The 2020 Christmas trading period is off to a strong start, with Black Friday and Cyber Monday tipped to reach a record $5 billion in sales for local retailers. Australia might not be at the point of overnight queues and store stampedes like the United States, however sales events are growing in popularity and size.
Roy Morgan market research forecasts Australian consumers will spend over $54.3 billion across retail stores during the Christmas period – an increase of 2.8 per cent from the $52.9 billion of retail expenditure during the 2019 Christmas trading period.
While the increase in expenditure is welcome news for Australia’s hard-hit retail sector this year, there are hidden costs that come with peak demand periods like Christmas and Boxing Day.
The aftermath of sales periods such as Christmas and Boxing Day
Growth in online sales and increases in consumer expectations for speed and convenience has a significant flow-on effect for procurement – pushing retailers to revamp obsolete supply chains designed for a once single-channel world. Just last month, Australia Post delivered almost three million parcels in a single day, eclipsing the record set in 2019, with eCommerce up 45 per cent year-on-year for the Black Friday and Cyber Monday sales periods.
This fast transition to a multi-channel supply chain increases potential risks of exploitation of vulnerable workers and sales periods, such as Christmas and Boxing Day, place considerable pressure on retailers to meet consumer demand. The growing number and popularity of ‘bargain days’ put immense strain on retail supply chains, due to the sheer number of deliveries, amount of preparation and extent of stock management needed to meet increases in orders.
Anti-poverty organisation, Oxfam and Monash University looked deeper into the business practices and supplier interactions of leading Australian fashion retailers in their detailed report, Shopping for a Bargain – particularly during the COVID-19 pandemic. The investigation found aggressive sales negotiations, short lead times, inaccurate order forecasts and last-minute orders keep wages low and pressure factories to cut corners, placing workers at-risk. This risk only heightens in peak demand periods, such as Christmas and Boxing Day, as retailers scramble to meet demand.
What’s the solution?
Responsible purchasing has long-term benefits for a business, allowing retailers to optimise costs, and increase productivity and quality. Sustainable practices are good business, and fundamental in the fair treatment of vulnerable workers and providing a safe work environment.
Transparency is key in this practice – retailers must demand details about the systems and sources of their products and communicate this knowledge both internally and externally. According to anti-slavery organisation, Walk Free, Australia imports almost $17 billion worth of products each year at-risk of modern slavery – and electronics, clothes, seafood, rice and cocoa from countries like China, Thailand, India and Ghana are the most at-risk.
Innovative applications like Australian-based Informed 365 can help track, monitor and visualise key supply chain metrics and allow organisations to run their supplier database through the Informed 365 Slavery Risk Index (ISRI) to provide a high-level, first pass risk assessment based on the supplier’s location and industry. This is particularly relevant where organisations have thousands or tens of thousands of suppliers and sub-contractors.
Looking at your supply chain through a ‘socially just’ lens extends far beyond good business practice. Researchers at the MIT Sloan School of Management found consumers may be willing to pay 2 per cent to 10 per cent more for products from retailers and brands with greater supply chain transparency. Transparent supply chains can also reduce reputational risk and enhance your brand’s standing as a trustworthy organisation.
As big brands often overlook people for profit, more needs to be done to ensure social and environmental sustainability is front of mind. Consumers can hold Australian retailers to account by calling for honesty – if a shirt costs $5, how much was the person making this item paid to sew it? Supply chain transparency is a constant work-in-progress and relies on a culture of continuous improvement within organisations and across the industry.
Nicholas Bernhardt is CEO of Informed 365