Over the last couple of years, ironically, the only certain thing has been uncertainty. Whether it be Brexit and its true outcome, the pandemic or the knock-on effect of lockdown, retail has been an industry hard hit by such unpredictability. Currently, brands face a variety of supply chain disruptions and shortages, not knowing how they will play out and whether they will be able to fulfil customer expectations. Looking beyond this year’s peak shopping season, 2022 holds even more unknowns making accurate forecasting a challenge for brands.
The last 18 months have been filled with a series of unique events, making results from this period redundant when it comes to forecasting for the future. Changes to consumer spending habits are also likely to impact demand next year. Whilst the latest government Budget speech announced a £1,000 Universal Credit boost for 2 million families, it has been said that millions of struggling low-income households will not feel this benefit.
So, if accurate forecasting isn’t an option, how can brands prepare for the year ahead?
Where there is no certainty, there must be agility
If there has been one lesson we have learnt over the last 18 months, it’s that when faced with adversity or the unknown, retailers must act with agility to thrive. This continues to be the case even after the initial dust begins to settle on the pandemic. After all, we aren’t out of the woods yet – in a recent interview, England’s deputy chief medical officer suggested the UK was at “half time in extra time” on tackling Covid-19, with scientists urging people to be cautious over winter and the upcoming festive period.
Even before Covid-19, the movement to ‘digital-first’ retail had already begun. The pandemic merely accelerated this transition, forcing consumers to move online in their masses. Since then, these initially temporary behaviours of lockdown have become a more permanent fixture. According to PFS’ own research of UK consumers, just under half (49%) of each group of Gen Z and millennial respondents affirmed that even when “pandemic living” ends, they would continue to do the majority of their shopping online.
What makes forecasting even more difficult to predict, are the spending habits of consumers. In January this year, consumer spending fell sharply amid tightening lockdown restrictions and a fall in consumer confidence. After further economic turbulence, the UK is set to face a potential two-year squeeze as inflation peaks at 5% in early 2022 – the highest in a decade.
Agility is only possible with the right infrastructure
Unfortunately, there is no crystal ball when it comes to pre-empting the outcome of such economic disturbance. Instead, online retailers and brands must ride the wave and arm themselves with the agility and flexibility to respond accordingly.
This begins with the right infrastructure. For many brands, a lack of clarity around what demand in 2022 will look like can make the decision to invest in warehouse space and additional employees, a difficult one – especially as many retailers have faced their own financial difficulties this year. Luckily, there are several alternative fulfilment solutions that are available for brands that can ease the level of investment required. Pop-up distribution centres, for example, can act as temporary warehouses to accommodate sudden spikes in demand. As a solution usually utilised for brands trialling new markets and supporting seasonal promotions, these temporary infrastructures can be rapidly implemented as and when needed. When underpinned with an effective Distributed Order Management (DOM) system, brands can scale effectively whilst also removing the need for the significant investments associated with leasing a warehouse facility. Not only in terms of cost, but time investment too.
Brands should also consider a multi-node fulfilment strategy, a concept based on decentralising the fulfilment process by taking advantage of a number of micro-distribution centres strategically placed close to customers, rather than operating out of a single warehouse. By considering such an approach, and teaming it with a DOM system, brands can easily locate and route stock to fulfil orders quickly – essential for post-Brexit spending also.
Micro-distribution centres can take many forms and shouldn’t just be restricted to traditional warehouse environments. With the right order picking technology, brands can leverage existing store space and transform it into a hybrid facility, armed and ready to fulfil online orders. Following continued ambiguity surrounding physical retail and the struggles faced by today’s high street, this concept can help to drive value back into store space which has already been committed to.
Learnings from peak 2020
Whilst the future is uncertain, there are indeed learnings that can be taken from last year’s preparations – which was arguable equally as unpredictable. In the early months of this year, a worryingly high number (50%) of retail businesses felt that they had not adequately prepared for peak season 2020, alongside other considerations including transparency around returns and improved sustainability.
However, those who had geared up their operations in preparation for peak 2020 were rewarded with increased sales volume. This presented a quick and significant return on their investments. Of those who saw an increase in sales, 67% invested in BOPIS capabilities to strengthen their omnichannel proposition to their customers. In addition, over half (55%) of those who invested in curbside pick-up and the same amount who invested in extra fulfilment capacity (55%) also benefitted from increased sales.
As a result, 52% stated they would be likely to begin outsourcing or change BPO providers for all or portions of their ecommerce operations in 2021 to meet changing consumer demand. Third-party logistics (3PL) acquisition, therefore, is a possible trend to watch for as retailers aim to have more control over their ecommerce fulfilment destiny.
Preparing for the unpredictable
Retail is now a ‘digital-first’ entity and for brick-and-mortar retailers, omnichannel capabilities are critical. The results of last year’s peak have also taught us that the supply chain must support multiple delivery options, with customers being allowed to drive those options. To support this, technology and operations must be aligned. Last year highlighted the detrimental effect not having these ducks in a row can have, with only 52% of retailers feeling that their technology stack was prepared for peak season volume.
