 in the CUBE studios in Palo Alto and Boston. It's theCUBE, covering IBM Think. Brought to you by IBM. Hi everybody, welcome back to theCUBE's coverage, wall-to-wall coverage of the IBM Think 2020 digital event experience. My name is Dave Vellante, we've been going really all week and focusing on the impact of the pandemic, how IBM is responding, how customers are likely to respond. I'm really excited, Luke Niazzi is here, he's the global managing director of consumer industries at IBM. Luke, good to see you. Nice to see you, Dave, and nice to be on the call. I mean, if I think about consumer, all the assumptions that we made about consumer behavior, they're really up in the air right now. I wonder if you could share with us what your current thinking is. I mean, the consumer has powered this global economy years. What are you thinking about the consumer right now and the consumer behavior? Well, obviously, it's a massive shift in terms of the immediacy. Let me just backtrack a little bit, Dave, and give you a bit of context. We did some research at the beginning of the year that we launched the National Retail Federation, and we surveyed over 19,000 people globally, and that survey showed that there were two big shifts that were occurring. First of all, there was a shift in the purpose-driven consumer of the 19,000 people that we surveyed. Of 40% of them said that they were making decisions that were purpose-driven, compared to 41% that make decisions that were convenient, and that's people who care about sustainability and aware products are coming from them. And the other big thing that we saw was shopping in micro moments, increased digital shopping kind of anytime, anywhere. Now, of course, with the pandemic, we are seeing an acceleration and a fastening of those activities. First of all, beyond the immediate move to panic buying that occurred, we've seen a big, big shift in online buying, and we think later on, going to drive also a reinforcement of this move to more sustainable products and services. Yeah, I mean, so right now, you have, I guess, buying for what's available. You need something that might not be available. As a consumer, you're making a lot of trade-offs. Okay, well, I'll go for alcohol-based hand sanitizer, as opposed to just conventional hand sanitizer as an example. Oh, well, I'll make some trade-offs in tissue paper, et cetera, et cetera, and maybe there's some boredom buying. I don't know if you've seen that. People are shut in, but so all kinds of daily changes, weekly changes. So how do you see this exiting? How do you see consumer behavior changing as we exit this pandemic in waves? And we're not even sure how we're going to exit. Well, let me kind of break it down in terms of what's been going on right now. So, of course, we saw this massive waves of a shift to look for sanitary products, a shift for groceries. Then we've seen a kind of a different shift about how can I keep my kids entertained while they're at home and kind of more discretionary choices being much lower. So when you kind of looked at that in terms of actual impact on business, we've seen groceries say in the US up by about 27%. We've seen a move on digital in the US, about 3% of the global of the US population shifts about buys online, that shifted to 43% during this period. And of course, we think that these are things that are going to sustain. What it's done is it's accelerated the type of purchases that people are doing in a digital context. And we think that that is going to continue for quite some time because of course, the data on the pandemic looks like it's going to continue for many months and in ways. So we've seen the shift to digital and initially people are kind of looking for things anywhere but it's going to be combined with a kind of a new type of delivery model. There's much more kind of buy online pickup in center, distribution center pickup at the car park, whether that's your groceries or whether that's health related product. So it's going to change the delivery models. It also means of course that stores are going to change a great, great deal at the moment grocery stores all have social distancing with the protection of the store associates being a key element of that. You're going to see not the same amount of people in those stores going forward and a different configuration and application of technology also in store to keep monitoring both the safety of the employees and the safety of the customers but also to make sure that occupancy levels are appropriate, et cetera. So big shifts to digital, the big shifts to different types of delivery models, big shifts to kind of safety related technology. Of course, what we're also seeing, and this is the difficult piece, which is if you have discretionary spread, fashion, apparel, luxury, the drop in those volumes are very, very significant. So what's going on right now? I mean, Luke, I've actually been quite impressed with some providers that have pivoted very quickly to things like curbside pickup and have really responded quite fast to that. At the same time, I've seen others where, I mean, it's clear that they really didn't have the infrastructure or the processes. They're asking, hey, how did we do? Do you mind taking a quick survey because they need to iterate? How can IBM help those that really weren't that prepared and it sort of bandated together some solutions, get to the point post pandemic before this thing ends, where they really need to be? What are you guys doing with clients? Yeah, so first and foremost, as the pandemic hit, we focused very much on