The peak trading period at the end of the year used to start when the Christmas lights were turned on, soon after the beginning of December. Now it starts in early November. It seems UK shoppers have adopted the US Thanksgiving holiday as their own, along with which comes Black Friday and Cyber Monday as bonuses. The “Christmas” trading period now covers the eight weeks between Nov. 1 and Dec. 26 bringing new problems as well as opportunities.
Shifting consumer habits
Patterns of buying behaviour have changed immensely with more sales moving on-line creating less foot traffic in stores. This move has created new challenges which highlight how important it is for both retailers and the supply chain community to plan ahead, communicate better and work more efficiently together.
Besides wanting a great choice of items, consumers expect flexibility in modes of delivery and to get their goods on time, as promised. A retailer cannot risk a poor delivery-and-returns record which will damage their public image and negatively affect their sales. Competitors are ready to pounce.
The size of the prize
During December 2015, UK consumers are estimated to have spent a huge £24bn online. Add to that, £3.3 billion spent on-line over the four-day Black Friday/Cyber Monday weekend. If, as estimated, around 90% of all goods ordered on-line in the period were delivered on time, then by definition, one in ten was a failure. Retailers need to ensure they are able to handle these peaks in sales and must deliver a consistent experience to the customer with zero tolerance for errors.
Where we can do better in 2016
Preparing for this current year’s seasonal shopping frenzy requires particular focus and meticulous planning. The goal is to capture as many sales as possible, keeping your reputation intact, without being overburdened with excess stock at the end. A good time to start planning is early in the 2nd quarter. What needs to go into the plan is:
Establish partnerships with trusted suppliers
This is the time to commit and build relationships that will ensure cooperation and support when the going gets tough and capacity is limited. Some professionals suggest that it’s best to start with inbound plans to make sure that the right amount of inventory will be in the right place by start date.
Secondly, open up price negotiations with all transport suppliers well ahead of time using facts and experiences gained from the last period. Bearing in mind any changes in operations in both your suppliers and on home soil, find new ways to work with third party logistics companies. Loads can be shared and economies of scale achieved in high traffic areas.
Decide what resources and capacity will be needed
When doing a post-mortem review of last year’s trading period, use the knowledge gained to review both distribution centre or warehouse capacity and staffing levels. Seasonal workers may be needed and they have to be trained. All additional costs should be factored in.
Design and test a returns management system
The peak for returns is New Year’s Day, also called Boomerang Day when unwanted Christmas gifts arrive in stores for exchange or credit. Customers are now returning goods to stores even if they bought them on-line, many retailers do not have an effective mechanism to deal with this trend. This is a real pain point for customers.
It seems that retailers do not consider the long term impact of a disgruntled customer and the resulting fallout. New technology can help provide an efficient solution to this problem if acknowledged early enough. Since more than 40% of December purchases are returned for credit or exchange, this problem cannot be ignored.
Develop a system for consumers to “click-and-collect” more easily
Placing orders on-line and then picking up the item from a convenient store location is taking hold in the clothing and apparel category, closely followed by toys and games and homeware. The main reasons given by consumers for their preference for this method of click-and-collect were that they saved on delivery fees and were guaranteed availability of sizes in stores.
Provide more delivery options and offer tracking visibility
Customers want to know where their order is and when they will receive it. The leading courier companies already provide this visibility using on-line real time tracking of items. Retailers need to follow suit or engage with partners who can provide this type of service.
The 2015 peak trading period was very different to previous years. 2016 will no doubt bring more complexity to the process which means supply chains need to be designed to cope with the more demanding consumer. Start soon.