUMER JOURNAL INTERVIEW
be on board with these shifts. Therefore, people financing initially, but then it became focused The biggest surprise for me was the ability of a
need to be aware of how the online and physical on the transactional relationship and payment whole organization to work remotely, and to see
channels complement each other and how this solutions. Now it‘s aimed at the payment remote work actually help break some of the
is not a channel competition, but rather a set of experience both in-store and online, ultimately hierarchical and organizational barriers across
solutions that will make the customer’s life easier. complementing our retail offerings. our businesses. It made us more horizontal in
We’re making a great effort to train people in how our interactions and helped to boost some of the
these solutions work together. We have the Falabella Another example is when we look at the countries cultural changes that we were seeking.
Academy, where hundreds of associates learn about where we don‘t have all the pieces of our ecosystem,
technology and logistics, BI, data analytics, and how for example in Brazil, where we’re working with Can we assume that this is going to be a
all those capabilities help improve the business. third-party marketplaces. So, depending on the permanent change?
market, we will build different types of partnerships
If you look at China, there are retail ecosystems to complement our ecosystem, but our main focus I think one of the challenges ahead is to find out
that are built up around the entire portfolio of is on enhancing the businesses we operate. whether we can project the reality that we are
what people buy and do and how they entertain seeing now into the future. It‘s like when you build
themselves. And then on the other side is classic One more question about people. The biggest a dam in a river. You know the river will change
retail, for example the Amazon purchase of surprise for many business leaders has been just direction — and that once you remove the dam, the
Whole Foods, a relationship where each can how well they could operate with fewer associates river will return to its previous path.
learn and profit from each other. Do you see in the stores than ever before. Going forward,
that evolving in either your company or in many plan to have a dramatically leaner number We‘ve seen very drastic shifts over the last six
your continent? of associates in stores. Do you see that happening months. However, once we bring the COVID-19
in Latin America? barriers down, we will go to a new balance. But we
We are moving in that direction. It is not clear will not go back to where we were.
whether it will be through partnerships. But if In Latin America, we went through a very drastic
you think about our acquisition of Linio a couple reduction in overhead and then simplified our What is the one thing that keeps you up at night?
of years ago, an online marketplace, it meets our organizational structure. I think that same mentality
main objective. We aim to complement our retail of simplification is taking place in the stores, taking The main thing that keeps me up at night is the
business with a marketplace platform and as a advantage of technology to automate. That also need to increase the speed of execution. What
result, have a more attractive assortment and means people’s efforts can be invested to really add happened over the last six months brought a
better customer experience. value to the customer. great deal of pressure to rapidly react to shifts in
customer behavior. That pressure will not ease
Another example is the development of our What has been most surprising for you about the up as we move forward. We have very ambitious
financial services business. We concentrated on past six months? plans of putting our e-commerce under a common
© Oliver Wyman 23RETAIL & CONSUMER JOURNAL INTERVIEW
umbrella. So if there is one thing that keeps me up never have imagined. Had we moved faster in like Falabella and the rest of the retail and
at night, it is the question how fast we can execute building out a digital ecosystem and creating digital financing ecosystem. Our move toward creating
on all the different initiatives and if they can truly capabilities for our business, we would have been in a marketplace — of doing it not just with a view
improve the customer experience. a much better position during the pandemic. of improving assortment, but of opening up our
platform to entrepreneurs and small businesses —
What did you learn earlier in your career that What lessons do you hope to take with you is an example of how we can become a more useful
helped you to navigate these dangerous waters? moving forward, having gone through this very player in the overall ecosystem.
difficult time?
I actually began in the agriculture sector. From The issue of cooperation is something that is not
that experience, I learned that you have to stay on I think the one thing that helped us, and that I’d often mentioned, because every company is more
the course and not overreact to very short-term like to continue moving forward, is that intensive focused on its own survival. But I think cooperation
shifts. It‘s a bad idea to keep changing your actions levels of communication are very important. As between smaller and bigger companies can create
because it rained yesterday or because something organizations, we tend to underestimate the a better offer for the customer. We have a lot of
is happening with your next-door neighbor. importance of communication, we often feel like small businesses that wouldn‘t have survived if
we are repeating ourselves and get bored of our not for the marketplace business model, because
The pandemic has brought on a lot of changes, own message. they don‘t have an online channel. I think that the
some of them long-term, while others may pass us larger players becoming a channel for everyone is
by. Of course, you have to act in the short-term, but The reality is that organizations and markets take a extremely influential and important moving forward.
you also have to make sure you hold steady on your long time to digest those messages. So you need to
future plans. Constantly changing strategy is a very keep repeating them again and again, even when
bad idea. you feel like you are getting tired.
The other big takeaway for me, is the notion that Is there anything else you’d like to add?
you‘d better be prepared to confront the long-term
trends quickly, because events like the pandemic Going forward, we will see an acceleration of
can accelerate those trends in a way that you could greater cooperation between larger companies
© Oliver Wyman 24RETAIL & CONSUMER JOURNAL INTERVIEW
MAGGIE CHAN
Sephora Greater China
Managing Director
© Oliver Wyman 25RETAIL & CONSUMER JOURNAL INTERVIEW
How has your customers’ behavior in China with our customers. Unsurprisingly, private domain
evolved in the past 12 months, and how have traffic has become very much top of mind for online
they been engaging with you and your channels business in our sector.
and brand?
BRINGING
Finally, the pandemic has not only driven change
The past year has been transformative in many ways. in how customers shop, but also in what they
OMNICHANNEL
Let me focus on a couple of points and how they are looking for in terms of product proposition.
relate to Sephora and our direction going forward. We have noticed an increase in the awareness of
BEAUTY TO THE
sustainability and in how sustainability connects
The first — and most obvious — point to touch with wellbeing. How do you maintain your health?
NEXT LEVEL
on is the shift to online consumption: COVID-19 How do you maintain your wellbeing and healthy
underlined and substantially expanded the lifestyle at home? How do you manage for things
importance of online channels for all retail, not just to be uncluttered, given that everything is arriving
beauty. The rapid expansion of digitization enabled in a package? In China, this sustainability trend
us to reach and engage our consumers — despite has translated into a desire for products that are
the temporary offline constraints of lockdowns. simple, direct, and uncomplicated, and packaging
2020 marked Sephora’s 15th year
that is less wasteful. The simpler, the better.
operating in China — and what a
The second, somewhat linked aspect are the new,
year it turned out to be for the multi- much more direct ways we now engage with Interesting! Let’s zoom in a bit further on
brand beauty retailer. Recently, Sirko shopper communities and individual customers the private domain point you made. Why is it
Siemssen, Senior Partner and global online. Last year gave a strong boost to live- that private commerce membership schemes
head of Oliver Wyman’s Retail & streaming, social media connectivity, and private and communities are growing so rapidly and
Consumer Goods practice caught up domain sales. These approaches are enabling us effectively in the prestige beauty sector?
to connect one-on-one with our customers and
with Maggie Chan, Greater China
build a community around our brand. This in turn Prestige beauty retail has traditionally been closely
Managing Director at Sephora, to
allows us to better understand customer needs tied to stores inside shopping malls and department
discuss the impact of 2020 on the and trends, to more effectively tell stories, to stores, and relied on a “private domain experience,”
company’s business model and its explain innovative brands and products, and to in terms of personal advice and product testing. The
plans for the future. add an emotional dimension to the relationship usual online experience is radically different from
© Oliver Wyman 26You can also read
