"One way traffic" to e-commerce – life after lockdown, according to Unilever
“One way traffic” to e-commerce – life after lockdown, according to Unilever
Thu, 05/07/2020 – 03:14
- A Stakeholder Capitalism veteran, Unilever has adapted its strategy to the current COVID-19 crisis, using digital skills and analytics to stay on top of changing circumstances.
The COVID-19 pandemic has, as we noted last month, put the notion of Stakeholder Capitalism to a cruel test. To date, many organizations have pivoted in this direction – for how long remains to be seen – while a few have been found decidedly wanting.
While the term Stakeholder Capitalism has been given raised profile through the efforts of the World Economic Forum (WEF) and key members therein, it’s a concept with roots that date back centuries. Back at the start of the year, we took a look at a pioneer here in the shape of global conglomerate Unilever, founded in 1860 with a philanthropic mission built in. As current CEO Alan Jope explained:
We have over 100 years of DNA that encourages us to do the right thing for multiple stakeholders, for the planet, for society. If there is one reason for the enduring success of Unilever, it’s the trust that we’ve built up with multiple stakeholders by having a [business] model that shows that we care about things that are more than just profit.
As he spoke back in January, the first news was coming out of China about the COVID-19 outbreak. Flash forward four months and Unilever, in common with all organizations, has been making course corrections in its strategy, such as adapting to the accelerated shift to online retail and making protective moves to shore up its global supply chain, a pain point for many retailers in the early weeks of the crisis.
That latter objective is particularly important in the current crisis as Unilever is a supplier of multiple healthcare and hygiene products. Part of founder Viscount Levenhume’s mission statement back in the 19th century was “to make cleanliness common”. It’s 2020 and “Wash your hands!’ is being drummed into us all with a frequency and urgency most of us haven’t encountered since we were young children.
Hardly surprising then to discover that producing more products to address this need has been a priority. Jope explains:
Prior to the COVID-19 outbreak hand sanitizer was an absolutely tiny part of our business yet over the last two months, we have opened up more than 30 new production lines, including many third parties to make hand sanitizers. In the UK, we converted one of our plants in just three days to support this effort. Our first priority has been to serve frontline health care facilities with sanitizers.
Such directional shifts are commonplace now, but it’s not as simple as arguing that change is a constant. Jope notes:
One of the unusual features of this crisis is how it feels like the world is at a complete standstill and yet things are changing at extraordinary speed. The rate of change that we’re witnessing is faster than I think any of us have ever known…It’s also in this context that we’re discovering the true responsiveness of Unilever, and the value of our closeness to consumers and markets in the many countries around the world where we do business.
The response to the pandemic cannot be looked at in some kind of global aggregate. In particular, the consumer reaction in different countries is appearing, for example, in a lack of stocking up in the developing world through to enormous panic buying in the United States. Governments are taking unprecedented action to protect lives and economies with lockdowns and curfews in most countries. And that’s having a knock on effect on the economy, where whole industries are facing a crisis of survival.
Previous investment in analytics and digital transformation is helping Unilever to keep on pulse with changing circumstances, says Jope, as well as nurturing longer term prospects:
Early in the pandemic we changed our monthly operational forecasting cycle to a weekly basis, so that we can replay it to respond to the rapid changes in consumer demand. We’ve been using our digital people and data centers to pick up changing consumer sentiment early. When we tap our unique local debt of consumer insight, and frankly a newly discovered organizational agility, we think it’s a potential to permanently unlock new sources of growth for Unilever.
We’re also drawing on our adaptability by quickly redeploying teams from parts of the business with low demand tell in the areas that are seeing high demand. This has been enabled by a digital internal talent marketplace called Flex, that matches employees who have capacity with opportunities to do interesting new types to work. So far we have redeployed over 3000 people…We’re seeing the power and agility of the flattened Unilever organization structure, with short chains of command to our market…This proximity to our markets means that we can respond quickly with the right balance of good execution of global direction, coupled with high quality decisions that are being taken by experienced and qualified people on the ground, close to the market.
In common with wider trends seen across the sector, Unilever has also benefited from the uptick in online grocery shopping as well as the boost for e-commerce in general:
E-commerce grocery sales have rocketed. For example, in the US we’ve seen our e commerce sales doubling and, as a total company, e-commerce sales increased by 36% in the first quarter. This change to online shopping and online media consumption is another factor that we think is going to have a lasting impact, as we saw with SARS and the swine flu epidemics, which really were points of inflection for the consumption of digital digital media and online shopping in China.
As for the all-important supply chain, while the early days of the crisis in Western economies saw a general panic hoarding of toilet rolls and shortages of hand sanitizers, Jope is confident that Unilever can meet demand:
I am very confident that we will continue to be able to produce and supply. Funnily enough, the only thing that has been a material disrupter is people to work in our supply chains, when government imposes such an extreme lockdown that people can’t get to work and we have to make emergency short term arrangements.
We’ve done everything you can imagine. We’ve recruited fleets of cars. We’ve put them in special buses with people physically separated. So getting people to work is one challenge when countries go through that initial government overreaction. Then we go and tell them, ‘Look, you don’t want to cut back on supplies of hygiene products and food’, and then they relax.The fastest example that we’ve had was in northern Italy, where there was a complete shutdown and within four hours we got a relaxation order for the essential goods that we make.
Life to come
As those lockdown orders begin to be relaxed around the world, attention is turning to what lies ahead. In common with the majority of his peers, Unilever’s CEO doesn’t claim to have all the answers:
There are many known unknowns things that we know we don’t know, such as the progression of the virus, including second waves, the development pathways for both antigen and antibody testing, the treatments and vaccines. We don’t know the skill duration of government containment measures, nor the mechanisms to unwind social lockdowns and therefore the severity and duration of the resulting economic crisis.
But there will be further change ahead that will need to be factored in to long term planning:
We’re thinking beyond the virus and setting ourselves up for a future where we can emerge from the crisis and strengthen positions at the start of the year we said are our five growth fundamentals, as the key leavers for driving growth in categories we compete… I think there’s absolutely no doubt that there’s going to be lasting changes on the importance of value. I think we are going to go into tough economic times for an extended period, We know that this has a strong impact on people’s hygiene behavior. We know that from things like SARS and swine flu in China.
We know that it will be a permanent shift to online shopping…there is one way traffic towards online grocery shopping and online shopping in general, and it will be an accelerator of the trend towards proximity shopping, which we had already been seeing, and are seeing at scale, right now, in terms of categories and business models.
Image credit – via Unilever.com