Coronavirus is teaching us that the expertise, knowledge, and specialization of every practitioner in each sector is critical to dealing with a crisis of this magnitude and the change it will bring about. However, these competencies are useless unless they are shared, coordinated and managed by control centers reporting to a single control room.
Globalization (and the quest for revenue at any cost) is behind the intercontinental spread of an epidemic that 30 years ago would have barely made the news, from one side of the planet to the other. And it highlights the limitations of business models that do not take into account, for example, uniqueness and differences in buying habits at the local level. Some reflections on Covid-19 and food retail.
Coronavirus, retail and technology
Retailing-in the coronavirus emergency-is revealing limitations and merits. And one is now faced with an opportunity to regroup and restart. Among other things, the current storm could serve to make otherwise painful, unpopular and unthinkable economic policy decisions.
There is now an undeniable need to rethink business models so that all-including food retail-integrate interoperable technologies at the ‘macro’ level. A technology that should not only serve to bring out the underground, or burden SMEs, but to offer the possibility of access to services and products by a larger segment of the population, not only in times of crisis.
We talk a lot about smart working, but we should think about smart cities, smart stores, smart organizations. Not all activities can be handled remotely, it is clear. A tomato will have to be grown and harvested and then sold and delivered. But planning, organization and management will have to become smart.
Ecommerce and globalization
Ecommerce is still a very inefficient system, economically and organizationally. But if it were integrated at the territorial and national levels it would enable economies of scale and sustainability goals (economic, environmental and social) that would otherwise be only theoretical. The possibility of integrating information systems-which is possible today and, above all, strategic-would, for example, make it possible to manage the inventory of a specific asset, at a given time, in an area.
Independent operators, if needed, could become part of the same macro system. The tradeoff of a smart system is the inevitable reduction in competition. The limitation of which could be, for example, the theoretical demand of communities in relation to spending power. Which would be used to determine the ubiquity and inventory of stores and warehouses close to the consumer.
From virtual to physical retail, however, on closer inspection it is precisely the model based on overproduction at the expense of quality that proves fallacious:
– what is the point of an increasing number of outlets in a retail network if spending capacity and demand are stable or declining?
– what chance do you have of selling globally foods whose production is based on circumscribed territories and is not scalable (except at the cost of disrupting it, as happened in Prosecco-shire)?
– what is the point of relocating production to countries that do not follow the same protocols (of food safety, animal welfare, and socio-environmental sustainability) in place as the countries of destination?
The possible alternative
However, the scenario described above, inevitably dominated by globally significant corporations (the only ones so far capable of sustaining the investment required for such projects), has an alternative. The coronavirus may cause us to reconsider investing in food sovereignty and short supply chains, based on small, local realities.
Brazilian meat orAsian palm oil, for example, no longer have any reason to have a market in Italy. A country that prides itself on ‘quality’ and uniqueness of food. And retail can, indeed must, protect the consumer only if the supply chain is protected, tracked and shared.
Publicblockchain systems, applied to virtuous supply chains rooted in territories and also physically visitable by consumers, can help establish the trust that globalizedecommerce still lacks, as we have seen. Provided they incorporate the primal stages-seed genetics and feed included(from seed to fork and from feed to table)-essential to ensure and enhance the authentic uniqueness of local supply chains.
Supply-chain and sustainability
The coronavirus will force a redesign of the supply-chain of many industries, the food industry first and foremost. There will inevitably be a relocation of many productions (and opportunities). And it is to be hoped that producers of unscalable culinary excellence will understand that there is no point in accessing globalized ecommerce platforms simply by accepting the production limits of artisanal products.
The hope is that this enormous crisis will be addressed with sustainability as the goal. Not theoretical or as a marketing tool, as it was handled in the pre-coronavirus era.
Multinational companies announcing the appointment of Sustainability Officers without giving them any decision-making power over supply chain strategies. Or they decry a commitment to reduce CO2 emissions, only to pass the burdens on to companies or countries that do not comply with the same protocols or mission statements in their advertising campaigns. That is, by purchasing Regulatory Credits.
