Retailers wait all year for a significant peak in their trading performance and then two come along at once. Preparing for the surge in consumer demand brought about by Thanksgiving and/or Black Friday and Christmas in the space of a month causes an annual headache for the retail industry.
The smartest retailers no longer view this time of year as containing two distinct peaks, but as one prolonged event with limited respite for fine-tuning their approach in between. This means they prepare plans for how their supply chains must be proactive to manage increased demand over the entire period rather than having separate plans for each peak.
In doing so, they focus on three key elements:
- Getting their store assortment right
- Optimizing the role of their stores to support order fulfillment
- Adjusting store delivery frequencies
Let’s start with store assortments. Many retailers still tailor their store assortments to appeal to the walk-in shopper with use of that assortment to support online orders as an add-on consideration, if even considered at all. The reality, which not all retailers grasp, is that the store and its assortment needs to meet the demands of the local community as a whole, regardless of how consumers within that community wish to shop. They focus on using analytics and demand forecasting tools to understand which products appeal to local consumers, whether they’ll walk in and purchase, order online and turn up to collect or request fast delivery to their homes. By looking at things in this holistic manner, they’re placing products as close as possible to the point of order fulfillment.
This may mean that they may hold products in store that have little appeal to walk-in shoppers but have strong appeal for being bought online and collected in store or via curbside collection. In doing so, they’re not only raising product availability levels to meet demand, but are reducing the costs of continually shipping individual orders to a store for consumers to collect. Of course, this approach isn’t needed for all products — there will always be unexpected demand — but they do it for products that have a high level of demand from online shoppers.
Secondly, as they approach the last few days toward the pinnacle of consumer demand, leading retailers flex the role that their stores play in order fulfillment. We see companies that would not normally ship from their stores to consumer homes during the year doing so during the last couple of days of the peak trading period. This approach works particularly well in the run-up to Christmas when there would not be enough time to ship from a distribution center and deliver an order by Christmas Eve. In this instance, stores switch over to being the shipping point and products can be effectively delivered the same day or next day from a local store. Of course, being able to do this depends on the products being in the store in the first place and so the reliance on getting the store assortment right is paramount in order to be able to ship from it.
Thirdly, the physical movement of products looms large as the most important capability of all. Getting the assortment right is a great step. Using stores to deliver product as the clock ticks down drives additional sales, but moving things so that consumers actually get them on time drives loyalty and repeat business. So it’ll be necessary to review and, where required, adjust the timing and frequency of when stores receive and make deliveries. This means effective use of transport route planning to incorporate shipment to and from stores, minimizing empty trucks on the road. It also means supporting stores with high peak sales but low stockholding capacities with additional deliveries from warehouses, suppliers and even neighboring stores to keep their availability levels high.
Finally, preparing for peak requires a form of supply chain flexibility that is additive to how a contemporary retail supply chain should operate all year round. Putting product in stores that consumers wish to buy is the most basic of retailing principles. Ensuring that those products meet the needs of all shoppers, regardless of the method of shopping they choose, sadly isn’t something that every retailer is doing well. Turning stores into mini distribution points and using all available transport as the clock toward peak ticks down allows for order fulfillment, collection and deliveries to keep going right up to the last minute.
Check the health of your supply chain to deliver on these elements and have a great peak.
Research Vice President,
Gartner Supply Chain