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Christmas is Coming. Is the Goose Getting Fat for Retailers?

October 3, 2022

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Every year the holiday shopping season seems to come earlier. With just over four score days to go before Christmas, retailers, marketers, supply chain professionals, and consumers are all wondering how this holiday season is going to unfold. As we all know, supply chain snarls disrupted last year’s holiday shopping season — with some inventory arriving well after the holidays ended. As a result, some retailers faced a glut of inventory. Retailers suffered a second body blow when inflation dramatically reduced consumer spending on some items. According to correspondents Sumner Park (@sumnerpark16) and Madison Alworth (@MadisonAlworth), this double blow to retailers has some of them in a deep funk. They report, “Retailers and customers are not feeling joyful after a year of supply chain backlogs and higher costs.”[1] The good news, they report, is, “Shipping experts expect the holiday shelves to be full, and big box retailers stocked up early to hedge against supply chain vulnerabilities that were exposed last year.” The big question is whether marketers will be able to entice consumers into buying available products.

 

Neil Saunders (@NeilRetail), Managing Director at Global Data, notes, “This is the first holiday season amid a consumer slowdown and high inflation for many years, so there is no recent precedent to learn from.”[2] Not surprisingly, one way retailers are looking to empty overstocked shelves is by offering steep discounts. Park and Alworth report, “Companies faced with an inventory glut are looking to get supply off their hands by rolling out shopping promotions and discounts early, a stark contrast to the pricing power that they held last year. Walmart announced its top toy list for the 2022 holiday season a month earlier than last year, and Best Buy will also put out discounts starting earlier than usual.”

 

Smart Supply Chains Got an Early Start

 

Supply chain professionals know that planning for the next holiday season often begins right after the last one ends. Of course, some planning must be delayed in order to determine which way consumer winds are blowing. Nevertheless, many retailers jumpstarted the process this year. Zvi Schrieber, CEO of the Freightos Group, told Park and Alworth, “Many retailers have not taken any risks and stocked up early for the holiday season. Instead of starting their holiday shipping in September or in August, many of them stocked up their inventories in June and July.” And Sin To (@sin_to), Senior Director of Marketing Communications at SAP, reports, “Production is in full swing on chocolate Santas, decorations and countless other products to meet demand for the holiday season.”[3] Supply chains that got an early start were smart. To explains, “As many problems across our global supply chains persist with many materials still in short supply, and logistics costs at an all-time high, experts are recommending to start preparing early, because before you know it, Christmas will be here.” If your organization didn’t get an early start, it may be too late to adjust. Nevertheless, To offers several suggestions for improving holiday season supply chains. They are:

 

• Plan early. “In order to avoid bottlenecks and disappointed customers, early planning is undoubtedly required.”

 

• Identify alternate sources of supply. “To minimize the risk [associated with a single source strategy], many companies are negotiating with suppliers and contract manufacturers in multiple regions for their key resources and products.”

 

• Improve supply chain visibility. “Knowing you have a problem is the first step to fixing it. By using a real-time traceable and connected supply chain, it is possible to gain visibility into the supply chain to monitor and to improve it at every stage of the supply chain.”

 

• Leverage cutting-edge technologies. “Use the latest technologies such as IOT, AI and blockchain to increase data transparency and enable the traceability of the life cycle of the components from design and production to testing and delivery.”

 

• Foster collaboration. “Expand and collaborate with the network of contract manufacturers, suppliers, third-party logistics to meet changing customer demands and needs.”

 

• Optimize inventory. “Ensure the right inventory optimization strategy is in place with an integrated business plan that can help to reduce operational costs. With an inventory management system, it is possible to allocate the right inventory at the right place and at the right time.”

 

How the Holiday Shopping Season is Shaping Up

 

Thanks to inflation and talk of recession, manufacturers and retailers are receiving mixed messages about this holiday shopping season. Business journalist Kate Marino (@theKateMarino) reports the move to e-commerce isn’t slowing. She writes, “This holiday season, don’t look for e-commerce growth to slow down. … Economists at Deloitte forecast growth of 13.5% in e-commerce sales this holiday season, pushing sales up to $262 billion, according to a new report. … That’s an even bigger increase than last year when e-commerce grew 8.4% (2020 was the watershed year when online sales jumped a whopping 50%). … Online shopping was turbocharged by the pandemic, and it’s one trend that’s not going away.”[4] Other analysts are not quite so optimistic and predicted a lower growth rate of 9.4%.[5]

 

The in-store shopping picture isn’t quite as bright. Journalist Kelly Tyko (@KellyTyko) reports, “The expected e-commerce growth is in stark contrast to overall holiday sales, which Deloitte estimates will grow by a smaller 4%–6% — less than the current annual inflation rate (8.5%). … Consumers say they will spend less as they watch their budgets. 41% of Americans are planning to spend less this holiday season compared to 2021, according to a recent survey by Trustpilot, a consumer reviews platform. Nearly 30% plan to reduce holiday spending by up to 20%, but 20% plan to reduce spending by more than 50%.”[6] Before getting too pessimistic about the upcoming holiday season, journalist Sarah Mahoney reminds us that forecasts can be wrong. She writes, “[Although the Deloitte] forecast is a bit of a bummer. Last year, Deloitte predicted a sales increase of between 7% and 9%, and the National Retail Federation forecast gains of between 8.5 and 10.5%. Both forecasts actually turned out to be too low. Actual retail sales came in much higher. Between November 2021 and January 2022, they grew 15.1% and totaled $1.39 trillion, according to the U.S. Census Bureau.”[7] Nevertheless, she adds, “An increase of 6% won’t feel like much of a gain, compared to the rate of inflation, which has been over 8%.”

 

Concluding Thoughts

 

I suspect that inflation will play a larger role in consumer shopping decisions this holiday season than any other factor. That means consumers will be looking for genuine bargains. A few years ago research from Euclid found that both gender and age made a difference in how marketers could entice consumers into stores. Concerning that research, Ayaz Nanji (@ayaznanji), a digital strategist and a co-founder of ICW Media, reported, “Some 60% of men say they have been enticed into physical stores during the holiday season by great deals advertised in windows. That compares with 55% of women who say so. Some 61% of men, compared with 54% of women, say they have been drawn into physical stores during the holiday season by online ads. Consumers age 18-to-34 are more likely than consumers age 35+ to be drawn into physical stores by emails and online ads.”[8] The bottom line is that omnichannel marketing is just as important for retailers as omnichannel operations. If retailers want to enjoy the fatted goose this holiday season, they will have to work hard to get consumers to spend.

 

Footnotes
[1] Sumner Park and Madison Alworth, “100 days to Christmas: Deals start early as supply chain eases,” Fox Business, 16 September 2022.
[2] Kelly Tyko, “Discounts could fuel unprecedented holiday shopping season,” Axios, 13 September 2022.
[3] Sin To, “How To Get Your Supply Chain Ready For Christmas,” Forbes, 19 September 2022.
[4] Kate Marino, “Holiday e-commerce sales forecast to grow 13.5% — report,” Axios, 13 September 2022.
[5] Tyko, op. cit.
[6] Ibid.
[7] Sarah Mahoney, “Will Holidays Humbug? Deloitte Predicts Gains Of 4% To 6%,” Marketing Daily, 13 September 2022.
[8] Ayaz Nanji, “What Entices Holiday Shoppers Into Physical Stores,” MarketingProfs, 8 December 2017.

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