Tough love: BSH UK interview

Throughout the pandemic, BSH’s market-leading status has meant it’s often been the most public recipient of retailer disgruntlement over the industry-wide problems of long and unpredictable lead times. For UK CEO Gunjan Srivastava, the last two years have, he tells Andrew Davies, been “one of the steepest learning curves it’s possible to be on…”

Gunjan Srivastava is about as ‘BSH’ as you can get. Calm and measured; he looks as unflappable as it’s possible to be – a particularly useful trait when you’re in charge of a company frequently under fire from its retail partners for its handling of supply chain dilemmas that have stricken much of the appliance market.

Srivastava was announced as the new UK head in January of 2020, and he would, the press release stated, “start in his new role in April 2020”…as we now know, a lot happened in between January and April of that year.

But he is a very experienced leader, joining the company in 2014 as CEO of BSH India and then, before joining the UK, running BSH across India, South East Asia, Australia and New Zealand as head of its Asia Pacific region. To illustrate the challenge, he ran the UK company from Singapore for several months before travel restrictions were lifted enough for him to actually come here.

Despite that experience, however, there is little that could prepare anyone in a senior leadership position for the last two years and one must have empathy for anyone tasked with sorting it all out – especially from scratch in an unfamiliar market.

However, empathy only goes so far and many frustrated retailers are asking simple questions about lead times that, from his point of view, have, unfortunately, very complicated answers. But, he admits, “they absolutely have the full right to explain to us what their challenges are and expect us to provide a solution”…

Q: The last two years have been a rollercoaster for so many companies, what is your assessment of the journey the market has been on?

A: A couple of years ago, the market was pretty stable but obviously the lockdown hit us and it all crashed for a few months. Then the market opened up again and there was an immediate bounce back. You have to look at two separate journeys in terms of consumers, there are people who buy appliances when they’re looking to replace stuff, and then there are those who are planning their whole kitchens. 

We saw both markets go up quite substantially during that bounce back and obviously home became the cornerstone of everyone’s lives during the lockdowns, so we have seen a clear increase in consumer demand for all appliances across the last 18 months. 

But in the last six to eight months, the kind of constraints we’ve seen – especially in electronic components – have resulted in the supply situation going completely out of order. With the amount of back orders we have, we just don’t know what the real demand is and what is the exaggerated demand.

Our current effort is to make sure that we meet commitments to our customers as much as possible, so that’s where our focus is. The market is still up, the housing market is also strong but exactly where it will settle down is something we’re not so sure about. There’s also a huge shift in the consumer journey between online and offline so it’s also difficult to say where that will settle as the share of online dropped suddenly when shops opened again. Will it go back to pre-covid levels or somewhere in between? We can only conjecture at this point but certainly the customer has changed and the use of technology has become part of the everyday purchase journey.

Siemens HS858KXB6 Connected Kitchen

Q: BSH is seen as a bellwether in the sector and, as such, all eyes have been on you as the supply issues have arisen. What is the current status? 

A: It’s hard to put an exact finger on it because we’re trying to get a better understanding of our own suppliers. We have 38 production sites across the world and there is a whole global chain of parts and components suppliers that feed into those sites. So our effort for the last six months and today is really to see how much commitment we can get from our suppliers, as that’s the only way our factories can be more reliable.

So I would say that in the foreseeable future things are likely to remain as chaotic as they are but we do believe that in a few months from now – I can’t say exactly when – things will start to be a little more easy to predict. As long as the demand remains consistent and the component suppliers can meet their commitments then we can see our ability to forecast lead times to our customers become more stable. The biggest problem we have right now is forecasting lead times exactly – that’s the improvement we need.

Q: It’s a global issue and most people are very sympathetic to that, but the principle complaint from retailers is around the reliability of communication.

A:  The most difficult part, without doubt, has been communicating exact lead times. However, we have been trying our best to communicate as much and as frequently as possible. We remain very close to all our partners and customers and being very open is the only way we can be – if we know something we say so and if we don’t know something we’ll say so. I think our partners have been quite accommodating given the fact that they have been struggling to manage this within their businesses too. So by and large, I think we have tried to be very communicative with our partners – it might not be communication that they’re entirely happy about but we still communicate the best information we have.

Q: The last two years have been a unique experience for everyone, what do you think you have learned about communication with your retail partners? 

A: Firstly, the more you communicate the better. Secondly, don’t hide anything, be completely open and transparent and say everything you know because otherwise you can’t be in a position of trust. On one hand you’re trying to pass on information to your customers and on the other you’re trying to get information from your suppliers, and somewhere you’re caught in the middle a lot of the time and that’s why it hasn’t always been the most seamless thing.

So I think from our perspective, we have learned to just communicate as much as possible and to not remain wedded to the defined lines of communication, because in situations like this you also learn that you have to be flexible – demands from customers can fluctuate quite a lot and you have to accommodate that. All of that is the challenge.

Q: How do you think your relationship with your dealers has been affected by all this? 

A: I think we are indebted to our retailers. We’ve always enjoyed a good relationship but I think for me that relationship has actually been strengthened because even though the problems have been quite acute, we’ve been trying to be as open and honest as possible, and they’ve appreciated that. So I would say the relationship has got tougher from a business perspective, but from a closeness perspective much better.

Q: And the retailers you’ve spoken to personally, have they been that understanding? 

A: Most of them are very understanding and they empathise with our problems, but at the end of the day they also have a consumer to serve and they absolutely have the full right to explain to us what their challenges are and expect us to provide a solution. That solution is not always possible at the time it’s needed but we are trying our best and in most cases our retailers are quite understanding. But we have also learned that trust comes from communicating openly and frequently, they understand that it’s not something we’re holding back.

Q: With such a backlog, how do you decide who gets what when? 

