As economic uncertainty continues, the big question is, were retailers and sales affected during the Christmas peak season? Statistics released by The Office of National Statistics (ONS) show that overall retail sales in the UK fell unexpectedly in December, as cost-conscious consumers cut back on spending in the run-up to Christmas as a response to higher prices, rising energy bills and a weakening economy.
Economists expected to see a rise of 0.5 per cent during the festive period, but ONS figures show a 1 per cent decline in sales volumes, attributing this trend to external factors such as increases in food prices and a fall in online purchases as consumers acted on concerns surrounding postal strikes.
The statistics show that the decline in December sales was partly driven by fewer sales across the retail sector compared with the same period in 2021, suggesting consumers counted every penny when doing their Christmas shopping due to the cost-of-living crisis and soaring bills.
Yet for some, it was ‘business as usual’ over the festive peak. Whilst many fulfilment providers experienced a slight drop in volume, the overall period was still successful. This was mostly down to contingency around delivery partners and options and ensuring their business has the ability to remain agile.
Although 2022 might have been an anomaly for the retail sector with the festive peak season usually resulting in a consistently high volume of sales, having a proven strategy to navigate logistics and manage inventory is critical for retailers to account for the mounting uncertainties leading up to Christmas. Due to disruptions in the supply chain that have been experienced in recent years, orders anticipated in Q4 2021 have been delivered in Q2 2022, which left retailers with excess stock. Retailers looked for opportunities to reduce their inflated stock before the end of the festive season to avoid any impact on their gross profit margins.
BEING PREPARED: FORECASTING AND THE CORRECT INFRASTRUCTURE
Forecasting customer trends and spending has been increasingly complicated in recent years, not helped by the uncertainty of global supply chain disruptions, financial crisis, and consumer demand. Even if retailers judge the customer demand correctly, inventory still needs to be able to meet the demand.
Most retailers in 2022 experienced uncertainty around forecasting, making decisions regarding additional storage and staff more difficult than in previous years. Retailers, such as ASOS, announced their reluctance to place orders for future seasons due to uncertainty surrounding demand.
While consumers feel the pressure of rising inflation, so do retailers. Many have also faced financial difficulties in 2022, struggling with supply chain disruptions and inflated stock levels. While warehouse space is currently hard to come by, there are alternative fulfilment solutions available that don’t require heavy lifting to implement.
Retailers that approached their fulfilment operations with an omnichannel strategy were one step ahead in the countdown to Christmas. An omnichannel approach diversifies fulfilment and inventory points. If one operation or part of the supply chain is under too much stress or hits a snag, another can pick up where it left off and get things running smoothly again. Implementing a distributed order management (DOM) system can help retailers manage their omnichannel strategy, assigning orders across all available fulfilment points whilst also optimising inventory, reducing the likelihood of stock being left over at the end of the season.
ALTERNATIVE FULFILMENT OPTIONS
For those retailers that don’t utilise an omnichannel strategy, there are alternative solutions that can help to reduce the strain experienced during peak season. Pop-up distribution centres enable retailers to create temporary warehouses, accommodating any sudden spikes in demand. These can be set up quickly within an existing property, such as a dark store. With coordinated order-picking technology, retailers can utilise existing and unused space and transform it into a multi-purpose facility, ready to fulfil online orders.
Retailers should also consider a multi-node fulfilment strategy and DOM system, enabling faster fulfilment by decentralising the process and taking advantage of different micro-distribution centres that are close to customers. By considering such an approach, customers could benefit from alternative delivery methods they’ve come to expect, such as click-and-collect.
CUSTOMER KNOWS BEST
In the instance that forecasting, and the correct infrastructure fail, ensuring top-notch customer service could be a saving grace for retailers, especially at Christmas. As customers brace themselves for tough economic times ahead, standards are higher than ever.
Orders are expected to arrive on time and customers are not afraid to demand answers if they don’t. On top of the inconvenience to the customer service team, loyalty is also on the line for retailers that don’t resolve complaints quickly and quietly. Whilst responding to inbound inquiries is key, retailers also need to proactively reach out to consumers who have or may experience delays with their orders. Although this is an inconvenience to the customer, this action is designed to create transparency and avoid any loss of loyalty in the future.
Retailers had to be agile as they entered the relative unknown. Although learning from previous mistakes is always effective, it has been vital that retailers were prepared as meeting customer expectations has been of utmost importance.