An ongoing pandemic, staff shortages, unexpected surges in consumer demand and delays at ports have made this another challenging year for retailers. Emotions will be mixed heading into Christmas, with the welcome boost of increased customer spending tempered by supply chain worries and other concerns.
The Omicron variant and pallet shortages are already having an impact, but suppliers will be hoping these don’t interrupt sales days. With large amounts of stock purchased across Australia’s long and remote supply chains, retailers need a full sell-through period with minimal markdowns to protect profit margins.
Some supply chain issues are unavoidable, but retailers should take steps to minimise the risk of product shortages, empty shelves, supplier cancelled orders, lost revenue, customer complaints and legal problems that failing to have advertised products may cause. Here are some actions to consider:
In the short-term, put the focus on encouraging workforce productivity and retention. For many companies, recruitment is a real challenge at present, and with reports predicting many people will leave jobs in the ‘Great Resignation’, it makes sense to make staff feel valued.
A great way to do this is by offering employees consistent start and end times, as well as longer minimum durations. Avoid scheduling people to work the early shift after working late the previous day. Employees need time to rest and recover between shifts to be at their best. Work with operations to plan for this year with Christmas Eve falling on the Friday. Despite the increase in on-line shopping, each Christmas creates are partially predictable buying patterns based on what day of the week Christmas Eve falls. With the time remaining, ensure your business, staff and logistics schedule accordingly for sales, checkouts, fast refill and presentation recovery.
Increase in-store management and leadership presence during busy periods and see what you can do to preposition stock as much as possible. Product doesn’t sell from the warehouse, so with the many unknowns going into this Christmas coming up, getting product out and into stores is a must. This will give you and your staff more time to focus on customers, who need great service as they venture back into your stores.
The best retailers are prepared to change the way they operate and reap the rewards. Many companies rushed to offer online ordering and in-store pick up during the pandemic, changing everyday business operations faster than they were ready to deal with.
Now it’s time to lean into these new ways of working. Simplify your supply chain processes that grew out of the pandemic, return to the full range of products you offer, increase your drop ship capability where possible and where profitable, and increase visibility and planning with your vendors so they can send stock as soon as possible. If you haven’t considered carefully an Order Management Solution, or a Distributed Order Management solution yet, now is the time to read up on this important phenomenon growing out of the pandemic and customers’ behaviour patterns. Watch how your business could improve this Christmas, and consider adopting some or all of its advantages for next year.
Make sure all employees know your customer services policies and what actions they should take when concerns arise. Keep stores informed when promoted items are out of stock or running low, and be flexible with substitution policies to keep your customers happy. This may mean adjusting your pricing structure.
Use dedicated replenishment teams to restock shelves when the store is closed, and allow for flexible store layouts, if you operate by allowing staff to cover gaps in shelves. Consider that some store to store rebalancing for top sellers and profitable lines might need to be planned in the logistics schedule in the next few weeks if your strategy is to be near fully allocated on your stocks. Staff people and hire vans if necessary to address accordingly.
Set your online store up for success by making sure algorithms are only promoting products with good stock levels, as there’s no use promoting items you may soon not be able to provide. And don’t forget to be open and honest with customers about available delivery dates and times. If possible, start looking at the tools that support predictive reforecasting of ETAs . This will allow you to minimise customer disappointment and complaints by providing them with advanced notice of likely delays.
The pandemic caused e-commerce adoption to reach unprecedented levels. And, despite shoppers returning to physical stores after lockdowns, the Australian Retailers Association says online retail sales remain strong year on year and does not show signs of reducing any time soon. Australia recorded online sales worth $4.1 billion in October, up 34 per cent on the same month last year.
This increased demand for home deliveries adds a ‘last mile’ challenge that you need to factor into your strategies.
Australia’s large size and low population density poses a significant challenge to this industry. This is why retailers have been slower to offer next-day delivery than elsewhere in the world. As orders grow, the challenge to fulfil them in an acceptable timeframe will only increase. Several major retailers have been assessing service strategies in the large cities and built up urban areas, realizing this is a great place to start experimenting with faster delivery and delivery cost efficiency. Your business should consider a strategy as well, or work with partners or logistics service providers in complimentary fields who can assist you by accommodating your business within their scale solutions.
Parcel consolidation offers a potential solution. These schemes see carriers holding non-urgent parcels for a certain period then delivering them together in a single delivery. Our research with Carnegie Mellon University shows this would mean fewer shipments with larger drop quantities and a reduction in costs.
Interestingly people may find it more convenient to have parcels arrive at the same time, 68 per cent saying they are willing to receive all non-essential parcels on two set days each week, even without an incentive to do so. This increases to 81 per cent when a gift card was offered, while 75 per cent would sign up in exchange for loyalty points. While grocery delivery is ideally same day, for non-essential items, most customers are willing to wait a little longer as they often do not have an expectation of immediate service, and fewer windows with multiple packages translates to less interruptions to their week.
With parcel consolidation, each delivery costs the carrier slightly more than the standard delivery cost due to parcel storage. So consolidated deliveries are far cheaper when each consumer receives more than one parcel per delivery.
Seize this opportunity to assess your current operations and use the challenges this Christmas to get smart about potential supply chain strategies. This will help you to better navigate the ever-changing operating challenges and keep you a step ahead of competitors long after the holiday season ends.
Guy Ferrier is consulting director at Tata Consultancy Services.