resiliency, making sure that our clients could operate as robustly as possible. And in fact, 95% of our services are being delivered digitally and remotely right. What then happened was, how do I deal with these massive core volumes that are occurring in my call centers? Where, by the way, I have less staff because some people are having to keep themselves safe and socially distance. And so we deployed immediately beyond our resiliency solutions to call center chatbots that are helping our clients both prioritize and screen calls. One of our major retail clients in the US said, I thought that the Watson chatbot technologies were going to be helpful. They weren't just helpful, they saved us. And so that kind of thing's occurring in the immediate sense. The next piece, of course, you then start to see is that clients have realized that both their digital channels and their fulfillment models have not been able to keep up. Nobody has been able to keep up with the demand that's occurred, not even Amazon's been able to keep up. And what was a 24, 48 hour delivery slot, those sorts of slots have gone out the window. So we are going to see a next wave of reinvesting in enhancing digital channels. And we will leverage both our services business as well as our cloud technologies to support that. And then underpinning that, you're also seeing a need to rebalance the supply chain because of course, where products can come from have changed, where things can be sourced is now having to move much more from a global supply chain to a global local supply chain. And we're having to balance supply with more local providers. And so there's a demand supply balancing to be done. That means that clients are kind of think about the practicalities of that, but they're investing in next generation technologies to support that for IBM, that things like our IBM Sterling portfolio, but it's also the application of our supply chain AI to this massive demand supply kind of imbalancing. And we've been helping certain clients look at that and move stock at the most appropriate locations. We've been doing that to help our clients kind of rethink that there's a supply chain. So we're going to see a lot of that. We kind of thought of the intelligence supply chain and we're going to see investment in the intelligence supply chain, just like we see this investment of pairing in the change in the commerce engines. Last thing to say is track and trace is going to be hugely important, track and trace of all products and where they come from, where they were handled and of course, track and trace of people. And so technologies like blockchain and what we do with food trust are also going to be a really important element to that. Yeah, another really key piece of digital. I mean, the Cube, we go to physical events and we've been saying that this, we're just not going to go back to 2019. The people are going to learn through this experience that there's really some additional value that they can create through digital. You think about consumer, that's a much, much more complex environment. Talk about tens of thousands, potentially hundreds of thousands or even millions of types of products. You mentioned chatbots, the entire experience that we talked about, like curbside pickup, lead times, people managing demand with lead times, you can only or limiting the volume. You mentioned supply chain, track and trace, blockchain. So a whole new set of digital assumptions are going to emerge or are emerging. I don't want to make it sound like there's a, there's some kind of binary beginning and end to this thing. This is going to be a slow, but yet fast iteration of constant iteration and continuous improvement, isn't it? Yeah, it is. One of my clients in Europe actually, we were talking earlier this week, and they said, look, as difficult the environment is right now, and of course we've been focused on our current operations and fulfilling our customers as best we can. It's actually bringing us to a whole new window about to rethink the priorities of our investments and how we look at that going forward. And he's almost saying, well, I'm going to have to go to a zero-based budgeting approach. And against that, we're going to see a much greater investment in commerce, regardless of what your model is, whether you are digital first or physical first, you're going to see a much greater focus on kind of dealing with the capacity and the variability that we've experienced because organizations weren't geared up for that. And you're going to see then the investment in the intelligence and the supply chain to support that backed up with trust and traceability. And back to the points that I started at the beginning of this discussion, it means that the trends that we saw and we assessed actually are going to be almost perpetuated because we think this move to sustainable and more local sourcing, more balanced sourcing will continue to be a big factor. And we think that this kind of idea of shopping in the micro moment, but shopping in a much more digital way is here to stay. Of course, the consequence of that is it's going to have quite a big impact on the physical environments. And unfortunately, there are going to be casualties in this for certain sectors that are not going to be able to sustain the big shift in the model. So I have a physical down for the immediate and probably mid and maybe even long term, digital up. One of your areas of expertise is agribusiness. We've talked about, you know, Sumer in general. I wonder if you could share with us what you're seeing there. I'm inferring