COVID-19 effects on consumer behavior - Live Webinar (5-14-20)

Welcome everyone to SureFront's weekly webinar series at 11:00 AM Pacific. I am your host, Dylan Lowe, and also the Director of Marketing at SureFront. Today we're gonna be talking about the effects of COVID-19 on consumer behavior. Very excited about our panelists today. Tom Schwarztrauber, who is the senior executive, or one of the senior executives at the world's largest food company, Nestlé. He's been there for around 20 years. I would say personally he's one of the foremost experts on consumer behavior. He's a very, very engaging speaker. Also, don't forget, at the end of this we will have a Q&A for about 15 minutes. If you see at the bottom of your screen, there's that little Q&A button. Try not to use the chat button, just that Q&A button, and you can start entering your questions at any time right in there. If you have any right now, right now, go ahead and type them in and we'll answer them at the end. And without further ado, Tom, thank you for being on, and I will hand it off to you now.

Thanks. So, um, good afternoon everybody. Uh, Dylan had asked me maybe a month ago if I could talk about what was happening with coronavirus and how it was impacting consumer behavior. And we had already begun seeing really dramatic shifts in consumer behavior back all the way back to about 2013. So you can imagine what coronavirus has done within the landscape. Uh, when I presented at the Global Retail Conference back in 2018 I had mentioned to the room that the average retail buyer has 13 meetings in an 8-hour day. That is in large part due to what technology has been doing, not just to shoppers who are tremendously empowered— I mean, grab your cell phone— but how retailers are responding to that through technology. And we're in a place now where I believe Credit Suisse indicated a couple weeks ago that the retail landscape, the things that most retail pundits had forecast for retailer— retail and the whole landscape they're in for the next 48 to 60 months, that has pulled forward within a 2-week window, the first 2 weeks of coronavirus. When you look at behavior itself, it is unfortunately Changing by the news cycle. That is not a very complimentary statement if you're on the desk at one of the retailers, because you are always, almost always, in a moment of change. So before I go too far, I was asked to make sure everyone understood what was actually occurring within the whole genre of retail, and that is who's running the show. There is a continuous struggle for power. For who's driving the bus, and it has changed over time. And you can see on the screen, from World War II to about the mid-1970s, manufacturers were at the top of, of this hierarchy of power. Basically, they were mass-producing with scale. This is the era where retailers would stack it high and let it fly. Shoppers were at the bottom of the heap. Shoppers were really forced to select whatever products were available or being made available by the retailers within about a 3-mile radius of their home. There was no internet at the time, obviously, and catalog activity was pretty minimal. And that changed, and it changed fairly significantly by about the mid-1970s. That is the dawn of the computer era and how it began playing across the landscape. Retailers were harvesting a whole lot of data. In fact, they began knowing more about the shoppers buying the brands than the manufacturers who made them. So if you look at this hierarchy of power, suddenly retailers are now at the top, manufacturers slide to number 2, shoppers are still on the bottom. Shoppers have expanded their radius of who they will purchase from to about a 5 to 8 mile radius from their home.

Tom, sorry, real quick, just want to say that the top bar on your screen, just noticed it now, the Bang Olufsen bar that you have there, I think it's on your screen, is covering up some of your slide. It might do that with the next ones too.

This?

No, it's a top bar, it says Bang Olufsen and has a microphone symbol on it as well. Yeah, that one right up there. I don't know if you're able to—

I don't know if I can make it go away.

I'm not sure if you're able to minimize that. You might want to pull out of full screen and then just try to maximize your screen. Oh, there you go, that worked perfectly.

