How an Optimized Supply Chain Can Tame Costs and Maximize Revenue This Holiday Season 2023
Increasingly, the end-of-year holiday shopping season has become a double-edged financial sword for Q4 retail revenue performance.
On one hand, early bird shoppers are getting a head start in Q3, fearful of inflation. The arrival of Amazon Prime Day has revived shoppers increasingly unmoved by Black Friday hype in recent years. On the other hand, the usual daunting cost control challenges are intensified by increasingly complex supply chains that are still recovering from residual post-pandemic factors.
Underpinning all of this, there’s collapsing brand loyalty triggered by the emergence of “value shoppers” and heightened customer sensitivity to poor returns experiences.
If those things weren’t enough, there’s the guessing game of how tech-savvy shoppers of all ages will combine channels to fit purchases around lifestyle, inflation-hit budgets, and increased appetite for spotting a great deal.
As the 2023 holiday season rolls in, how can retail supply chains position themselves to intercept fleeting opportunities, while gearing up to keep costs from unraveling amid a cluster of overlapping factors?
Here Are the Revenue Opportunities This Holiday Season 2023
Holiday retail predictions from seasonal forecasters such as Deloitte are pinning predictions on overall holiday season figures up 3.5% — 4.6% in 2023 versus 2022. In e-commerce, the same forecast cites 10.3% to 12.8% growth for the same period.
So, where are the revenue opportunities? It’s hard to call precisely ahead of time. Which is why retail supply chains need to stay on alert and agile to respond to demand patterns as they arise and before they fade.
Where might the patterns be?
Gen Z marketing: More Gen Zers have started holiday shopping earlier this 2023 season compared with 2022 (34% versus 21% respectively). This big behavior swing has also led to shifts in fulfillment channel usage for early orders.
Given the likely discount-heavy 2023 season, apparel, beauty, personal care, electronics, and retailers with strong omni-channel presence may be able to secure non-discounted revenue with Gen Z-specific campaigns at the start of the season.
Catching the “value shopper” wave: Though inflation has eased, it remains high relative to annual norms. As such, inflation will still play a big role in influencing not just what consumers buy, but how they make those purchases.
According to Gartner’s September 12 Marketing Survey, although only 9% of consumers plan to spend more this holiday season, 19% have been shopping year-round, with price and free shipping being top factors influencing purchasing decisions.
If the 9% of spend-shy consumers is an indication of things to come, retailers will need to leverage inventory levels cautiously to avoid overstocking, which could lead to increased holding costs and potential markdowns later.
Retailers hoping to attract those drawn by free shipping and discounts will need to put particular focus on optimizing transportation to reduce costs and shield margins.
So, what’s the best inventory and workforce strategy for lining up opportunities and dodging cost pitfalls through the 2023 holiday season?
Hedge Your Bets: Keep Inventory and Workforce Tactics as Flexible as Possible
The sensible answer is that there’s no single winning strategy. Things will move too fast and too unpredictably.
It really comes down to having the ability to view and respond to changing demand across channels in the moment and to flex workforce and inventory in real time. That’s how retailers that come out on top can be “in the right place, at the right time” in terms of making the most of unpredictable patterns.
Imagine you’ve geared up your distribution centers (DCs) to focus on serving in-store replenishments based on how the holiday season panned out in 2022.
What if online orders boom this year? By some predictions, it’s more than likely: According to forecasts by eMarketer, e-commerce will account for almost 20% of retail sales as consumers try to offset high gas costs and “power shop” faster online to find deals.
Retailers setting up DCs to prioritize in-store sales could be caught out by inadequate staffing for dealing with peak e-commerce fulfillment times, or be overstaffed during in-store replenishment lulls. This miscalculation alone will lead to delayed orders, overtime costs, and workforce burnout.
How Can Retail Supply Chains Predict the Unpredictable, Side Step the Costs, and Lean Into Opportunity?
Ultimately, the name of the game will be clearing up inventory and demand blind spots by keeping retail supply chains as interoperable as possible.
In other words, the entire supply chain will require rapid, fluid, real-time data sharing up and downstream. That’s how store and warehouse operations can pivot and adapt synchronously. That’s how in-store and online customers will receive orders in the shortest time possible. That’s how retailers can revive brand loyalty. And that’s how satisfying surges in demand without incurring spiraling costs can become standardized.
To do that, retail supply chains will need to add new layers and capabilities to existing architecture throughout operations, from store to DCs. And it needn’t take months.
- Real-time inventory visibility
- Adaptive demand forecasting
- Automated order routing
- Demand-driven replenishment
- Fulfillment performance feedback loops
Schedule a strategy call with a Blue Yonder expert.
Blue Yonder ordering and inventory microservices can quickly augment ERP and other systems with these capabilities and more, without disruption or major workforce retraining requirements.