How Retailers Can Prepare for Disruption From COVID-19

With current concerns about the impending severity of COVID-19, consumers are taking steps to prepare for personal impact — even to the point of major retailers selling out of supplies such as water and hand sanitizer.

Another consideration for retailers, however, should be peripheral effects on the entirety of the supply chain, given China's heavy hand in our manufacturing and shipping economy. China is the top source of imported goods for 65 countries globally, including the United States.

Much of the inventory coming from China takes 30 days to ship, so, given the Chinese New Year holiday and unprecedented quarantine of the Chinese population, most of the existing inventory already arrived in late February.

In addition, many suppliers are reliant on shipping containers that arrive from China in order to fulfill deliveries throughout the nation. Therefore, even if supplies and parts are made in the United States, the downstream effects of being unable to deliver domestically will impact the supply chain in the near term.

Retailers need to carefully monitor inventory as well as relevant communication in order to mitigate losing potential or loyal customers. Here are a few considerations as retailers prepare for a potential shortage or delay.

Marketing teams should be in close alignment with supply chain teams to understand inventory.

Retailers may need to reconsider previously scheduled promotions in order to align with desired margin, revenue and inventory for Q2, and potentially beyond. Historically, companies that have continued investment even in a downturn are more successful in emerging on the other side. Promotional schedules and spend may need to change, but by being more cognizant of where consumers are in their life cycle and more conscious of the relevant touchpoint, companies can continue to fill the funnel for re-engagement activities and subsequent conversions once they're able. Ceasing spend altogether may be short-sighted and ultimately have deep fiscal impacts to the business.

Ensure any transactional fulfillment messages are married with current inventory, and pause any disparate messaging.

Manage customer expectations if inventory is low or may be delayed, especially as fast shipping becomes an increasing expectation. Low inventory may still be a surprise to customers. Don't let them get caught off guard after they've already purchased, as it may be a risk for retention. In crafting communication with the customer, ensure it's concise, transparent and timely, and be cautious of messaging specific to COVID-19 so as not to seem like companies are capitalizing on the outbreak. If relevant, consider directing consumers to an FAQ page that speaks to shipping practices employed to mitigate any disease transmission.

If not yet established, create a committee to understand all aspects of relevant customer touchpoints, from sales and service to advertising.

This should also include any third-party fulfillment companies (e.g., Amazon.com) to determine potential impact to delivery. Currently, e-commerce sales still only make up about 11 percent of overall retail revenue. The industry at large may see a temporary uptick in e-commerce activity, given consumer hesitation to being in crowded spaces. Though it’s a much larger initiative, companies should embark on connectivity efforts where possible to understand that shift from offline to online — and how to capitalize on it to create more loyal online shoppers.

As retailers work through the implications of a looming global pandemic, managing customer expectations through their end-to-end experience will cultivate better relationships, even in unprecedented territory such as this.

Kerri Driscoll is vice president of marketing strategy at Merkle, a global, data-driven, technology-enabled performance marketing agency.