So thank you. Thanks, Dylan. So this is, if we're talking about the late '70s to early 2000s, this is the era where we typically saw zone pricing come into effect. You saw localized assortments, but this all changed very significantly late '90s, early 2000s when the internet came on the scene, and certainly when smartphones did. Shoppers rose to the very top of the heap. Retailers took a terrible fall from number 1 to number 3. And retailers who used to worry about who they were competing with within that 8-mile radius of a home are now competing with global competition. And this is why, coming into the coronavirus situation, retailers were already in a fairly nervous and precarious place. Okay, so we need to talk about what is influencing the shopper psyche before we even talk about where they are today. What has, has basically been their world for the past 8 weeks that is influencing their decisions already? And the unfortunate truth about the slide I have on the screen right now is it's already dated. I made this for Dylan about a week ago, and it has shifted again. Uh, you can see on the screen that about a quarter of U.S. households were already being negatively impacted by what was occurring with coronavirus in the economy. Um, significantly negatively impacted means your income has to be reduced 25% to 100%. As of yesterday, that is now 49 million households, which is 40% of all U.S. households. Um, this is extraordinary because if you look at the middle of the screen, you can see another third, which some have now moved into the box on the left, another third were well on their way to being part of this group. Okay, so the economy is weighing heavy on a lot of our shoppers' hearts. And that kind of figures as we look at this slide, where we, we can see over 90% of shoppers had really awful in-store experiences throughout this homestay coronavirus scene. Nightmare is a word that figures prominently, and there were certainly plenty of toilet paper memes that we could all go, go and look at. But I think what matters is when you look at the, the purple bars on the right, Over 40%, when they saw the out-of-stock or couldn't find what they were looking for, they bolted and went to another store. But an equal number simply went without. So you can already see there is fallout from basically the economic situation. When we look at the next slide, one of the really astonishing elements of this slide is the fact that from 2011 to 2018, shoppers were actually rationalizing their retailer set. And what I mean by that is, when you look at the drivers of shopper satisfaction, 3 always pop as key. It's always price, value, and convenience. They change order depending on, well, what year we're in and how strong the economy is. And for the past 3 years, convenience has been king. Okay. And if you were viewed as an inconvenient retailer, you didn't just get removed for a period of time, you were removed forever. That is, that is a big thing. And from 2011 to 2018, across the entire realm of retailers a shopper shopped, almost 30% of them had been truncated. And within the core retailers that you shopped, meaning the one that you hit every 4 weeks, over 25% had been culled. So what happened with coronavirus and what, what we're looking at on the screen was when shoppers were desperate to find toilet paper, hand sanitizer, paper towels, pet food, you name it, that's all the essential categories. There was what we're looking at, a massive trial generation, right? All these retailers that never had some of these shoppers come into their stores now saw them come in like a flood. And that's not just the retailers that saw this massive trial generation, the fulfillment side of it saw trial as well. So OGP is online grocery pickup, um, sometimes it's called BOPUS, uh, buy online, pick up in store. Um, and really when Walmart introduced its OGP back in 2018, that began changing the landscape. And what it did was it caused massive acceleration in the number of people that were willing to now utilize curbside pickup. Some fun facts around this, when you look at grocery trips in particular, the average shopper makes 78 trips a year. They will walk 1.1 miles browsing 65,000 different SKUs to find the same lousy 200 and 250 items they will buy. Each and every trip over the course of a year. So when curbside showed up from Walmart, where you could make your list online and then pick it up, and the whole process was done within 10 minutes, time is equal to money, okay? And there was a huge part of the population that had not gone into these fulfillment methods, whether it's home delivery, that can be DFS, deliver from store, or deliver from a pure player warehouse, or as you can see on the screen, curbside or in-store pickup. These people that had been hesitating all opened the floodgates because they had no choice. Okay, and when we go back to what's weighing on people's minds, you know, you have to look at coming into COVID, you already had cash-strapped shoppers. And so a cash flow shopper is a shopper that's either on government assistance, um, or lives paycheck to paycheck. Those are not mutually exclusive terms. And immediately as coronavirus set in, in mid-March, they began trade-down. Trade-down can be price tier, right? It can be channel and/or retailer. It can be size. But it had begun in spades, and it has picked up steam dramatically over the past 4 weeks. And I think the most heart-wrenching part is on the far right of this slide, where you can see now they are actually looking at what they, they need or have to delay or just go without. Okay, so that is the backdrop behind what is the experience that's been playing out for the past 8 weeks for, for our shoppers. Okay, and now what we're going to look at is where are their minds at. So How are they behaving? What is their sentiment? And where do they go with this? And you can see on the screen right now, sentiment is not good. You need a good strong consumer sentiment because you want them to have confidence. Consumer confidence is what fuels a shopper's willingness to part with their money. Either part with money on non-discretionary items or everybody's favorite in category management, trade-up. Right, I will move up the price tiers. And you can see, with the black bar being the latest week, which was May 2nd, a larger number of people are now believing that the fallout and the impact of what's going on with coronavirus will be pervasive and ongoing for some time, okay? And if we look at the next slide, I'm not gonna belabor all the pieces on the bottom for how it calculates. What I would like to make known is, basically the unemployment rates are understated and everybody knows it, including the government, right? This is why Mnuchin basically said the unemployment rate for April was truly closer to 25%. Uh, the unemployment rate for March was closer to 12. The unemployment numbers came out today. They were roughly 3. They were ahead of what was actually projected. These are very difficult numbers for for all of us to kind of take into account, uh, what it means and, and the consequences for becoming re-employed. Um, the next few slides will go relatively quickly. This has a lot to do with shopper behaviors when it comes to spending money, and you can see there was a great deal of hoarding that occurred in March, and it's still occurring. Now, it is not happening at the same level that it