It’s that time of year again.
‘Sell, sell, sell!’ is the motto of every retailer during the holiday season, while ‘buy, buy, buy!’ rings through the minds of most consumers—especially once it’s time for them to benefit from Black Friday and Cyber Monday discount prices.
And every year, it feels like the holiday shopping season starts earlier than the last.
At a CVS store with my son in late August, we saw the workers switching out the aisle displays from summer time products to Halloween. ‘Really?’ I questioned. ‘What’s next? Easter decorations in December?’
Granted, I also saw Christmas ornaments, lawn Santa Clauses, wrapping paper and other related items being sold at Costco that same month. I really shouldn’t be surprised. But more important is the fact that this presents a real symptom of a greater situation we have when it comes to the retail and consumer package goods (CPG) supply chains—the growing pressure to capture margin, clients and loyalty.
Consumers hold the key to retail
As consumers, we are aware that via multi-channel retail we have a seemingly unlimited variety of products; and instant access to competitive pricing and services from all corners of the retail world.
Great for us consumers, right? Perhaps, but this paradigm has placed a new strain on the supply chains that are needed to fulfill and support this commerce.
Companies such as CVS realize that we might already be shopping online for our Halloween products in August. And if they want their piece of that pie, they better stock their shelves appropriately.
Sure, as the seasons start earlier, they infringe upon the end of other seasons—such as back to school (which feels like it starts in June now, right about the time kids should be in the middle of summer vacation!) And this maddening dash to capture customers earlier and earlier in the seasonal cycle has some drastic impacts on supply chains.
First is a greater strain on inventories—and maybe it’s a good strain since it provides business sales that drive a retailers profit margins up. But with so many retailers starting earlier with seasonal items, the supply chain is under greater pressure to ensure the inventory is there when the clients come to claim items they placed on layaway; or if they want to purchase their Christmas ornaments in August. Wal-Mart is one such retailer that has been in full swing with their advertisements, promoting their layaway programs to ensure you get your kids all the toys they want from Santa Claus—adding another month to the program.
Of course, this earlier start of the season allows CPG companies and retailers to capture buying patterns earlier in the cycle. It’s almost like early voting in that you can better predict the outcome with actual sales and product movement. But the problem remains—you better have the right inventory for those consumers.
Look at what happened with Best Buy last year. They were caught woefully short with certain products. This started a firestorm of bad press and angry customers. One might argue that Best Buy has struggled to recover from that situation. When a customer pre-orders or uses layaway, they still expect it to be delivered and available for the event they are building up to. And it’s up to the retailer to ensure that the inventory will be available.
Another consequence of this shift in the start of seasons is how it impacts promotions and other levers used to drive traffic. As your seasons lose some of their delineation, the ability to transition from one season to another becomes increasingly strained. Add to this the need to more rapidly collect, cleanse and understand your data—or what has happened to your data—and the ability of your supply chain to react has been placed under a greater strain. To better address this, companies need to ensure that they access and understand the data and signals that their supply chain provides during these transitions.
A third issue for the retail and CPG supply chains are how to handle reverse logistics. In a way, the earlier buying cycle might help this—as one would expect, consumers typically realize sooner than usual whether or not they actually want the products; or if they received the right size, color or shape. Of course, with a longer sales and promotional cycle, one opens themselves up to more unevenness when it comes to returns.
For example, what if someone bought a costume for Halloween in late August, only to discover in the beginning of October that there is a more desirable costume for purchase? A return of the original goods purchase might be made. And that returned item might no longer be popular and needs to be discounted immediately to improve its chances of getting purchased. Such actions would potentially impact the distribution channel.
Long-term effects of earlier seasons
In the end, the longer buying cycle and earlier starting period will help in reverse logistics—as one would think that returns might happen earlier in the cycle that usual.
And as consumers start purchasing our Halloween costumes in August, our Christmas ornaments in September, our bathing suits in November and our back-to-school items in April—retailers must come to terms with this shift in buying behavior and what impacts it will have on their supply chain.