A: You’re working on the lead times as much as possible. You’re trying to make sure you get more and more clarity on lead times and that’s what you communicate and that’s where we’re trying all the time to make ourselves better and more accurate. Things have improved over the last six months and going forward it will be better again but the challenge for us is how accurately we can arrive at exact lead times. You have to look at all the hundreds of products we have  separately, you can’t look at an average lead time across the whole range as it doesn’t help anyone, it has to be SKU by SKU, so we don’t have a magic formula to decide that as such.

Q:  But is there a literal queue and when you reach the front, no matter who you are, you get your products or is the size of your business and the order a factor? 

A: All of our customers are equally important, we don’t have a preference anywhere at all. Each customer has their demand already with us, we know exactly who needs how much and we are able to communicate lead times accordingly and we’re trying to stick to them as much as possible.

Neff N90 downdraft hood

Q: The prediction of that demand is made more difficult by retailers that are buying bulk in anticipation of future sales. Do you think the system will go back to just-in-time or will this experience lead to a hybrid model? 

A: The last two years has been one of the steepest learning curves it’s possible to be on and we’re learning on multiple fronts. One of them is how our entire supply infrastructure is set up; we have probably realised that we had too much concentration of component supply in certain areas and we need to diversify that. We’re also working on alternative platforms so that we won’t get limited to just one that works perfectly well when everything is fine but doesn’t when something like this happens, and we will probably face more volatile situations in the future.

So all of those learnings are being taken in. The biggest unknown is what is the demand going to be for the next five years – is it at the level it is now or not? Making commitments based on what we project for the next five years is going to be so difficult, but it has to be done.

Q: Given all that, what are your predictions? 

A: What you can probably plan for, or project, is what changes you are likely to see and make some judgements on them. The consumer journey is going through a transformation, and we are monitoring it quite closely and that will input into the change. We are also seeing the use of technology going up and up in our daily lives so you will see use of it grow. The other big factor is sustainability, five years ago it was a topic that was discussed but not taken into much consideration in purchases, now consumers are quite proactive and really want to see brands and retailers who give them that option. These are all drivers going forward that we will consider in our future roadmap. Again, what’s really difficult is predicting demand and what level it is likely to be – our best estimates are that it won’t go down to pre-covid levels, but it will settle down at a higher level. Covid has had an impact on the market that no one has seen before in terms of collapse and recovery, but our collective assessment is still cautiously optimistic.

Q: And what about new products, what is the next big thing? 

A: It’s in the direction of technology, without question. It is about all the products in your house connecting together, it’s about an ecosystem that isn’t just appliances, it’s everything and it’s all controlled by your phone or by voice. It’s been heading in that direction for a couple of years but I think the last 18 months has accelerated it. However, you’re not seeing the full impact of that right now because of the supply constraints. All our new innovations are not out in the market yet because we want to put out the current products and they are suffering from a long backlog already. So over the next 12-18 months you will see an acceleration of innovations getting into the market and a lot of it is about that connectivity – not only using it day-to-day but also around repair, learning, diagnosis, and connecting to customer service. This is not a gimmick, it’s something that’s really going to impact and make
a difference.  

Selling direct to consumers

Gunjan Srivastava confirms that BSH is planning to launch a direct-to-consumer offer for large appliances in the near future. He says that a direct sale operation is at an early planning stage – a move that may concern many of the company’s kitchen retail specialists.

But, he insists, the business-to-consumer model would help its retailers in the long run by improving BSH’s understanding of how consumers buy their products.

“Direct to consumer is something that is a global strategic priority for us,” he says. “It’s in our vision and we have looked closely at that in the last year to 18 months.

“But, for us, direct to consumer is not about going out and competing with retailers, the idea is to be closer to the consumer and understand the entire journey as much as possible.

“And by doing that we’ll also be able to really help the larger part of the business which is business-to-business-to-consumer. So it’s a complementary approach.”

The move comes during a difficult period for the wider appliance sector as it grapples with continuing supply chain pressures that have strained many brands’ relationships with their independent dealers.

Srivastava says that the planning is in a very early stage and, as such, it’s not yet known which brands and products will or won’t be included.

“We don’t know right now,” he says. “It’s in an initial thinking-through phase. Once we have more clarity of what our step-by-step plan is going to be we will start talking to retailers and other stakeholders. But, as I say, it’s a complementary approach and we’ll obviously take our retailers along. We’ll understand what issues they may or may not have and communicate regularly what we are or aren’t going to do.”

One concern many existing retailers may have is that their margin may be squeezed if consumers can buy product more cheaply directly. Srivastava, however, insists that this is not the intention.

“This complementary approach means that it’s not a competing approach,” he said. “That’s probably what retailers are afraid of or think might happen depending on what might have happened in the past with other brands. But that’s not going to be our strategy.

“The idea is not to maximise turnover through this, the idea is to get an understanding of the consumer. It’s not something to rush or hurry, we will do it quite gradually and learn at every step.

“And initially I’m talking to a few retailers and explaining to them at this early stage that this is something that might be coming and, yes, they’re apprehensive. “

That apprehension is eased, he said, when retailers are told that this approach will lead to the better understanding of consumers and more benefits for showroom retailers in marketing, planning, or product training.

“Our going business-to-consumer does not mean any reduction or rethink in what we do in the business-to-business-to-consumer area. Most consumers want to shop in a multi-brand environment, and they’ll continue to do that, but some of them might want to shop in an exclusive environment and that’s what this will provide to them.

“For us it completes our understanding of the journey of the consumer, which otherwise for us is a bit limited. Now, as soon as we sell our products to the retailer we lose track of them but by doing this we get to understand the journey better, and therefore across all of our touch points we can then provide better solutions.”

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