happened in March, but it is happening. And when you blow apart the income demographics of these households, it is the higher income households that are still stockpiling, okay? Now, when you look at what is in their cart, it is not just essentials anymore. So you can see on this chart, when the coronavirus situation began, essential categories were just getting pounded and non-essentials took a back seat. You can see by roughly mid-April, non-essential categories began to really take off, and it makes sense why. This is where people are getting tired of their spouse. This is when people are getting annoyed by their children or their pets, and they are now buying products and, and items that can occupy, entertain, keep them busy. It also has a lot to do with DIY. You're stuck in your home for an extended period of time and you're not going anywhere, you start really noticing things that you want to work on in the house that you probably should have tackled some time ago. So when we look at the spending elements, so spending did rebound in April. There was a lot of concern, I would say, across multiple categories that when we saw this much pantry loading occur, was there just going to be a stall-out and nobody would be purchasing goods for a prolonged period of time? And the answer is no. What we have is a new normal for what your pantry and my pantry looks like. And there's some reasons that the spending rebounded in April. You can see that it isn't to March levels, but what you had was beginning of month— beginning of month you typically see higher spend. Stimulus checks arrived. Here's a fun fact: those that received the stimulus checks 98% of the recipients spent almost 100% of the stimulus check within 48 hours. But you see accelerating media narratives that are troubling. Meat shortages, visual stimuli, such as when you actually do go in a store and they tell you the toilet paper situation is rectifying, but you're not seeing that on the shelf, or don't worry, there's not going to be a meat shortage, but you find nothing in the meat section except 2 chicken wings. So the intriguing part on this is you can see that when the stockpiling began, researchers began teasing apart the level of stockpilers. So you can see 1.5, 2.5, 4 times differentiates the type of stockpiling that was occurring, and on the bar on the far right, all 3 groups are picking up steam again. Okay, so when we talk about what is the impact of all of this, so week over week we can still see 9 out of 10 shoppers are still changing their behavior as a result of, of coronavirus. States are reopening. Don't get your hopes up too quick because it's still close, close to that 90% level. And that is because when you do a lot of shopper psychology research, what you see is uncertainty is the devil. What it does is it causes a lot of angst. You either have people hold on to their money, or they begin spending really hard on, as we've seen since March, essential categories, and they let go and put off non-essentials. And that's really what we're seeing when we look at the most recent weeks on what are they doing, you know, when it comes to shopping behaviorally week over week. The two elements on the chart on the slide right now that I would call your attention to: the triple bars that are on the far left. This is not helping the situation at all, and what I mean by that is if two-thirds of shoppers are still waltzing in and discovering product shortages, that does not instill confidence, okay? And it can lead to the triple bars that are third from the left where Because I am uncertain and I am seeing product shortages, I am now delaying the purchase of other goods and services. I don't feel confident. The way I can equate it to is when you saw bank runs back in the '20s and '30s. Okay, so looking at fulfillment, um, we are going to see this stick. So I had mentioned earlier BOPUS, and I had mentioned earlier deliver from store, DFS, or deliver from pure play. And you can see the number of people that have turned to this, whether it's existing or new, is extraordinary, right? When you can say that 35% of the households have now incorporated it as a normal part of their routine, with another almost 50% basically using it on occasion now, that means 85% of shoppers are using delivery on a regular basis. These are big numbers. And when we look at who's new to it, and they keep coming in, right? It isn't— it's 16% placed an order for the first time and it was new. It's these new people, when we refresh the data, sweep into the use it occasionally/normal group. They don't just fall out. And really, when we look at all of this week over week, what it's demonstrating there is a sizable sustained shift to online that does not appear it's going to go away anytime soon. I mentioned uncertainty is the devil within this situation, and uncertainty remains. It is good when we look at the chart on the left that, you know, we're down to only 28% of shoppers stating that they are 10 out of 10 very concerned, but that is a really high number. It is the lowest number since we began tracking that, but that is still over one-fourth of the households are not happy with the scene. And what it means is, as we look at these stores reopen and municipalities reopen, there is not going to be an immediate return to normalcy. There is going to be a very slow and, and, and kind of, I don't want to call it casual, but gradual return to what a new normal will look like. When you ask shoppers what is actually weighing on their mind the hardest, the easiest way to interpret the chart on the left, a shopper is given 12 to 14 factors that they can choose from, then you tally up in green which one was number 1, and number 1, which makes sense, is I don't want anyone in my household or me to catch it. Numbers 2 and 3 are then tallied in blue, and then you, you add them all together, and you can see the biggest things weighing on people's minds are social elements and economic elements. And those intertwine when we talk about retail because there is an enormous social aspect to retail. So when we look at what's happening in sales itself, and I am going to cut this 3 different ways, sales remain elevated, specifically for food and online for sure, and and that makes all the sense in the world. As I mentioned earlier, DIY should be seeing some lift, and it is, because we've all been staying in homes for 2 months now. The challenge when we look at elevated sales is trips have collapsed. There is somewhat of a fear around public places and strangers. I often joke that at this point, If you were to go to a Home Depot and look at the line, what you see is people staring at each other, wearing a mask of course, as if they are asymptomatic plague missiles. And because of that, trips are down. On the contrary though, spend per trip is up. Okay, and that is, I need to accomplish more on the trips I'm going to make. And what that equates to for our retailers is the winners win really big now. So if I am a retailer and I can get you to make a trip to me, whether it's a trip to my website, a trip to my store, or I just deliver it to you, I win big because you are now conglomerating categories with me. All right, I'm gonna pause now, and before I get into out of all of that, then what are the implications then June forward, I'm gonna let Dylan ask whatever questions he wants to ask, make comments, share. This is his meeting.

