For years now, retailers have been advancing the date for Christmas holiday sales. For decades, holiday sales began after Thanksgiving on Black Friday. In the past few years, however, it has not been unusual to see holiday store displays and sales shortly after Halloween. This year those sales could begin before Halloween thanks to continued supply chain disruptions and delays. Consumers still stinging from package delays experienced last Christmas season understand the current supply chain situation could make this holiday season even more chaotic. As anchor-woman Ashley Thompson (@AshleyCBS46) reports, “A supply chain crisis is forcing shoppers to buy their holiday gifts earlier than usual.”[1] And many consumers realize their gift selection could be limited to items currently found on store shelves or currently available in online retailer inventory. Jon Gold, Vice President of Supply Chain and Customs, explained to Thompson that retailers are trying to get products earlier than usual. He told her, “If you can’t get the product when you need it, you could potentially not have it on store shelves. Typically, the peak shipping season is August, September, October, when the bulk of those products come in. But because of the ongoing congestion issues, a lot of those orders and timeframes [were] moved up.” Whether those products arrive in time for the holidays remains up in the air as port congestion and port shutdowns continue plague supply chains.
Consumers Are Ready to Buy, But …
A shortage of products and an abundance of available consumer cash have created worrisome inflationary conditions. Inflation, however, might dampen sales. Richard Howells (@howellsrichard), a supply chain expert with SAP, explains, “With record ‘non-spending,’ and cancelled vacations in 2020, it has been estimated that Americans have stashed away more than $1.5 trillion in excess savings. So now, as a result of the vaccine rollouts, the $1.9 trillion stimulus package, restrictions starting to be lifted, shops opening, and the possibility of children returning to school and employees going to work, you can almost smell the money burning a hole in people’s pockets.”[2] He believes the urge to spend will be uncontrollable. He explains, “This urge to spend is known as ‘revenge spending.’ It usually follows an unprecedented event as people seek to reclaim control and a sense of normalcy. And lord knows, I think we all want to get back to something close to normality.”
Journalist Stephanie Boland predicts much of the revenge spending will be done online. She writes, “Following COVID-19, most global consumers (60%) have changed their purchasing habits. Increasingly, people are moving from appointment shopping to impulse shopping, powered by the acceleration of eCommerce — from going shopping to always shopping.”[3] With consumers concerned about having presents under the tree, they may find themselves doing online research then heading to a physical store to purchase available items. Boland notes, “Most (79%) holiday shoppers surveyed agree online is the easiest way to discover products during the season, with 68% agreeing it’s the easiest way to make purchases.” In the past, consumers have benefited from a cornucopia of available products. As a result Boland writes, “Consumers can often find themselves overloaded with choice and points of friction on their journey to purchase: 88% of shopping carts were abandoned worldwide in March last year.” This year may be different.
If the Delta variant of the coronavirus continues to create havoc, online shopping may once again dominate holiday shopping. Last year reporters Michael Corkery (@mcorkery5) and Sapna Maheshwari (@sapna) noted, “The forces propelling online shopping were set in motion long before the pandemic. But charting the decline of many brick-and-mortar stores and the simultaneous growth of e-commerce … is like watching the industry’s evolution, and its impact on the broader economy, on fast forward. In the future, 2020 will be seen as a major inflection point for retail.”[4] Last year’s holiday season saw an increase in “buy online pickup in store” (BOPIS) options and the rise of curbside pickup options. This year could mirror last year in that respect. Corkery and Maheshwari report, “Retail executives said that staggering growth [in e-commerce] was not a fluke of the pandemic lockdowns, but the result of a permanent shift in how people shop.”
