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

August 30, 2022

Holiday Season 2022: How Rate Fluctuations and Spending Trends Could Impact Stock Availability

brand-mike
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brand-mike

For retailers, the holiday season is traditionally the time of year when sales hit new highs. However, since 2020 with the pandemic and the major supply chain bottlenecks in 2021, there have been a series of distortions to normal seasonality. In 2022, logistics is once again predicted to impact on what a shopper sees on a shelf around the holidays.

Changing Retail Spend Patterns

In some sectors, retailers like those in the fashion industry have been preparing in advance, having learned their lessons over the last two seasons that it pays to be in-stock. This has resulted in a highly-publicized inventory glut at several of the largest retailers in the U.S. At the same time, while ecommerce continues to occupy more of shoppers annual spend, brick-and-mortar and hybrid retail models are going strong, prompting many sellers to question where they should be stocking their precious goods—in central distribution centers, Third Party Logistics (3PL) partner warehouses, or in-store?

Traditionally, retailers with larger brick-and-mortar footprints have hired additional staff to keep up with higher in-store customer volume to help ramp up for the holidays. Then, during the height of the COVID pandemic, many shifted to an ecommerce-first model, so they hired more warehouse and logistics staff to keep up with the orders pouring in from their websites. Now, with a hybrid model coming to the fore, where the selling happens in person, online, and through third-party sites like Amazon and Walmart—retailers are having to restructure again.

According to the Office of National Statistics, online shopping made up 32.8% of total retail sales at the height of the pandemic. A recent survey from eMarketer shows ecommerce possibly surpassing $1 Trillion by the end of 2022, representing 17% growth YoY. This trend incorporates some hybrid shopping models such as Buy Online, Pick-up In Store (BOPIS); a model that grow in popularity as the pandemic drew on and stores began looking for ways to bring customers back safely.

Peak ‘22 May Defy Past Trends

Stepping into the freight side of peak season, what often dictates the holiday season are rate fluctuations and the balance between capacity and demand. Peak ‘22 stands ready to defy the trend set by the previous two years in two crucial ways.

First, as mentioned earlier, many of the larger retailers have been preparing for peak since early in the year by bringing in extra supply with each regular shipment. For many hard goods categories, such as home goods, clothing staples, and electronics—this model may serve them well as there will be no last-minute orders to worry about leaving fewer empty shelves.

An additional impact on retail bottom lines this year is that spot rates are coming down, but remain substantially higher than pre-pandemic. Those who have locked in contract rates are seeing them remain steady. Match that with the increase in belly space available for air freight as international travel picks up speed again, and you may find yourself with several options to choose from.

The second potential difference this year is that while demand may not be as strong, given all the early ordering that was done, capacity is up significantly. This trend may effectively negate the impact of a traditional seasonal peak, so the bottom line is that with advance planning and possibly strategic use of alternative routes/modes you can ensure your buyers get the products they want, in time for holiday gift giving.

What’s Coming After Peak ‘22?

What does all this mean as you look beyond the 2022 holiday season? The bulk of our advice is to continue doing everything you’ve started doing during the pandemic—get POs in as early as you can and pre-book whatever shipments you can to lock in capacity and rates. With the additional capacity that came online throughout ‘22, there’s enough to adsorb any peak increases. So looking into ‘23, things are expected to continue apace.

That said, we don’t see congestion going away anytime soon, so if anything, there’s more of an impetus to stay ahead of your own needs as much as possible. Work on your supply chain visibility, as the more data you have to analyze, the more accurate your forecasts and inventory management will become. And that accuracy is what will enable you to stay ahead of your competition when it comes time to start planning for Peak ‘23.

About the Author

brand-mike

Key takeaways

1.

Online shopping made up 32.8% of total retail sales at the height of the pandemic—now ecommerce might surpass $1 Trillion by the end of 2022.

2.

Peak ‘22 defies previous trends with higher-than-normal spot rates, decreasing demand, and increased capacity.

3.

Visibility and strong data insights can help forecast trends so you gain an upper edge for Peak ‘23.

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