Company survival during the downturn might depend on finance chiefs' willingness to spend money on real-time analytics and marketing, even if their revenues are down, so they can take advantage of shifting consumption patterns, a planning consultant says.
Start with restaurants. For many of them, whether they stay afloat over the coming weeks as people shelter in place could depend on their take-out and delivery business. This will require getting the word out that they’re competing for that business.
"You have to spend money right now to make it," Brian Kalish, a financial planning and analysis (FP&A) consultant who works with many consumer-facing businesses, told CFO Dive. "You still need to be getting the message out, but you have to be sensitive to the environment; 'Hey, we can do take-away service and delivery. We’re still here.'"
If your sales are down, it can be hard to set aside that money, but CFOs armed with real-time data analytics capability can do modeling that shows the importance of leveraging the available market niches.
Kalish pointed to data showing an increase in alcohol consumption, of between 30% and 200%, since the start of shelter-in-place directives. For a spirits company whose sales to restaurants and bars have plummeted, getting inventory to retail outlets, and available for home delivery, can be a lifeline.
But due to varying state laws governing alcohol transportation — laws that can differ even between counties — it's mostly cost-effective to have the data and analytical capabilities to model all the variables out.
"Instead of having humans go through all the regulations and figure out if you can ship or can’t ship, you just put that all in your model," he said. "Let’s say you can ship wine and beer into Michigan. It makes sense to pay for a marketing campaign there. 'Hey, we can send your favorite case of beer to your door.' You wouldn’t necessarily do that marketing in Virginia, where there are restrictions on what you can do. If you want to double your sales in Virginia, where the state owns the ABC [alcohol beverage control] stores — which have been deemed essential businesses in the state — that’s a different scenario. ABC stores only have so much shelf and storage space, so they’re going through stock more quickly. And what online sales are available to you there?"
One of the quirks of the downturn in retail has been an increase in shirt sales while pant sales have dropped, presumably because people participating in video conferences while working from home are paying more attention to their appearance from the waist up. Whatever the reason behind the trend, CFOs can model that kind of change to justify a shift in how resources are allocated within the business. But to pay off, the modeling has to be done in as close to real time as possible.
"If you’re the one who ramps up on shirts right before the demand kicks off, you’ve got the supply," he said. "That’s where the value is. It’s that speed to insight."
If your system isn’t set up to do real-time analytics, any modeling you do will be based on backward-looking data, which puts you behind the trend and at a disadvantage to capitalize on it.
Kalish said he’s hearing from companies prepared to invest in real-time analytical capabilities, because the downturn has shown them the limitations they face if they can’t plan for and capitalize on shifting consumption.
"They’re realizing they’ve got to have this information," he said. "Data is great, but it’s got to be converted to insights, and then into knowledge, and in the end, there has to be an action involved. And because the speed from data to action is at such a premium right now, companies are spending. Five years ago they would have said they can’t do it, but because of the crisis mode we’re in, [they're] doing that."
The right analytics capability can provide insight not just on whether shirts are outselling pants, but what style is selling best, and whether men’s or women’s clothes are increasing.
For companies with a regional or national footprint, real-time analytics can also help create models based on what’s happening in parts of the country hit first by the virus. In other words, what’s happening in New York today could be happening in other parts of the country two or three weeks from now.
"Because of the wave nature of this pandemic, New York is three weeks ahead of most of the rest of the country, so from a retail perspective, we can start to see behavioral changes and then adjust inventory," he said.
Rolling forecasts help
Companies doing their forecasting on a rolling basis are at an advantage, he said, because they can use their data analytical capabilities to modify their forecasts as they go along.
"Budgets are being thrown away," he said. "It’s 2008 all over again. But with rolling forecasting, people are adjusting to what’s happening. There’s nothing to look back on. That’s part of the challenge. But you do have this wave effect. For large organizations, you can start seeing things that stop selling and those that are selling and, to the extent you can, you start making more of the things people are buying and ramp down what they’re not."
This insight isn't just for surviving the downturn, he said. It's for being ready to ramp back up once the time is right.
"We know the shelter-in-place mandates are going to be lifted at some point," he said. "There are few produce companies sending trucks to restaurants right now. But at some point they know they’re going to get that demand and are they ready to then shift? And, operationally, your grocery stores are going to start ordering less. How soon can we know that? That’s what everybody should be doing right now."
Which is why you need to make two investments if you haven't already. The first is in data analytics, so you can do planning in as close to real-time as possible, and the second is in marketing, so you can leverage shifts in consumption patterns as you find them.