more local sourcing, which obviously has some impacts on what's available at different times a year, potentially on pricing. Thoughts on agribusiness and how they're responding. Yeah, well, it's fascinating. If you take it into two terms, first of all, of course, agriculture has been impacted right now by not so much for the professional farming, which has a large scale mechanization, but for a lot of farming in large parts of Asia or parts of Latin America or parts of Africa and even parts of Europe. There's a lot of transitionary labor that occurs in order to be able to harvest the crops. And so that's a really difficult immediate problem. We've seen, you know, people volunteering in certain countries like here in the UK, where I live, either people volunteering who can't work in their current job to say, how can I help the harvest? And that's kind of an immediate thing that's needed right now. But the broader topic and the work that my teams do is that actually the application of digital technologies and science through agriculture is behind what occurs in other industries. And there's such a great opportunity by leveraging digital technology to be more effective in actually getting the most out of farming land without over farming the land. And so we're working quite a lot on digital agronomics, applying traceability truly from farmed ore and starting to bring together data sources that were not in the same place to be able to help build effectively an aggregate cloud type capability for the benefit of farmers. And across those things, we're going to see farmers empowered with more information and more insight. So simple things like the weather channel application that we have from our weather company. We're deploying that to millions of farmers in Africa and Asia. And on top of that, we're being able to plan for the deployment of other related information. So how to farm, but also we could start to look at how to provide safety related information, et cetera to those farmers. So we are going to see through effective use of technology increase appropriate digitization of farming processes. And it'll be at a very practical level that I can put onto my phone a bit. So definitely this is a big thing. And of course, as you know, the traceability that we do with our food trust and it isn't just about safety. It can talk about how food was produced, how far it traveled, what conditions was it handled in, what is it CO2 footprint. And so that traceability engine can actually accelerate also the sustainability agenda that I referred to earlier. Well, Luke, I mean, as we're discussing the moment by moment, the assumptions are changing. You know, the narrative this weekend, of course, at least in the U.S. was, hey, we've got to just now get out there. And many are saying this, not all, but just affect mass immunity that it's really going to be the only way. Vaccines aren't coming anytime soon. Young people will go out, retail environment. Of course, you're still going to have social distancing. People that are compromised or older aren't going to go out. So clearly volumes are going to be down, it's a very fluid situation. So business resiliency and flexibility is critical here. And it sounds like you're helping organizations really build that into their operating model. That is critical. Yeah, absolutely. And, you know, for some of the grand categories that I haven't talked about so much, you know, what you're seeing in things like apparel, fashion and luxury is a move to try to drive that engagement to you, to the customer in a much more digital sense. So how do I interact with the brand? How do I experience the brand? How can I go all the way through to my purchase digitally when I don't have the ability to get stores? So this digital transformation agenda will affect pretty much all major segments. Obviously the food supply chain, the healthcare supply chain is the focus right now, but we will see increasing digitization and the need to rebalance the in-store experience, even for the fashion apparel and luxury segments. And so there will be a lot of transformation to be done, while of course having to deal with the cost balancing that needs to occur in these industries as they effectively shift more towards digital. Yeah, you're right. I mean, the cost structure may dramatically change, yet at the same time, it may be critical for maintaining or even gaining market share. So a lot of potential disruption. Luke, I'll give you the final word, your thoughts. Bring us home, please. Well, first of all, people's well-being and safety is our paramount focus and that's what we've been looking at from the outset. But I think people could be positive that there is a lot of opportunity and we can deliver the things that they need in a safe way, in a secure way, in a digital way, that is able to cope with the environments that we see today and may prevail. And it's about bringing that intelligence and innovation into both the commerce and the digital channels and into the supply chains all the way through to the track and trace, which is what we focus on. Well, Luke, thanks so much for coming on theCUBE. It's great to have you with your insights. I mean, IBM very clearly has its hands in a lot of these different industries and it's great to have your industry expertise sharing with our audience. I really appreciate your time. Take care. Thank you. All right, thank you for watching everybody. This is Dave Vellante for our continuous coverage of IBM Think Digital Event Experience 2020. You're watching theCUBE right back, right after this short break.