The last six months have been a true test to retailers’ approach to contingency planning, with unprecedented decisions to make regarding inventory and fulfillment. Blindsided by the pandemonium of lockdown back in spring — when orders are usually placed for the holiday season — U.S. retailers undermined the strength of consumer demand and slashed orders for merchandise by 9%, only to be left scrambling for goods.
Despite recessionary market conditions, consumer spending increased by 6% year-on-year during the second quarter due to an inevitable e-commerce boom. Demand for non-essential products had not been grinded to a halt. Quite the contrary, amidst reinforced lockdowns and safety scares, consumers diverted their attention to online as a primary, if not exclusive means of purchasing goods. Global digital commerce sales are expected to rise 30% year-on-year during the holiday season, encompassing 34% growth in the U.S.
Misjudgement of industry trends has now left retailers with dreaded stock shortages. With Amazon Prime Day having officially kick-started the frantic holiday shopping season, it is now crucial that sellers learn from the overly conservative planning that took place earlier this year and stock up in advance of upcoming global sales events, such as the Chinese New Year, to avoid falling short against pent-up demand.
A Global Strategy
The shift to e-commerce has been largely driven by customers flooding online to source items from around the world. Online marketplaces — today’s ‘virtual malls’ — have grown to become a sustainable source of continued growth and critical overhead savings. Presenting a lifeline opportunity for retailers to stay afloat and penetrate fast-growing markets, the online marketplace offers promising chances for boosting revenues and mitigating risk amidst the recession. Cross-border online sales worldwide have increased by 21% since January, as consumers seek a cheaper, broader, yet high-quality selection of goods.
In order to overcome crippling inventory shortages, and ultimately provide customers what they want, when they want it, retailers should diversify their business models and tap into high growth international markets. In fear of unanticipated future disruption to supply chains, sellers can redistribute risk by sourcing and selling products overseas. Leveraging the right network, they can expose their products to a more targeted revenue stream and benefit from a localized supply chain, with the Chinese New Year in February being a great example. China’s retail sales are projected to rebound 8% next year as the country’s consumption environment continues to improve, indicating its sales will outdo those of Christmas.
Planning for Tomorrow
This year of disruption has been a huge wake-up call for retailers to avoid the risk of running out of products. The holiday season will always remain a permanent fixture, therefore sellers must be on the pulse with tracking inventory to be able to serve both new customers and brand loyalists. Contrary to initial predictions, sales will inevitably spike during the season, and retailers should be striving to circumvent ‘out of stock’ listings, and a drop in rankings, at all costs. They must also be sure to expect the unexpected, and consider any COVID-19-induced limitations across the end-to-end supply chain to be able to quickly source new suppliers and keep orders moving.
Staying Up to Date
As proven by the current stock shortages sweeping America, keeping track and correctly analyzing industry trends is as important as inventory planning. With consumer habits and behaviors differing across verticals and geographies, investigation into product demand, the channels customers are active on, and the related conversion rates is essential. Customers’ needs have transformed since the pandemic began, as they look for instant and seamless online experiences and communications with brands. Sellers must adapt by having the logistics in place to offer instant delivery and simple purchase options to make their lives easier, and staying connected with customers to boost their rankings. Conducting timely due diligence will allow retailers to remain up-to-date with how consumers are converting, and pivot their selling strategy informingly.
Adopting Interconnected Platforms
In the current climate, it is wise that businesses underpin their global e-commerce strategy with advanced, tech-enabled tools to eliminate the chances of encountering unforeseen expenses, stock issues, and lengthy exchanges. Retailers can benefit from enhanced transparency and knowledge of cross-border payment providers, who enable efficient and stable transaction processes for third party sellers. Having the right payments solution in place, where sellers can be confident of paying their suppliers on time and in the appropriate currency, will help curb unanticipated fees, build a reliable reputation for their brand, and most importantly enable them to keep more of their hard-earned profits.
Integrating smart inventory management, powered by artificial intelligence and machine learning software, will also enable retailers to pivot their product lines and manage inventories with agility. Capabilities in analyzing market and searching trends support inventory decisions, and help sellers to strategize what they should be selling, and when.
Success in the all-telling holiday shopping season will be defined by how well retailers plan ahead. To bounce back from the mistakes made earlier in the year, selling strategies should be expanded overseas to capitalize on the e-commerce boom taking place on online marketplaces. Sellers can rebound sales and comfortably meet customer demand by researching and exploring new markets, and then leverage the right interconnected platforms to manage new supplier relationships and underpin their entire global e-commerce strategy. It will be this level of meticulous preparation that will separate the winners from the losers this holiday shopping season.
Kenny Tsang is managing director at PingPong Payments.
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