Sep. 22, 2020

Holiday Season 2020: How High Rates and Low Spending Could Impact What Appears on the Shelves

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The year-end holidays have traditionally been a bumper time of year for retailers when sales hit new highs. In recent years, that trend has been shifting. In fact, December 2019 saw retail sales fall from November as holiday shopping sprees failed to materialize.

Looking to 2020, the pandemic has changed everything. And low consumer confidence, combined with consumer fears of coronavirus, is set to make this year’s holiday shopping period unlike any others.

While typically the ability to get goods from manufacturer to store has been relatively smooth, in the last year we’ve seen constant disruption. In few circumstances could logistics have such an impact on what a shopper might see on a shelf.

Changing Retail Spend Patterns

In some sectors, retailers have had to already accept that sales are going to be down this year. The fashion industry, however, will have experienced a boost driven by shoppers buying outfits for holiday parties, or seasonal clothing to wear when offices reopen. In other areas of retail, we could see a more prolonged sales period as consumers seek to beat the rush and the virus, by getting their shopping done before the November/December crowds. John Lewis, for example, launched its Christmas store a whole 10 days earlier than usual this year.

Traditionally retailers with large physical footprints have hired additional staff to keep up with higher customer volume in the lead up to the holidays. But with consumers likely to spend less time in-store, one immediate impact on the logistics industry could be more warehouse-based staff to manage growth in online orders. According to the Office of National Statistics, online shopping made up 32.8% of total retail sales at the height of the pandemic. Amazon has already pledged to create 7,000 new jobs to meet growing demand.

Fluctuating Rates

While some may celebrate a growth in online, the changing rates on both air and ocean freight in the last year could spoil the party for some online retailers. Here’s what to expect in terms of potential impact of Covid-19 throughout physical and digital commerce.

1. Delayed Delivery Spot rates have rarely been so volatile, particularly air. Demand exploded in the second quarter as capacity was cut. While ocean rates have stabilized to some extent, the core challenge for air remains: a lack of passenger flights to make up capacity. Should space availability and rates return to normal, it won’t necessarily make up for those shipments that should have been completed already. The challenge for logistics specialists will be to make sure they have full visibility of orders and goods in transit—to plan what will and will not be available for customers.

2. Inaccurate Descriptions Retailers will understandably want to make sure they are getting hold of the items they think will be most in demand. To speed time to market, many will look to new suppliers, skipping the traditional cataloguing of product information before a first order is put in front of customers. That could lead to incorrect descriptions or slightly off colors that don’t match shoppers’ expectations. Logistics managers who have full visibility into their supply chains are able to have an edge here by quickly addressing concerns related to defective products and inaccuracies in descriptions online.

3. Limited Options or Oversupply The pressure on rates will cause many retailers to either over- or under-stock. During the current peak season brands have been juggling more inventory than they might expect to sell this year in order to protect themselves from any future lockdown. In contrast, others have ordered less to avoid paying high transit prices.

Both strategies pose a risk: An oversupply could result in having to offer large discounts to free up warehouse space for future seasons. However, an undersupply could see retailers lose to competitors with a more reliable supply. In this environment, it is critical to have an integrated supply chain which enables an organization to plan and react to demand based on data rather than trends.

Understanding the logistics landscape and reacting to it in real time will be critical in the coming months for retailers. 2020 has been a difficult year to predict. And while it is not over yet, it could prove to be a model for holiday shopping in the years to come.

To learn more about supply chain strategies and trending issues in freight shipping, register for FORWARD20 by Flexport.

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