Restructuring the supply-chain is the inevitable consequence-politically and economically-of a realization. The epidemic, in affecting some of the richest countries–has demonstrated the inadequacy of organizations, national investment and disinvestment plans, and business models.
Triple Bottom Line (TBL)
A sustainable approach to restructuring business models can enable previously unthinkable goals to be achieved. The Triple Bottom Line (TBL) model-which has been developed for more than a quarter century but rarely applied seriously (1)-proposes to guide strategies and measure business performance by devoting equal attention to three objectives. Profit, People, Planet. That is, in retail:
- economic (P&L, profits and losses). Enterprises must pay for the investment and the people who enable the activity. But businesses are kept alive by market demand and spending capacity. That is to say, if businesses are not healthy, communities are sick. Scripted and artificial growths of retail networks no longer make sense. Companies and their activities must be sustainable in both economic and financial terms. Coronavirus teaches us that retail in general (and food retail in particular) is strategic, but it must evolve to survive and stay relevant,
- Social. The indiscriminate opening of outlets without real economic viability can only lead to social tension and unemployment in the medium term. Instead, a healthy community needs to be socially sustainable as well. And social sustainability is achieved with jobs that provide a decent income that can forage for family and community, taxation that contributes to an efficient public health care system, and education that trains the resources of tomorrow,
- environmental. The goal of lean organizations should be to produce what is needed. Overproductions generate waste and are not sustainable. Covid-19, in reducing the value of publicly traded companies, is actually providing an alibi for those who could no longer grow. Stimulating artificial growth, reverting to production above demand, is not the solution. Rather, a shift in gear, based on real sustainability goals, is desirable.
Ecommerce, sustainability and efficiency
The environmental cost of globalized ecommerce is the pollution that results from long-distance shipping, traffic, packaging disposal, returns, and destruction of obsolete or expired products. Wouldn’t it make more sense to use ecommerce technology to enhance local assets and inventories, reducing international or out-of-area shipments of goods that are already in consumer markets instead?
‘Severe natural disasters call fora change of mindset that forces us to abandon the logic of pure consumerism and promote respect for creation.’ (Albert Einstein)
Streamlining retail organizations is one of the great opportunities that this tragic experience now offers us. Not to go back to destroying communities and the environment once the solution to this pandemic is found. But to accept that growth at all costs is one of the root causes of coronavirus. And a retail model that meets economic, social and environmental needs is possible today. Sharing technologies and information and making them available to consumers and businesses.
Fabio Ravera and Dario Dongo
Notes
(1) The Triple Bottom Line (TBL) model was developed in the UK in 1994 by John Elkington, a renowned management consultant and sustainability guru. With the idea that an enterprise could be managed in a way that made profit but also improved the lives of people and the planet.
The concepts of environmental excellence (1984) and green consumer (1988) were in turn devised by John Elkington himself. Whose book The Green Consumer Guide, which has sold more than 1 million copies, has given significant impetus to the demand for environmental sustainability, from the most sensitive consumer communities to the Corporation.
The Triple Bottom Line actually represents an econometric view of the concepts underlying SustainAbility (Brundtland Report, UNWCED, 1987). However, its application has been declined in the decades to follow in terms of Corporate Social Responsibility (CSR). A leitmotif that has moreover translated into the macro phenomenon of greenwashing, which is still in vogue even in the retail sector as we have seen. And that is why already at the time of Expo 2015 the writer (Dongo), following in the footsteps of Philip Kotler, proposed introducing the new paradigm of CSV (Contributing to Social Values)
Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT - Food Times) and Égalité.
Specialist in distribution models and Revenue Operations with over 25 years of projects in different industrial sectors and countries (12 years in the US). I work on Lean Organizations, Supply Chain Inefficiencies, Organizational and Financial Restructuring Projects, Digitization and GDPR
