August 17, 2020

Forecast: Brands & Distribution Post Lockdown

At Pattern, we make it a habit of looking forward and trying to predict what is coming in the world of digital and commerce to help our brands and ensure we can continue growing globally at pace.

There has been a lot of content put out there about the immediate impact of COVID-19 and what businesses are facing globally. But what does the future hold? A few thoughts below that might help you take some important decisions for your business to ensure you adapt and prosper as it doesn’t appear COVID-19 is leaving us anytime soon.

Shelf space

Big department stores are downsizing or closing unprofitable locations. Brick and mortar locations generally are being consolidated as shopping trends change. The reality of this scenario means there is going to be a long-term battle for existing brands to get traditional shelf space and be front of mind for consumers.

Digital is an obvious extension for brands to lean into, however Direct to Consumer (D2C) sites are not always the best extension for brands. They can be an expensive proposition to run and drive awareness to consumers, so much easier to go where the traffic already is and look towards marketplaces. With established marketplaces, you have the opportunity to reach a large audience and then it is only about attracting them to your brand and product.

The key to success here is going to be working with the right partners to ensure success in your chosen country.

International without the cost

A strong trend that is emerging with brands is a desire to grow international to mitigate a reliance on single markets—this is nothing new. However, with the strain on budgets and cutbacks rife across most industries, there will be much less desire to sink costs in building remote teams and infrastructure. Brands will be keen to avoid anything that may be a drag on profit during downturns or shock events, and so they will be looking to gain upside with an expanded distribution network but in a way that removes risk.

Discounting will be rife

Given all the store consolidation and closures, I think we are in for an unprecedented run of discounting. This may not even be the brands directly but their distribution partners that are in financial trouble and need to generate cash quickly to meet immediate demands.

Brand should be very careful about who they engage and ensure that any partner has a strong balance sheet and will be able to weather an uncertain future in the near term. I would personally avoid any partners that have a strong reliance on offline sales networks as we see this to be particularly risky over the foreseeable future.

There will also be breakdowns in long term relationships between brands and distributors as companies are forced to engage in short term discounting to keep afloat. No doubt turbulent times are ahead.

Supply chain impact

The quick shift to online has put a strain on even the most advanced of supply chains. The last mile capability is probably the most flexible, and this can be increased by bringing on independent contractors. However, storage space at warehouses and long-haul freight will be harder to spin up quickly, and so I can see costs rising until supply can meet demand. This may take some time as regular warehouse shutdowns and issues with quarantine will be a regular occurrence as we work through the pandemic.

Brands will only succeed by making hard choices and diversifying their distribution channels. This may mean the ending of old relationships, adapting to the new focus on digital, and engaging with brands that can be a one stop global distribution partner. Either way, in a world of disruption, get ready for some more.

To find out what Pattern solutions could help your brand navigate the “new normal,” reach out to Pattern below to schedule a consultation of our services.

More Resources
Amazon Benchmarking Report 2020
Selective Distribution in Europe 2019
Amazon Global Insights Report
The Great Debate: Is Revenue More Important Than Profit?