How Retail Leaders Will Weather the Holiday Season Supply Shortage with Digital Technology
The retail industry may have set itself up to fail.
Don’t get me wrong: It’s hard to blame anyone in retail for the impending supply crunch. No one could have predicted exactly how the COVID-19 pandemic was going to impact consumer activity. But it’s clear now that many bet wrong.
At the outset of lockdowns and closures around the country (and world) in March, countless retailers began cancelling orders, well into summer and fall. Then, despite the pandemic’s persistence, a funny thing happened: Customers just kept buying.
By July, according to Sentieo, 33 of the largest U.S. retailers had $119 billion in inventory, 9% lower than in 2019. Those 33 companies also saw $292 billion in sales in Q2 2020, a 6%rise from the previous year.
In other words, a dangerous combination was created: lower supply, higher demand.
Now, absent a typical Black Friday, retailers find themselves racing to catch up — with holiday shopping already in full swing. Rebecca Minkoff of the eponymous fashion brand told the Financial Times they were “scrambling” for product. “There’s a major inventory problem,” said Craig Johnson, president of the Customer Growth Partners consultancy. “There’s simply not enough product,” said Simeon Siegel, retail analyst at BMO Capital Markets.
So, who will survive? Odds are, it will be organizations that embrace intelligent technologies and insight-driven data to meet customers’ needs and exceed their expectations. Odds are, it will be digital leaders.
Delivering with Data
A digitized core was already integral to modern success, even before COVID-19. But the new reality created by the pandemic has only emphasized its importance. Your technology solution must provide clear visibility and insight into your inventory, in real-time, across all channels. As demand increases, will you be able to identify where things are? What’s trending? What’s needed? Without a digitized core, you simply won’t be able to make the best decisions for your business.
The actions of big-box stores like Target are instructive in this instance, especially as COVID-19 cases again skyrocket. A spokesperson told Loss Prevention Magazine last month that the retailer plans to send more inventory to stores in advance than ever before. Fashion leaders with powerful visibility and insight into their data can make similar anticipations — and ensure smooth delivery throughout the holiday season.
No matter the situation, one simple truth tends to hold: Customers want to know what’s going on. They want to know when their purchases will arrive, and they want to know where they’re at along the way.
If you’re out of stock, can you tell customers how long that will be the case? Can you offer them the ability to choose the exact day their package will arrive? Can you boost convenience by enabling online order pick-up at a local store? Digital insight into every element of inventory and fulfillment is essential.
Take the recent frustration by consumers surrounding the launch of the PlayStation 5. Many customers frustratingly refreshed their computers for hours hoping to buy. Some made it as far as the shopping cart before being booted. Some resorted dangerous and expensive means to ensure they get one by Christmas. As one friend put it to me in a text, “I don’t really understand the business sense behind them being so scarce. I want to give them money.”
Enabling the E-Commerce Experience
It should be noted that sales did not just “increase” this year, per my earlier data point. In fact, in-store sales have plummeted — with online sales skyrocketing on the other end. Stores like Macy’s (53% increase online year-over-year), Kohl’s (60%) and Ulta (200%) have seen massive e-commerce spikes. Forrester estimates that online marketplaces and e-commerce tools have grown more in the last five months than in the last ten years.
A next-generation digitized core and fully integrated e-commerce strategy is now a prerequisite, providing adaptable shopping experiences that drive conversions, enabling maximum business agility to cope with changing market conditions, and tailoring features and capabilities specific to your business needs.
Traditional strategies just won’t cut it — not this season. There’s too much at stake.
Make sure you set yourself up to succeed.
Robin Barrett Wilson is a retail industry executive advisor, at SAP with a goal to help prospective and current customers identify new opportunities that meet the expectations of today’s consumer, deliver value, and achieve business results.