Thank you so much, Tom. That is super interesting, and sorry to interrupt, but I think this is a good segue to talk about SureFront for a second. For those of you that are not familiar with SureFront, and I hope you can see my screen. Tom, are you able to see my screen?

I can. Great.

So SureFront is an all-in-one app built for showrooms and sales reps with a patented immersive collaboration technology. This allows you to do a variety of things, and I'm going to talk about what those are that are pertinent to Tom's presentation. But amongst those are create a virtual showroom and showcase your product lines to your customers, uh, which are most likely retailers, anywhere at any time, collaborate and chat with retailers on quotations buying programs and purchase orders without ever leaving the app. So this is in-app chat. And then also, uh, you can work with your suppliers and even factories on product development at the same time, uh, all within SureFront. So the page that I'm on right now is our catalog page, and you can digitize your entire catalog and put it in SureFront. And if you want to showcase this or share this with your buyers, you simply go to this catalog page and you can search through your various items. Now, it doesn't have to just be apparel. This is hard goods, soft goods, whatever goods you happen to be, uh, selling. You can search by filtering through tags. You can see many tags above there, and then simply click on those items that you want to show to your buyer. And what we call showcase is our virtual showroom. And this is very important now because all of our suppliers I know that are on this call, or at least the majority of them, have their physical showroom shut down right now during COVID So what you're wondering is, how do I get these products in front of my buyers right now? Well, this is how you do it. So by clicking on your virtual catalog, selecting those items, you can then click on those customers that you want to send those items to. Simply enter in their email addresses there. The great thing about this is even if the buyer is not on the SureFront app, you can still send them your entire showcase that you want them to see. So it will send in the form of an email which they'll receive that looks like this. So those are the items that I clicked on. I'm logged in as our director of product here, so this is Doug Heckman. So if I want to— if I'm the buyer and I want to see those products, then I go ahead and click on this button. I'm going to click on incognito since I'm already logged in as the supplier. And this will bring the buyer— drop them down directly into this showcase or this virtual showroom. So what's great about this is they can get any information they want on these products. So they can click through various images. They can then click on that product and drill down on the item details as well. And then being that they want to get a quote on these items, simply click on those and then go to request a quote. And what's really amazing about this as well is that if they do go ahead and request for quote, this will drop both you and your buyer down into the quotation where you have the ability— you can see on the right-hand side— for in-app chat. So again, everything takes place on the SureFront platform, whether that be sharing your catalog, building out a quote, talking about product details. It all occurs right there. So this is an incredible tool to stay safe, to keep selling, and to make sure that while you're working from your home office you can still conduct business, and then your buyer has the assurance that they can do so safely. Because of course you can't fly over to your buyer and have a meeting, and also they can't come into your showroom. So for anyone that's attending these webinars right now, we are giving an extensive free trial of 3 months to try anything on SureFront. Quite simply to do that, I will send you a follow-up email after this how to log in to SureFront. You can also go to surefront.com. I'll show you the website really quick. And go to the sign-up button there at the right. There's another sign-up button here. We put another one at the bottom, made it quite obvious for you to be able to sign up. And once you sign up, very quick, just enter in your email address. You're going to choose a password. It's going to take you through a quick tutorial, and you're able to start using this right away. And then if you have any questions whatsoever We're here for you. Drop us a line. You can contact us at the contact information I'll send you in the follow-up email after this, or even at support@surefront.com. So I really appreciate it. Take advantage of this. That's what we're here for, is to give you all the tools that you guys need to, you know, conduct business and stay safe. We understand that most of the people on these webinars are suppliers, so we want to give you all the tools that you can to not just survive but hopefully thrive. Survive during this difficult time. So without further ado, let me get back to our amazing presenter. Tom, you can go ahead and just take over the screen share at the bottom there.

