Supply and Demand

Supply and Demand

 

Kaihan Krippendorff shares a post that identifies the need for agility in the face of major disruptions, such as COVID-19, and explains how companies can adapt their product to meet the shifts in demand.

“As the COVID epidemic rounds through its second year, Gen Xers, like me, are happy to avoid airplanes. On average, compared to younger travelers, our houses are bigger (so why risk leaving?), we have kids at home to be with and care for, we have the seniority at work (so who is going to tell me I can’t work from home?). While younger Millennials are itching to escape smaller apartments for warmer beaches with friends or conferences with colleagues, we are happy to stay put.

This creates a challenge for airlines. While air cargo reached an all-time high in 3Q 2020, US airline passenger volume is down by 60% compared to 2019. Not only has volume bottomed out, but the mix of customers flying has shifted. Gen X business travelers are out. Gen Y vacationers are airlines’ best hope of a recovery.

Now, as my analysis of industries’ vulnerability to the COVID crisis shows, airlines are in trouble. They have low profit margins and weak balance sheets. In the most optimistic case, experts project that US air traffic volumes may recover to normal levels in 2024. In a pessimistic scenario, by 2024 we may still be almost 20% below normal volumes.”

 

Key points include:

  • Adapting your product 
  • The attribute map 
  • How to adapt 

 

Read the full article, Adapting Your Product Is A Life-or-death Skill … Here Is How, on Kaihan.net. 

 

 

Chris Moe and Jonathan Willbanks share facts, stats, and observations on Amazon during a sixty day period of COVID-19.

The last couple weeks have been slow on Amazon – flat to slightly down for most brands. In a move that’s probably related, Amazon has removed stocking limits, turned coupons on, and started accepting deals. This was faster than we expected and we suspect grocery will be entirely “ungated” soon.

What we have been seeing:

DEMAND – slower for May – flat to down across grocery. Most promo levers now active, some new ad formats

Sales have been flat to down (5-15%) for the first two weeks of May. This seems to span many grocery categories, including the formerly white-hot baking category. The trend is still up vs. Feb, but demand seems to be softening.

~5% of sales have shifted back to younger age groups (<45 years), as it was before COVID. 

Coupons are live again, and deals are being accepted. We mostly see deals available for early June, though a few brands have been able to do earlier. (Note: Vine is still inactive.)

Ship times estimates have continued a slow march back to 1-2 day speeds, although significant variation still exists. 

The window to accept Prime Day deals was extended to early June. We still think Prime Day will be at earliest in August or later (maybe even folded into Black Friday). 

New ad formats: enhanced sponsored brand ads display a second image, and sponsored brand campaigns can now target ASINs. We’re testing both as incremental levers. SC ads are now live in Amazon Advertising (formerly VC). 

A number of our clients had their items suppressed for using ‘flags’ on the main image that called out size or quantity. This affected Seller Central accounts only – Vendor was unaffected.

 

Insights shared include:

  • Supply / logistics
  • What grocery brands should do on Amazon
  • Future outlook

 

Read the full article, Observations on Amazon amidst COVID-19 – 60 Days, on the Cartograph website. 

 

 

Azim Nagree explores the necessary steps to take when the current crisis is over and shares a template you can use to build your business case.

Many of us are spending our time thinking about (and writing about) how to get through the current Coronavirus-driven situation. For those who have had to endure headcount reductions, your energy and focus is probably on just getting through the day-to-day workload.

But it’s important to think about what will happen when the current crisis is over, especially as it relates to hiring. So, when management is telling you to cut back on headcount, how do you make the case to start hiring again?

The answer is simple – data.

When you are asking for additional headcount, make sure that you have the data to back up your request. It is likely that every department will be requesting headcount, and the executive team will not approve everyone’s request. Those with a solid business case backed up with data will win, compared to those who have generic requests based upon intuition. More simply said: Bring a gun to the knife fight

 

Points covered in this article include:

  • Sales targets and quota capacity
  • Demand generation
  • Customer support and customer success

 

Read the full article, What Happens When This Is All Over, on LinkedIn.

 

 

Eric Hiller unrolls a few facts behind the need to hoard toilet paper (TP) as he shares his knowledge on the supply chain in this article recently published on MarketWatch.

One of the bizarre phenomena that we have been experiencing in the United States during the visit of our unfriendly visitor from Wuhan, the SARS-COV-2 virus which causes COVID-19 disease, is the strange behavior of people to irrationally hoard toilet paper (TP). I admit, this is one thing that I did not expect, nor did I expect it to go on for so long. I told my wife two to three weeks ago that this would not be a problem, because of the reasons that will be discussed in this article. But I admit, so far this problem has not resolved itself.

I feel pretty competent to talk on this subject, not only because I know the product so intimately, but also because I spent a summer at the East River plant of Procter & Gamble in Green Bay, Wisconsin making TP. I was interning as an undergraduate as a process engineer implementing statistical process control and machine center lining (exciting stuff… yes, I know). It just so happened that I was working on the “converting” floor for Charmin, Charmin Ultra, and Banner toilet paper. This, where you take finished rolls, that is the size the Jolly Green Giant must use (maybe 12 feet tall and 8 feet in diameter, weighing a couple of thousand pounds), and progressively unroll and cut them up until they end up in cases shipping to your friendly grocery store or another outlet.

So, when it comes to TP, I know my… stuff.

 

Facts included in this article:

  • The US supply chain
  • Why people are hoarding TP
  • The cure for TP shortage

 

Read the full article, Three Sheets to the Wind, on the MarketWatch website. 

 

From Luca Ottinetti’s company, a blog post that explains why business managers should rely on the industry cost curve to guide their actions and find out how supply and demand is impacting profits.

 

Market forces affect the equilibrium between supply and demand all the time. For instance, a typical situation of rising production costs drives excess capacity in the market and a shift in the supply curve. Another scenario of a drop in market demand causes a reduction in the equilibrium price and quantity of that good. In both cases, supply will exceed demand, a condition that can exert considerable pressure on profit margins and, in some case, drive companies out of the market. What can managers do?

 

Points covered include:

-What does the industry cost curve look like?

-Addressing the problem

 

Read the full article, How Are Supply and Demand Impacting Your Profits?, on the Great Prairie Group website.