Peak performance: How retailers prepare for holiday season

Every year, the holiday season is retail's big event. Organisations spend 11 months of the year preparing for a surge in demand from sale events like Cyber Weekend up through Boxing Day, hoping to be victorious in the industry's grand final every year.   

With inflation recently hitting a three-year low, Federal Treasurer Jim Chalmers' proclamation of "very welcome and encouraging" news sparked cautious optimism about a retail recovery.  However, economists have been quick to remind us of the significant pressure that interest rates are exerting on consumer spending in the build-up to this holiday season. Shoppers are expected to prioritise discounted items and leverage early sales events, potentially leading to a more subdued period overall. However, it's crucial for those of us in supply chain management to avoid broad generalisations and instead prepare for multiple scenarios – and expect the unexpected. 

The retail sector is diverse, and different segments will undoubtedly experience different outcomes this holiday season. Regardless of how the overall picture develops, the ability to anticipate, adapt, and execute will be paramount. As we delve into the key challenges and solutions for retailers during this peak season, we must remain agile, data-driven, and customer-focused to perform well this holiday season. 

Adapting to changing consumer behaviour 

The overall slowdown in consumer spending has prompted a revaluation of sales strategies across the board. This season, we'll likely see longer discounting cycles, with sales starting earlier and running longer than in previous years. This strategy aims to capture the attention of price-conscious consumers, who are now more likely to wait for deals before making purchases. Retailers with a firm grasp on their inventory will be better positioned to strategically move stock, adjusting from recommended retail prices to discounts or clearance as needed. 

The traditional pre-Christmas rush is evolving, with many shoppers now making their festive purchases earlier during events like Cyber Weekend. This shift requires retailers to be prepared earlier in the season and maintain flexibility throughout to meet changing demand patterns. 

The strategic role of supply chains in challenging economic times 

Today's industry leaders don't view an efficient supply chain as just a logistical necessity—it's a strategic advantage for organisations under financial pressure. The key to success lies in meticulous planning, which begins immediately after the previous peak season to analyse successes, failures, and lessons learned. 

Post-pandemic, most companies have developed a more nuanced understanding of their stock levels and inventory management. The focus has shifted from simply having stock to knowing exactly where that stock is at any given moment. The issues which plagued many retailers during the pandemic have eased, but far from subsided, with insufficient stock or excess inventory that arrived too late to meet demand still a major challenge with the industry.  

Technologies like Warehouse Management Systems (WMS) have become indispensable for tracking stock availability and potential disruptions in transit. Real-time inventory updates allow retailers to make informed decisions about what's available to sell and when. This improved insight and visibility is needed to deal with unexpected issues - which are all too common - such as port delays or transportation snafus that can throw carefully laid plans into disarray. 

The role of data and AI  

The importance of data analytics and AI in supply chain management cannot be overstated. Digital tools are constantly evolving, but the essence of digitisation is to help retailers make more informed decisions about stock levels, pricing strategies, and promotional timing. 

The pandemic disrupted historical data points, forcing many companies to look back two or three years for more reliable forecasting baselines. This disruption highlights the need for flexible analytics tools that can adapt to unusual circumstances and provide meaningful insights even when historical patterns are unreliable. 

While larger organisations are at the forefront of AI adoption due to their vast data pools, medium-sized businesses are beginning to harness these technologies more. The key is not to view AI as a plug-and-play solution but rather as a tool to augment existing systems and processes. For instance, AI can help identify trends like certain colours or styles not selling well, allowing retailers to adjust their purchasing and pricing strategies accordingly. 

Addressing staff shortages 

The tight labour market presents a significant challenge, particularly during peak seasons when demand for workers surges. As a result, retailers must plan for adequate staffing and focus on retaining their workforce, which is especially critical for casual staff, where building loyalty is more difficult. 

Automation has, of course, been at the forefront of overcoming labour shortages. From RF devices and voice-directed systems to robotics, automation technologies not only improve productivity but also create a more appealing work environment, which helps to address the fundamental labour problem as well. Warehouses have introduced automation systems that allow them to maintain a baseline output even with fewer staff, reducing the stress of labour shortages during crunch time. In these environments, warehouse workers aren't reliant on others for maintaining high performance and accuracy is assured, which alleviates stress levels as volumes increase.  

Another benefit is that these tech advancements can make the work environment more appealing to younger workers who are attracted to roles involving cutting-edge technology. Ultimately, to allow automation to really improve the lives of workers, organisations need strong leadership—honesty about the crucial nature of peak period mixed with caring and compassion for signs of overwork or dissatisfaction.

Preparing for unforeseen disruptions 

Retailers are increasingly seeking greater visibility across their supply chain, from manufacturing to last-mile delivery. Order Management Systems (OMS) have become crucial, offering insights into stock levels across stores and distribution centres, and enabling smarter fulfillment decisions. An OMS can, for instance, redirect an online order to be fulfilled from a store with available stock rather than a distant warehouse, improving delivery times and customer satisfaction. 

Diversifying suppliers and storage locations is also a common strategy to mitigate risk during peak season. The pandemic highlighted the importance of collaborative supplier relationships, with many retailers now prioritising partnerships that demonstrated flexibility during crisis periods.  

Evolving supplier relationships 

The shift towards greater supply chain visibility extends to supplier relationships. There's a growing trend of information sharing and collaboration to create more predictable and efficient partnerships. This transparency allows both retailers and suppliers to anticipate and respond to challenges more effectively. 

Some major retailers have even taken control of their manufacturing processes, creating their own brands to gain more control over the supply chain. This vertical integration allows them to respond more quickly to market changes and maintain better control over quality and costs. 

Technology advancements shaping the future 

Autonomous Mobile Robots (AMRs) continue to be a game-changer, especially for high-throughput operations. Unlike traditional fixed automation with long ROI periods, AMRs offer flexibility and scalability, allowing businesses to adjust to changing demands more easily. This adaptability is particularly valuable in the current economic climate, where long-term forecasts aren't always reliable, and businesses are increasingly required to scale up and down. 

In the transport sector, advancements in parcel tracking and delivery window predictions are responding to the increase in customer expectation. Postal services are responding to consumers by providing specific time windows for deliveries rather than just a delivery date, improving overall convenience and driving a better customer experience. 

These seemingly small improvements, often powered by AI, contribute to continuous operational enhancements which become more critical during the holiday period. While small improvements might not be as noticeable as major technological overhauls, they can significantly impact efficiency and customer satisfaction over time and affect organisations up for the long term.  

For every peak season, the focus should be on leveraging technology to gain incremental improvements year-over-year, offsetting rising costs without necessarily passing those costs on to consumers. Retailers who can adapt quickly and efficiently to different economic and operational realities will be best positioned to make incremental improvements and set themselves up for success over many peak seasons to come.