There we are. So thanks, Dylan. So if we talk— want to talk about what are the things that are going to kind of become prevalent with retail June forward, quite a lot actually. So states are opening up, retailers are reframing what the physical store visit will look like, retailers are also reframing how they're engaging with manufacturers for that matter. And I think the two analogies I can give that would be very germane is if you know anyone that had gone through the Great Depression or anyone that lived through polio, things were— there were aspects of those experiences that they could not unlive. With regard to the Great Depression, there was this, this constant panic that there would either never be enough scarcity, reuse and whatnot. My grandparents, I recall, were using coffee canisters nonstop, almost like Tupperware. With regard to polio, there was enough confusion on how you contracted it, and this predates the vaccine, that there is a huge swath of the American public from that generation that never learned how to swim because there was an element of time that it was believed you contracted polio from public swimming pools. And so the two aspects that really, really stand out are none of us will unlive what just happened over the past 8 weeks, and remember, we're not done yet. There's still the fear of second wave. But the more important element is most habits and patterns begin forming within 3 weeks, and we've been social distancing and home staying and whatnot now for almost 8. And so if you look at what retail is becoming, it is a look, don't touch world. There is a lot in this slide that we have to think about. Think about your own personal shopping and how you, how you interact and engage within a store with people that work there, other people that shop there. How do you interact with products in a look, don't touch environment? Spaces, whether the aisles are skinny, whether the aisles are wide. If you think about, and I will use grocery first, going down the aisle when you are trying to make sense of which product you want to buy, most shoppers make sense of it by doing price-to-value equations. They'll spin a can to look at what's on the ingredient deck and the nutritional statement, then they'll look at the price and compare it to the one that's 4 feet away. You shouldn't be doing that now if that touch could equal viral contamination. You can see at the bottom, what does a dressing room experience look like for an apparel retailer now? There are, there are so many elements of what we would call no-touch retail that now have to be addressed, and this is actually the new normal for physical retail. Very close to that is our personal space bubble. So as you think about always-on social distancing and what does that mean, you know, how do you think about open-air retail strips versus an enclosed mall? Even beyond that, normalcy is quite different, and what I mean by that is if I used to just drive to the Home Depot, dash in and go through the self-checkout and get out. How does a shopper now view a 45-minute wait in line just to get in the store, right? And so most of your retailers are putting X's on the ground for where you have to stand as you wait before you're allowed to come in. And the physical spaces themselves— and I'll go beyond retail at this point, restaurants as well— Physical spaces inside are being reimagined and reshaped to ensure always-on social distancing. This can make this experience quite different and perhaps less satisfying. The push towards local is here to stay. What happened with coronavirus is certainly from the, the initial stages was we saw small and we saw local collapse. They could— many of them were forced to close to begin with, but a huge number of them did not have a strong e-commerce platform to begin with. And as they began shuttering left and right and claiming they would never reopen, most communities really rallied around neighborhood and local, and it has become a thing thing, which means as states reopen, um, those retailers that are positioning around neighborhood and local, they're going to thrive. And what will be intriguing is large national retailers that are not neighborhood and that are not local are going to attempt to, to move into that equity space. And so this is one to watch. I will say what's going to be very difficult for all of us is the impact to discretionary spending. You cannot have unemployment at the level that it's at and the length of time it's going to take for the employment scene to correct and not, not be concerned for what's going to occur with discretionary spend. Pete Nordstrom at the bottom had made some very pronounced statements about this at the global conference, which is how do you position yourself so that you maintain some level of relevancy? I mentioned it earlier, we are already seeing a massive spike in discounter retailers. Pricing is beginning to matter more. Private label is really taking off. And for retailers that sell products that are more high-end, they are looking at some very, very difficult times over the next 6 to 18 months. When you look at the factors that that contribute to shopper loyalty. Up until coronavirus, the primary factors were value, convenience, store associate value. And what I mean by that is your store associates, if they can, if they can come across as either trusted advisor or in some instances friend, that is a huge asset. And personalization. Those were the 4 primary contributors of shopper loyalty up until coronavirus, and that is, that is going to be different now. It is going to be much more centered around safety, dependability, and kindness. And I will talk a little bit about all 3. Safety is my safety. That means I need to understand hygienically, what are you doing to the store to keep me safe from contracting something? So how are you cleaning? How are you doing social distancing when I'm there? On those types of threads. Dependability. So dependability has to do with when you think about, well, all of our experiences trying to purchase groceries from Walmart or Instacart or Kroger. There were some rather unsatisfactory moments as we went through the last 6 to 8 weeks, and a lot of that had to do with scarcity. It was either scarcity of product, that they were running out of stock or scarcity around pickup windows. So the pickup windows had everything to do with— I will use Target Drive-Up as an example. Most Target Drive-Ups have on average 2 to 3 spots. So dependability means Target Drive-Up now has 8 to 10 spots. So these are things our retailers are actively working on, which means dependability— I have access when I need access. And an in-stock position. You are carrying what I want when I want it. Okay, with regard to kindness, the kindness actually has everything to do with kindness to the store associates themselves. This is why you see Walmart, Dollar General, Tractor Supply making a lot of news and headway with shoppers, because they're talking about handing out bonuses, handing out repeat bonuses to these frontline workers who are maintaining the store and working in the store during the pandemic. And so retailers that can come across with, with across these three key elements here, that is who's poised to win. But probably most important, which would come as a surprise to absolutely nobody on this, on this call, is how everything is shifting digitally and virtually. This was done by force. I mean, there was no choice when this, the, the whole pandemic occurred. And you can see how many changes have occurred. And if you're on the retailer side, there are the changes that you're making consumer-facing so they can procure their goods. But frankly, from a B2B perspective, this is changing almost at the same pace and rate. Meetings where, I'll give an example, planograms are resetting. Where you would typically complete a review and then have to build a mock set or live set at the retailer's campus, those have gone video, those have gone digital. You are building it together on the web. I think Dylan had just mentioned showrooms and those types of meetings. Much of that is happening virtually, and the bigger question is not will it go back to— there may be some elements that go back to the pre-COVID world, but there is a lot that, that will not. And this has turned into a very, very efficient element for a retailer where there's cost savings and time savings when this is done digitally. And what most retailers are trying to figure out now is, from a digital perspective, if this is part of the new norm A, what is the purpose of their brick-and-mortar store? So even Whole Foods announced today they're moving another store to a BOPUS depot. You know, that, that physical manifestation of the store, if more and more volume begins to be fulfilled through an online, online method, whether it's curbside, click and collect, or it's delivery, then the store itself is either becoming a BOPUS depot or it's becoming a marketing vehicle. When you look at the website itself, it will begin moving and elevating from— frankly, most consumer-facing websites look like a Sears catalog from 1972, it's just digital. And you are going to see a rapid rise in the use of AR and VR with regard to retailer websites. But as consumers have kind of gone there and retailers are looking at that aspect and what the online experience needs to be, they are also looking at their B2B interactions and engagements and how can they be more efficient, because again, they don't have time. And that's the one nice thing about the homestay and all of us having to work digitally is there's an enormous amount of time saving that we've all achieved by going through the internet. So I think that was it. Dylan, back to you.

