Indicators from the 2012 Holiday Buying Period Point to Significant Change and Fulfillment Challenges
Guest Post by
Bob Ferrari, the Executive Editor of the Supply Chain Matters Blog, and a periodic guest blogger on the Infosys Supply Chain Management blog.
This commentary is an interim follow-up to this author's previous Infosys Limited guest commentary: Headline for the 2012 Holiday Buying Season- Overcoming the Challenges of Fulfillment Complexity.
Thus far, initial indicators reflected in individual consumer actions during the current 2012 holiday buying season provide for some perspective as supply chains reach the peak of activity this week.
First, consumers have clearly stepped-up their preferences towards online channels as the preferred buying option. They have embraced the conveniences of in-home buying and cyber-based price and feature comparisons. That has been reflected in data provided thus far including Black Friday and Cyber Monday weekend sales. Increases in online buying reflected double-digit growth rates. According to ComScore Inc., the Thanksgiving holiday and Black Friday promotions fueled online sales increases of 32 and 28 percent respectfully, over last year's numbers. For the first time, online sales topped $1 billion during Black Friday.
Retailers and online providers have similarly spent lots of money in capturing consumer online interest, especially in Internet and social-media based platforms, aggressively competing to capture the early interest of consumers. This week, the Wall Street Journal featured two articles that succinctly portray the current aggressiveness among retailer sales and marketing teams to capture consumer online interest. Noted was that Wal-Mart and Facebook jointly rolled out one of the largest mobile advertising ad-blitz campaigns consisting of 50 million mobile ads during the Black Friday shopping period. The global retailer had sponsored 2 billion ads on Facebook throughout this holiday season. Facebook provided a dedicated joint-development team to Wal-Mart both before and during Black Friday weekend. The article reports mixed benefits. On the one hand, Wal-Mart was able to mitigate the availability of certain excess inventory through real-time promotions on Facebook. A pair of $88 speakers that were not selling to expectations by Black Friday were offered as a 'special buy' on Facebook and soon sold-out across the U.S. On the other hand, labor unrest among certain Wal-Mart employees and consumers offended by the Wal-Mart online blitz were offsets.
Best Buy utilized Twitter in an 8 week campaign to generate gift-giving ideas and offer gift card promotions. A Best Buy executive is quoted as indicating that the electronics retailer is spending 50 percent more on Twitter based marketing this holiday season. Radio Shack aggressively leveraged Twitter in a "24 Deals in 24 Hours" promotion campaign. Analysis firm DataSift Inc. indicated that "the Radio Shack offers were among the most frequently shared coupons or offers on social networks during the shopping days surrounding Black Friday." The WSJ quotes Twitter as indicating that 6.1 million posts related to Black Friday, roughly 50 percent more than last year. These Twitter ads are being targeted to subscribers based on demonstrated preferences in their 'tweeting' activities.
On the supply chain fulfillment side, new initiatives, realities, and dealing with the effects of supply disruption have retail supply chain teams rather busy during this final month. There have been postings on social media as well as reports in business media where certain retailers have had to either scramble or de-commit orders because of inaccurate inventory assessment. The heavily promoted multi-day promotional campaigns noted below provided little margin for delay within supply chain fulfillment. We may well anticipate further visibility to order fulfillment snafus as consumers' further test retailer Omni-channel buying and pickup options in last minute shopping.
The realization that available inventory must be effectively optimized to meet order needs across multiple channels is hitting home for many. The Wall Street Journal featured an interesting perspective on the world's largest toy retailer Toys "R" Us who has experienced a multi-year trend of more consumers shifting their buying to the web channel, while overall sales growth has been flat these past two years. Sustained profitability has also been a challenge, motivating this toy retailer to break down more supply chain silos to position, optimize and fulfill customer orders through available inventory residing in both distribution centers and physical stores. Distribution fulfillment centers and physical stores however are now challenged to anticipate daily order volumes to expect.
Regarding unplanned supply disruption, the effects of super storm Sandy slamming directly into the New York and New Jersey regions of the U.S. east coast had some supply availability impacts for retailer holiday promotions. Port closures resulted in ocean containers being re-routed to other east coast ports, causing transportation and fulfillment delays. Luckily, an 8 day labor shortage involving the U.S. west coast ports of Los Angeles and Long Beach occurred in early December, after the bulk of holiday goods had already arrived. The impact for retailers may well show-up in post-holiday fulfillment.
I will feature a post-holiday assessment guest posting later in December. In the meantime, there is no question that the new revolution of B2C retailing is manifesting itself in the current holiday surge, and traditional and online supply chain teams will have lots of learning to contemplate in planning for 2013.