Omnichannel Operations are Essential
The most important lesson retailers learned last year was the importance of omnichannel operations. If they took that lesson to heart and bolstered their omnichannel operations, those efforts are likely to pay off big this holiday shopping season — which could have started already. According to Mark Burstein, an Executive Vice President and industry principal at Logility, most retailers did learn the importance of omnichannel operations. Last year, he reports, “Retailers [spent] 29% of their overall IT budgets on improving supply chain technology, according to the RIS Supply Chain Technology Study 2020. Digitalization is a key part of this, and it’s no surprise that this is such a significant priority for retail supply chain executives. Digital supply chains provide the resiliency, agility and speed that retailers need by bringing together all the systems, applications, processes, information and users in a supply chain in a single digital platform. Emerging technologies such as artificial intelligence (AI), blockchain and Internet of Things can help them execute decisions based on changes in customer demand faster, reduce markdowns and out-of-stocks and improve profit margins. These are critical technologies that winning retailers will master during the holiday season and beyond.”[5]
Perhaps the most important thing retailers — both virtual and physical — can do this year is manage customer expectations. Journalist Brooke Sutherland (@blsuth) reports, “We’re now most of the way through the industrial earnings season, and you’d be hard pressed to find a press release or conference-call discussion so far that didn’t include a mention of supply-chain bottlenecks.”[6] More importantly, Sutherland doesn’t see a way to break supply-chain bottlenecks before Christmas. She explains, “The big question, of course, is how long industrial supply-chain leaders need to keep coming up with new ways to make and ship products. Some of the component bottlenecks and high raw-material costs will work themselves out as the economy settles into a more sustainable growth rate. But absent an economic slowdown that no one wants, the only real way to rectify the semiconductor shortage and a dearth of ocean-freight capacity is to build more chip factories and shipping containers. That takes time.” As a result, retailers should warn consumers about out-of-stock situations and expected delivery delays. The last thing they need is for consumer frustration to turn into consumer anger.
Concluding Thoughts
Last year, most experts agree the holiday shopping season kicked off with Amazon’s Prime Day, which had been delayed from July to October. This year’s troubled supply chain means holiday shoppers may try to get a jump on the holiday shopping before Halloween. As a result, retailers may try and kickstart holiday sales with earlier than usual holiday offerings. According to Randy Mercer, Vice President of Global Product Management at 1WorldSync, retailers could benefit from a longer holiday shopping season. He explains, “Instead of waiting for Black Friday to announce new lines and Christmas deals, brands are finding that it may be easier to elongate the holiday season, creating a slightly more steady trickle of holiday shopping instead of a fast-paced peak in late November and December. Delivery networks like FedEx and UPS have been saturated with demand, so a wider holiday window gives supply chain networks more time to recoup and get back to normal operations.”[6] Don’t surprised to see Santa sitting next to a Jack-o-lantern in the weeks ahead.
Despite Howells optimistic view that spending will continue to rise. Sutherland notes, “The supply-chain challenges and the great debate over whether inflation will suffocate the economy are related.” Retailers certainly hope this season will see increased consumer spending; however, their best bet is to get consumers to buy now. Selling current inventory not only increases profits it eliminates consumer frustration resulting from out-of-stock situations. For merchandise not already on hand, consumers should be warned about potential delays — perhaps extending well beyond Christmas. Some retailers, however, insist inventory worries are overblown.[8] Time will tell.
Footnotes
[1] Ashley Thompson, “Attention shoppers! Shipping delays could impact holiday shopping,” CBS46, 18 July 2021.
[2] Richard Howells, “The Rise Of The Revenge Economy,” Forbes, 13 August 2021.
[3] Stephanie Boland, “Discovery Commerce: conversion for the holiday season,” The Drum, 10 August 2021.
[4] Michael Corkery and Sapna Maheshwari, “As Customers Move Online, So Does the Holiday Shopping Season,” The New York Times, 23 November 2020.
[5] Mark Burstein, “Why Supply Chain Agility is Essential for Retailers’ Holiday Success,” Supply & Demand Chain Executive, 14 November 2020.
[6] Brielle Jaekel, “How Will the Supply Chain React to a Stretched Out Holiday Season?” Supply & Demand Chain Executive, 14 October 2020.
[7] Brooke Sutherland, “No End In Sight to Supply-Chain Snarls, So Now What?” Bloomberg, 30 July 2021.
[8] Lauren Thomas, “Target CEO Brian Cornell quells fears about out-of-stocks this holiday season,” CNBC, 18 August 2021.