That's fantastic, Tom. Thank you so much. Um, you are an amazing presenter. I really, really appreciate that, and that is very valuable information as well. Uh, at this time we're going to switch over to the Q&A section, so If anybody has any questions, we already have a number of questions. There is a little Q&A button. Try not to use the chat button, use that Q&A button at the bottom of your screen there. Sometimes it just pops up if you make your cursor hover over the bottom of the screen and ask any questions you have for me or Tom. Tom, you know, a few of the questions that come in and also a question that I had, and I guess the first one is You know, I don't mean this to be a leading question, but back to the beginning of your presentation where you talked about the shift to what consumers want, and instead of buying, you know, your, your, as you put it to me before, your 71st pair of jeans for your, your daughter or niece, you're going to now buy her that iPad. How should especially suppliers be thinking about maybe adding new product categories or shifting to new product categories or highlighting those ones they already have to their buyers?

So a lot of it's gonna have— so you're gonna have a margin element to it for sure, right? So margins are compressed, and you could even read now as Target gave its earnings report out maybe a month ago, They had a, I mean, just a barn burner of a quarter. The problem was the mix was completely wrong. Target is very tied, its P&L, to apparel sales, and most of the products they sold were food. Food has much lower margin than apparel, and their CEO had to forewarn Wall Street, we will achieve sales objectives and our profit will be under pressure year remaining. So the first piece that you have to come forward with is, in category management it's called the WIFM, what's in it for me? And what's in it for me in this game is margin. So how do you help me on my margin? The challenge becomes if you have sold me a menu of items where the margin profile is great, but there's no consumer demand, then I should look good on paper, but in reality I could be in trouble. So the second piece is how do you position and help the retailer position that product line into need versus possible desire or possible want. This can be challenging with clothing, right? So if we're talking on the apparel line, you have to position this to how does apparel link back to my current situation. I'll give a good example today. Is you are beginning to see a lot of manufacturers tie products that you would consider non-essential, and it's being positioned back to how would this link to homestay. So it's things like, at Walmart, they're tying goods to movies, right, where they understand at this point people are so tired and have nothing left to say to their family member, so how do you have movie night right? And this is the key. You really have to figure out how do you make your item fit my new normal. And if we stay on this apparel thread, right, if we're not going to have a huge return to work where there is a need for a lot of formalized clothing or more formal clothing, or there is a push now for some universities not to come back in fall because it's not clear if, if the coronavirus scene will be under control, then what is that mix of apparel that fits the new normal, right? And so it really becomes integral to your business plan in providing the WIFM for the retailer— what's in it for them— then providing why it matches the consumer desire based on that consumer situation. You are going to see a lot of brands repositioning based on where the economy is sitting right now. Is that helpful?

Yeah, that is incredibly helpful. So consumers are still spending, they're just spending differently.

There you go. Right.

Okay. And you showed before too, which I thought was very important, was that dip in consumer spending before that initial spike, but then it started picking back up again. So it's probably very prudent for suppliers to start thinking a little bit differently how they offer their products instead of, as you said, you know, wants. It's more of, you know, what do people actually need right now? And those things that they are buying because they do indeed need them. We all need, you know, to make sure that we have proper webinar equipment right now. Students all need to make sure that they have the right tools to study from home. Whether that be an iPad or, you know, whatnot. But, you know, people are buying less suits and buying, you know, probably more casual wear. So, you know, that's key to understand. And in regards to that switch to local you talked about, I know a lot of our suppliers do supply local. But for those that don't, what might be a good way of thinking how to switch to local? Any tips that you might have on that? And also, if you can speak a little more to how does that local shopping work?

