How can retailers foresee what the must-have holiday gifts will be — and, most importantly, manage increased activity accordingly?
Fashion trends have always been tricky for retailers to predict, and the terrain has become increasingly rocky with the rapid growth of influencer marketing, fast fashion and social shopping. What’s in today can easily be out tomorrow. This presents a major inventory challenge for brands and retailers, especially during peak retail season.
Common peak-season obstacles include scaling fulfillment operations to meet increased demand, executing proper inventory management during order surges, and satisfying consumer expectations around service and returns. For the big players in retail that have large fulfillment and distribution channels in place, these peak-season challenges are supported by teams with extensive experience and sophisticated systems. Digital-first retailers, on the other hand, experience greater demand variability. To get ready for shopping’s biggest season, they must partner with companies that have the agility to scale up and provide a seamless shopping experience for consumers.
Here’s what digital-first retailers need to be thinking about as we look toward the shopping surges in November and December.
Social media has birthed a new era for brands and retailers. In the realm of fast-fashion specifically, 72% of Instagram users said they have made a fashion, beauty or style-related purchase after seeing posts about certain products on the platform. New features such as “Checkout on Instagram,” Instagram’s addition of “Shopping Tags,” and Facebook’s Dynamic Ad options are all designed to make shopping directly from social platforms easier than ever before. Users simply need to click to buy, making it likely the 2019 holiday season will see more traction from social media than in years past. This is especially important for digital-first retailers, who must heavily prepare for order surges in order to capitalize on the holiday rush.
Imagine launching a social campaign for a new sweater. After steady promotion by Instagram influencers and fashion icons, the sweater becomes one of the season’s “must-haves.” With the simple click of a button, the product post is quickly shared, liked, commented on and tagged by thousands, and an unstoppable surge of orders begins to pour in. This is the challenge many digital-first retailers will face this season. With the increased influence of social media, most will find that their back-end order and inventory management system can’t scale. They will face the very real threat of having to update their social media presence with “sorry, out of stock” notices.
They will need to determine how much inventory is needed, which regions are in high demand, which shopping trends emerged from last season, and what looks likely to pop this year. Oftentimes, this requires investing in dynamic omnichannel technology that can support quick changes in inventory management. This includes prioritizing distributed order management, so orders are fulfilled from the best and most profitable locations, using an enterprise-wide view of inventory. If digital-first retailers do have any physical brick and mortar stores, they should consider using those assets to capture more sales by offering ship-from store or in-store pickup options. Retailers should also look to prioritize omnichannel technology that offers in-depth forecasting data from similar clients and payment transactions, which can help in predicting buyer habits.
Digital-first retailers that had steady order volumes throughout the year will likely head into the holiday peak season with a false sense of confidence. Let’s go back to the sweater scenario. With tens of thousands of orders placed, it’s now time to get those orders from the fulfillment center to the customer. But digital-first retailers are often staffed with very small fulfillment teams, used to filling hundreds of orders. Facing such a severe influx in orders presents a severe backlog in this leg of the order journey. The trickle-down implications on supply-chain logistics, as well as supporting customer service, can end up being a huge challenge before the holiday season.
For some retailers, the change in order volume can be so great in Q4 that it causes a need to increase the fulfillment workforce by many times the current size just to keep up. The simple fact is that not every retailer has the luxury of having large fulfillment networks like Amazon and Walmart, which can quickly adjust to changing order volumes with the drop of a hat. Meanwhile, with 64% of consumers expecting free delivery, and Amazon setting the bar at an all-time high with its one-day delivery promises, digital-first retailers will find that scaling up fulfillment operations without sacrificing their bottom line is a tricky line to walk.
The amount of work needed to ramp up fulfillment operations and train seasonal employees isn’t a journey that has to be taken alone. By incorporating a logistics partner into the equation, brands and retailers can leverage existing experience and relationships when it comes to supply-chain networks, and they can also support the upscaling and downscaling of a seasonal workforce at the appropriate times. Multi-client facilities can shift labor between clients and provide greater scalability. Retailers should also explore fulfillment options such as Seller-Fulfilled Prime, to capitalize on more sales by offering the Amazon Prime customer experience via their own distribution channels. For those digital-first retailers that are experiencing rapid growth, fulfillment is a key component to support expansion.
Shoppers today are on a need-to-know basis with their online orders, with 43.8% of consumers expressing a preference for proactive communications throughout the entire delivery process. During the holidays this compulsion for updates and delivery timelines runs at an all-time high: Will that dress arrive before the holiday party? Will my mother’s present get here before Christmas? In such instances, transparency is key. Retailers should leverage omnichannel technology to gain full supply-chain visibility to track and allocate in-transit inventory, using a single trusted enterprise view that can be synthesized and then shared with customers. By keeping lines of communication open and providing visual delivery updates throughout the entire process, smaller retailers can provide an experience that consumers are accustomed to receiving with larger online retailers.
Another area where consumer expectation has increased is in a seamless returns and exchanges experience. Returns are an inevitable part of peak season, but they are also crucially important when it comes to a company’s bottom line. In fact, 51% of Americans and 49.3% of Canadians avoid purchasing goods from online retailers who do not offer free returns. Additionally, roughly half of all consumers feel that physically shipping their returns is the single greatest challenge when returning online goods. Having a return policy in place strengthens customer relationships and builds brand loyalty, but in the competitive space of omnichannel retail, the ability to process a return has become complex. For digital-first retailers, it can be hard to scale to accommodate the volume of returns while providing a satisfactory experience for social media shoppers.
Returns are an opportunity to show off excellent customer service. Generous shipping and return policies go a long way toward securing sales in the future. Hassle-free returns can be achieved by providing customers with pre-paid shipping labels and fulfilling refunds as quickly as possible. Retailers should accept that returns are inevitable, and look to implement as many options and channels as possible for consumers to be able to easily return a product and be fairly refunded for it.
In the digital and mobile commerce age we live in, many retailers can churn out compelling content highlighting products to grab a consumer’s attention. But if they can’t deliver when it comes to having inventory in stock and getting products to consumers’ doors quickly, consumers will turn to the competition. Digital-first retailers need to take a close look this month at how they can strengthen inventory management, increase fulfillment workforces, improve returns policies, and lean on what makes them special in the eyes of their consumers to win this holiday season. Preparing for peak season is no easy task, but with the right tools and groundwork, retailers can provide an exceptional experience that leaves their customers feeling assured ahead of the holidays.
Tim Hinckley is chief commercial officer with Radial.
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