• What are some of the biggest challenges the supply chain and retailers are facing this holiday season?

Inventory levels are higher overall this holiday season which has caused a variety of challenges for supply chains and retailers alike. People are shopping early, but there is less demand for big ticket items and more demand for necessities and staples given the inflationary trend. According to data from  Coupa, over the past two years, retailers have grown their inventories to historically high levels, with warehouse and distribution spend rising over 30% resulting from the glut of inventory and not enough storage and distribution capacity. Retailers are struggling to draw down from the large inventories they’ve built up so we should expect this holiday season to be about getting rid of backlogged inventory. Inventory build up is a result of changes in consumer behavior  based on skyrocketing inflation rates,excess ‘Just in Case’ inventory being used as a cushion in anticipation of another disruption, and seasonal merchandise that arrived late.. 

• How are retailers coping with these issues?

Retailers must balance the scales and also focus on what practices will actually benefit their business while catering to the demand of customers. Buy online and pickup in-store are customer crowd favorites during the holiday retail season, however, this impacts real-time  in-store inventory. Notably, nearly all (93%) respondents reported they’re concerned that consumer worry might reduce spending this holiday season. A way to combat excess inventory is for retailers to leverage price as a lever to promote/ markdown excess inventory, study stock keeping unit (SKU) behaviors in order to anticipate consumer demand for products based on location and channel and redeploying inventory based on such predictions. Retailers can also utilize scenario planning on the digital model of the physical supply chain (a.k.a. Supply Chain Digital Twin) to optimize inventory targets and manage their back stocks effectively. 

• How have supply chain struggles continued to impact holiday shopping?

Disruptions throughout the supply chain on a macroeconomic and geopolitical scale continue to affect holiday shoppers with delayed shipments and a shortage of raw materials. Shipping,transportation costs  in addition to material costs continue to pressure suppliers and only some of those costs can be passed down to consumers. Additionally, labor shortages across the supply chain resulted in workers taking on shifts and an expansion of roles beyond their scope. In terms of transportation, this week, U.S. freight rail workers are negotiating over contracts which potentially could lead to a massive union strike in the midst of the holiday shopping season. If this were to happen, retailers and the supply chain would experience massive delays and economic losses during a peak shipping and delivery season. 

• How are labor shortages impacting the holiday shopping season?

Retail workers are unprepared and unhappy about the additional responsibilities thrown their way due to staff changes. In fact, 98% of those workers that have experienced turnover and/or layoffs say that due to resignations, layoffs, and/or talent shortages, they have had to take on additional responsibilities in addition to the functions outlined in their job. Without the right tools, technology and training, workers are considering leaving their job for one that more closely fits their original job description. 

• What kind of incentives are businesses offering customers this season?

Sales are starting earlier every year and stores are eager to reduce the amount of surplus inventory. In addition to Black Friday and Cyber Monday, sales will extend longer as retailers look to capitalize on consumer demands. However, retailers should be selective with what goods they select for promotions, as consumers may feel sales fatigue if they know a deal will be available for longer.  Additionally, 39% of retailers are offering buy now, pay later (BNPL) options to help consumers manage their holiday budgets. With customers dealing with higher prices due to inflation and economic uncertainty, they are being careful about what is being purchased this year.

It’s important for retailers and businesses to focus on the customer experience as they remain locked in the battle for brand loyalty. Retailers will need to provide consumers experiences they can’t find in other stores for less money or risk losing lifelong customers. 

We will also see more in-store promotions as retailers look to lure shoppers back into stores. Subscription programs that include free delivery and value added services such as streaming will be more prominent as retailers try to lock in loyal shoppers.

• How has the impending recession affected the holiday shopping season? Will we see fewer Black Friday deals this year?

Rising gas prices, grocery bills and increasing inflation rates have affected shoppers as the economy heads towards an impending recession. Many consumers are already substituting store brand goods for name brands and are more selective on what they are purchasing. There is a greater need for consumers to find the best deals available even with a tighter budget. However, 90% of respondents noted they are offering fewer Black Friday and Cyber Monday deals than last year amidst supply chain challenges. Retailers must balance the need of pricing items accordingly with their current inventory surplus in order to maximize their profits and satisfy consumer demand. 

The survey was conducted online between October 4 and October 10. The 602 respondents are employed in management-level or higher positions at retail companies having more than 500 employees.