So a lot of it has to do with positioning, and primarily it's the retailer that's positioned as local that's going to win. You think about your own neighborhood, the restaurants that are independent— and independent is a nice way to, to put it— smaller chains, right, regional chains. These are the ones where, you know, most shoppers are now, even before coronavirus, were viewing them through the lens of, "You get me and you get my community." So as you're selling to them, there's going to be some hallmarks that you probably want to kind of identify what is driving shoppers to that particular retailer. It is not just the neighborhood piece, right? That's That's the first step of that journey. The next pieces are what we refer to in the industry as OBI, ownable brand idea. So what makes it unique, right? Everyone can claim their neighborhood and their local, but what is it that makes it that neighborhood or that local? And the challenge is, even with coronavirus, there was a move about a year ago into Authenticity. Authenticity began to really matter. Truth mattered to a degree, and shoppers know when it's more marketing hoo-ha versus this is legit. And you really want to understand if that neighborhood retailer or that entity is coming across or trying to sell a brand equity of local. Then what is it, those hallmarks of that local? I live in an area in St. Louis called Dogtown. Dogtown is the Irish part of St. Louis. I'm not Irish, but there are some very specific hallmarks of Dogtown which make it unique. And we all have that, right? No matter what city you're in, there are neighborhoods. When I lived in New York, in Manhattan, I would not say I was from Manhattan. I would say I was from Chelsea because it was its own authentic bubble. And these are the types of things you're looking for as you're selling, right, to a retailer that is positioned neighborhood or positioned local. What is it that makes you different from everyone around you, right?

And along those lines, someone asked, uh, what would be the future of independent retailers, mom-and-pop stores, especially those selling non-essentials without e-commerce? So, uh, what about buying and selling without e-commerce local?

It's going— it won't go away. I mean, many of them are scrambling now to create curbside, right? It's very expensive to create a deliver from store, takes a while. Most of them have rushed to create a website. Most of them had a website to begin with, but it was mostly kind of a browsing website. There was no shopping cart button. It was more for informing. And it was rather crude. And I would say over the last 4 to 5 weeks, there have been a host of them that did not create cart buttons, so to speak. What they created was the ability to just pick it up in the store. Easiest way to think about it is, putting it very crudely, back in the day when you would order a pizza over the phone, you'd give them your credit card number and you'd go. This is what they've created over the internet. They are still here to stay. It's just so many of them got hit so hard that it's now you have to look at who are the ones that are going to really dominate coming out of this, right? Because many of them have been financially weakened, especially over the last 3 weeks. As they've made the mad dash, it behooves all of us, and I do this with my retailers, is every Monday I go to their website to see what's changed and what's their message. And when you look at the message, does it feel relevant and on par with what's occurring based on what you knew from over the weekend, or is it the message from last month and it's never evolved? This, this kind of tells you how current are they and are they evolving as the scene evolves, or are they so boggled by the whole situation that they are barely keeping up. It's a good bellwether that I use pretty frequently.

Great. And then another person asked, what is the future of trade shows and how soon can it be restored? They also asked also the future of merchandising between buyers and salespeople. And I can tell you that with trade shows, I think it's gonna be a long time before we come back to traditional showrooms and trade shows. And SureFront is actually going to be putting on a virtual trade show sometime around July or August, which we're going to announce. So if anybody has any suggestions for participating in that or what they would like to see in that trade show, you can always send us a message. But I think that a lot of this buying and selling is going online, it's almost completely online right now. And I think you're going to see even more en masse with that happening with trade shows, where those are going to go for some time probably completely online. Do you have any opinion on that?

No, I think I agree with what you're saying. I think I was at a trade show— excuse me— in February when this— right as this was starting to occur, and there were over 1,000 vendors that never even showed. And this is going to be I think there's an evolution of trade shows to your point, and it is very online. And I think what most of the researchers are really watching is maybe about 7 or 8 months ago, Microsoft introduced the Oculus, which were the VR goggles. And they were revolutionary because they were not so heavy. You could put them on and they were very light. And for those of you that have not experienced it, most of the first programs that you would go through in Oculus were travel programs, right? So you could go to European cities that you had never been to, and it feels very legitimate to the point it's very disarming. And most of the researchers are indicating on trade shows in particular, AR/VR, and it'll be VR primarily, will become a more increasing, you know, will have a more increasingly big role as we move into this kind of new normal.

Yeah. And I, you know, I was watching Jim Cramer the other day and he said, you know, what if we're waiting for nothing? What if no vaccine comes out? You know, the unfortunate possibility of that where everything— people will still be buying, but all commerce will completely move online, whether that's B2B, B2C. So yeah, I could see a solution like VR with Oculus, a solution like having virtual trade shows like we'll be putting on in July or August. I think everybody's going to be clamoring for what that solution is to, you know, continue to conduct business. So yeah, that's a great point with VR. This person asked, how long will retail be restored to normal, if ever? I, you know, I don't think— I don't have an answer for that. Tom, you have any answer to that?

