Why Logistics Dictate Holiday Channel Performance

November 01, 2022
By Melanie Stern

The 2022 holiday retail season brings up visions of celebration immersed in global discontent. “Power Up Retail Supply Chains in Time for Peak Season,” a recent webinar hosted by Reuters, illuminated concerns echoed by industry professionals in what to anticipate from the buying public and the supply chains they rely on.

“The last two years have taught us to deal with uncertainty,” said one of the panelists, Rogerio Pezutto, North America sales and operations planning/integrated business planning vice president of Estée Lauder Companies Inc. “We are still in a volatile period, still rebalancing — but I’m an optimist and think that when the time comes, people will shop for the holidays.”

Gary Barraco, assistant vice president product marketing, global trade and logistics at supply chain software provider E2Open, differed, saying, “Customers want the shopping experience, but I don’t think we’re going to see that on a global scale. We’re seeing stockpiles of product on shelves and floors, back rooms and warehouses, with port congestion in Europe and the U.S., and imports from Asia are slowing.”

Oana Rusu-Williams, director of product marketing, channel products at E2Open, doesn’t expect much in the way of end-of-year sales. “Consumers are more cautious due to inflation,” she said, and added that sales will depend on the category of product, what moves and what doesn’t perform.

Product Lost, No Fulfillment Found

For retailers, which prepare for peak season a year earlier, 2022 was all about protecting their cash while reducing inventories, Pezutto said. “It’s about the ‘sell through,’ ” he said.

As supply and demand ratios ebb and flow, often defying predictive measurements, the challenge lies in hedging sales forecasting against geopolitical- and economic stressors.

Barraco stated that while there is product availability, omnichannel fulfillment is key to reaching a high sell-through rate. “A full e-commerce solution can identify where specific products are and coordinate the transport and delivery with the best service and best cost,” he said.

While Pezutto believes retailers should focus on individual channel performance, Williams said retailer purview should be across all channels. “The industry must refocus toward online shopping,” Rusu-Williams said. “Not all consumers will go to brick-and mortar stores, and as availability of product can be a challenge, the online space provides consumers more opportunity to find the product they want.”

With the fast-moving supply chain landscape, said Rusu-Williams, visibility is what supports fulfillment. “By using applications that serve omnichannels, retailers can make decisions that support the customer experience through technology,” she said.

Barraco added, “Planning is essential, but technology has to show multitier visibility across all phases of the product journey — what’s in production, what’s amidst shipping and what’s in packaging.”

Lessons Learned Through Agility

Should the 2022 holiday season err on the side of heightened consumer demand, manufacturers will face stopgaps in the product life cycle, nonetheless. Labor shortages, going into peak season, add stress to suppliers and consumers, Pezutto said, “but that’s just more of the same since the coronavirus pandemic. Using machines and artificial intelligence will help compensate for shortfalls from a contracting labor force.”

Barraco cautioned that labor and equipment shortages experienced by logistics companies hamper delivery on consumer quick-turn expectations — and it’s a reason many retailers recommend shopping early this season. “We’re all dealing with the ‘Amazon effect,’ ” he said, referencing the glutton of in-store returns from online shoppers. But according to a 2022 ParcelLab study, more retailers may be implementing what is already in Europe — charging consumers for product returns.

“If you plan correctly, you can avoid returns,” said Pezutto, adding that retailers will benefit by investing in agility to better dissect data complexity. “For example,” he said, “some returns can be resold as gently used for a lesser price. This provides other buyers the opportunity to purchase, (buyers) who would otherwise not pay full retail price, (and) in turn, expand the retailers’ market share.”

While there may be no way to get around the trials and tribulations, Barraro said, “doing business through resiliency helps improve the supply chain practice. Resilience comes from using adversity as the teacher and then taking corrective action.”

Rusu-Williams added, “Resilience takes foresight to see potential disruptions, and thereafter doing what it takes to avoid it.” She noted that without agility, risks to retailers increase.

Looking beyond the 2022 holiday peak season, Pezutto said black swan events are the biggest risk for next year. “To get through them, engage business planning internally and with supply chain partners to help move past unpredictability,” he said.

(Photo credit: Getty Images/Liliya Krueger)

About the Author

Melanie Stern

About the Author

Melanie Stern is Manager, Communications at Institute for Supply Management®.