Sort of. So by retail normal, I don't— you mean without the social distancing and whatnot? You won't have any— It's a difficult answer because you won't have a resumption of physical retailer, physical retail looking and feeling like it did pre-coronavirus, frankly, ever, because so much of it is moving online. Habits form in 3 weeks. You will become more comfortable shopping online. So your expectations are changing right now for if I have to go to the store, then this is why. Whereas pre-coronavirus, you just assumed you were going to the store, by and large. And so as your expectations reframe, we're kind of in a permanent new normal. Now, I will say, if we're talking about the economics of it, they are basically stating recovery begins second half, and it will be robust given our collapse, I will say, in economic productivity and unemployment and whatnot. The full economy will not see full recovery to where it was in January of this year for almost 9 years. Yeah. So if you look at that, and I'll give an example, is let's talk about travel. So the CEO of Boeing announced that one major airline will probably declare bankruptcy by September. Travel itself will only be at about a 25% capacity by September and will only barely hit 50% by end of year. And that's fine, right, if we're talking about airlines, but there is a lot that goes along with that. And, you know, there's not just hotels and there's not just restaurants. If we were to go back to apparel, just think about how much so many municipalities are reliant on tourist spending for apparel. Case in point, New York.

So, and even then, I think a lot of airlines going forward will not be selling those middle seats. I know there's been news on that going back and forth. Hotels are closing down half their hotel rooms to maintain capacity and be able to sanitize rooms properly. So I think no matter what happens, even if a vaccine comes out, that businesses are gonna try to protect themselves and to protect their customers as well. So that's a very hard one to answer. Another person asked, "Does SureFront design for manufacturers directly? I'm a territory manager for a rep group." So SureFront is an end-to-end app. So it goes all the way from the manufacturer or product development all the way to the retailer or buyer executing a PO. So that affects your people that are in product development, that affects suppliers that want to show these items to those buyers or showcase these items, and that of course affects the retailers or buyers who are buying these items. And it all takes place on the SureFront app. So I didn't go into too much detail, I just went into the virtual showroom because that's what's that's pertinent for this and for the sake of brevity, but you can find out so much more just by going to SureFront.com. And for everybody that are in these webinars, we're giving 3-month trials, free trials, so you can try everything in SureFront. So just takes about 5 seconds to create an account. If you have any questions or trouble with it, you can also just drop us a message directly on the website or email me directly. And I think everybody on here should have my email address dylan@sherifront.com. Another question, Tom, was, is there going to be a back-to-school season this year? That's an interesting question.

So I would say it depends. If we're talking about the retail aspects of this, what does back-to-school mean when Los Angeles announces they are going to maintain homestays through August and fall semester, I believe, is canceled for most college campuses. So I think even to build beyond just back to school, think about what does holiday look like this year? I mean, for most of us, we have those comical images of people having a slugfest in a Walmart over the one TV that's, that's on, on sale. Um, are they doing that this year with breath masks? I doubt it. Um, so we have to consider Is this a very digital holiday we are going to be looking at? If it is brick and mortar that, that shoppers go to, do they wait outside like they used to for Best Buy in huge lines, or is it more scattered across Friday, Saturday, Sunday, and Cyber Monday's a hell of a day? I think back to school, that what's going to predicate it is what are you hearing in the municipalities where you are selling. What are they saying about the fall term? And it goes from elementary to college, and it's public and private. That is going to predicate— if I am a parent, am I having to prepare my child to be clothed to go to school for that year, or is it still sweatpants and t-shirts brigade because mom's going to be teaching at home apparently for a little bit longer?

Right. And to your point, if there is a back-to-school season, it's probably going to more look like what do the students need rather than what do they want. So, you know, not focusing on fashion so much as, you know, do they have the equipment that they need and what does that look like when they're doing all their work from home rather than, you know, doing all their work at school.

It's a great time to be selling, I believe it's called athleisure. Because that has become the norm up and down for the last 2 months. So it was all— it was one of those areas that was already on an uptick, and it has exploded in a major way.

Companies like Under Armour are probably doing pretty well right now. Yeah. Okay, great. I think that's all the questions that we had. I don't want to take up too much of your time, Tom. That was a very engaging conversation and presentation. I really appreciate that. We had several A lot of people ask about, they can get the recording and the slides later on. Yes, absolutely. Tom and I already talked about that. So he's going to share with me his slide deck. I'm going to send that in a follow-up email after this to everybody that participated. Along with that, we'll have a recording of this webinar and then also announcement for next Thursday's webinar. Again, we do this every single Thursday, 11 AM Pacific, 2 PM Eastern. And for any questions on signing up for SureFront and using that virtual showroom, you know, please respond to the email that I send you as a follow-up and I'll help you with anything that you guys need. If you have any questions for Tom as well, then we'll go ahead and help you with those too. So Tom, thank you so much. I really appreciate your time. Thank you to everybody for attending and we'll see you all next Thursday at 11 AM Pacific.

Thank you.