Getting ready for another turbulent year of retail will by no means be easy. Rather than getting hung up on what the future may hold, retailers should prepare for the unpredictable by ensuring they have multiple contingency plans in place.
If we’ve learnt anything from the last year, it’s that fortune doesn’t just favour the brave; it favours the prepared. With peak promotions already in swing and Black Friday just weeks away, now is the time to look ahead and build a strategy based on agility, flexibility, and scalability.
Author:
Claire Grattidge, Manager, Business Management at PFS
You are in: Home » Guest Comment » GUEST COMMENT Uncovering the unpredictable – responding to retail demand when accurate forecasting isn’t an option
GUEST COMMENT Uncovering the unpredictable – responding to retail demand when accurate forecasting isn’t an option
Claire Grattidge
Over the last couple of years, ironically, the only certain thing has been uncertainty. Whether it be Brexit and its true outcome, the pandemic or the knock-on effect of lockdown, retail has been an industry hard hit by such unpredictability. Currently, brands face a variety of supply chain disruptions and shortages, not knowing how they will play out and whether they will be able to fulfil customer expectations. Looking beyond this year’s peak shopping season, 2022 holds even more unknowns making accurate forecasting a challenge for brands.
The last 18 months have been filled with a series of unique events, making results from this period redundant when it comes to forecasting for the future. Changes to consumer spending habits are also likely to impact demand next year. Whilst the latest government Budget speech announced a £1,000 Universal Credit boost for 2 million families, it has been said that millions of struggling low-income households will not feel this benefit.
So, if accurate forecasting isn’t an option, how can brands prepare for the year ahead?
Where there is no certainty, there must be agility
If there has been one lesson we have learnt over the last 18 months, it’s that when faced with adversity or the unknown, retailers must act with agility to thrive. This continues to be the case even after the initial dust begins to settle on the pandemic. After all, we aren’t out of the woods yet – in a recent interview, England’s deputy chief medical officer suggested the UK was at “half time in extra time” on tackling Covid-19, with scientists urging people to be cautious over winter and the upcoming festive period.
Even before Covid-19, the movement to ‘digital-first’ retail had already begun. The pandemic merely accelerated this transition, forcing consumers to move online in their masses. Since then, these initially temporary behaviours of lockdown have become a more permanent fixture. According to PFS’ own research of UK consumers, just under half (49%) of each group of Gen Z and millennial respondents affirmed that even when “pandemic living” ends, they would continue to do the majority of their shopping online.
What makes forecasting even more difficult to predict, are the spending habits of consumers. In January this year, consumer spending fell sharply amid tightening lockdown restrictions and a fall in consumer confidence. After further economic turbulence, the UK is set to face a potential two-year squeeze as inflation peaks at 5% in early 2022 – the highest in a decade.
Agility is only possible with the right infrastructure
Unfortunately, there is no crystal ball when it comes to pre-empting the outcome of such economic disturbance. Instead, online retailers and brands must ride the wave and arm themselves with the agility and flexibility to respond accordingly.
This begins with the right infrastructure. For many brands, a lack of clarity around what demand in 2022 will look like can make the decision to invest in warehouse space and additional employees, a difficult one – especially as many retailers have faced their own financial difficulties this year. Luckily, there are several alternative fulfilment solutions that are available for brands that can ease the level of investment required. Pop-up distribution centres, for example, can act as temporary warehouses to accommodate sudden spikes in demand. As a solution usually utilised for brands trialling new markets and supporting seasonal promotions, these temporary infrastructures can be rapidly implemented as and when needed. When underpinned with an effective Distributed Order Management (DOM) system, brands can scale effectively whilst also removing the need for the significant investments associated with leasing a warehouse facility. Not only in terms of cost, but time investment too.
Brands should also consider a multi-node fulfilment strategy, a concept based on decentralising the fulfilment process by taking advantage of a number of micro-distribution centres strategically placed close to customers, rather than operating out of a single warehouse. By considering such an approach, and teaming it with a DOM system, brands can easily locate and route stock to fulfil orders quickly – essential for post-Brexit spending also.
Micro-distribution centres can take many forms and shouldn’t just be restricted to traditional warehouse environments. With the right order picking technology, brands can leverage existing store space and transform it into a hybrid facility, armed and ready to fulfil online orders. Following continued ambiguity surrounding physical retail and the struggles faced by today’s high street, this concept can help to drive value back into store space which has already been committed to.
Learnings from peak 2020
Whilst the future is uncertain, there are indeed learnings that can be taken from last year’s preparations – which was arguable equally as unpredictable. In the early months of this year, a worryingly high number (50%) of retail businesses felt that they had not adequately prepared for peak season 2020, alongside other considerations including transparency around returns and improved sustainability.
However, those who had geared up their operations in preparation for peak 2020 were rewarded with increased sales volume. This presented a quick and significant return on their investments. Of those who saw an increase in sales, 67% invested in BOPIS capabilities to strengthen their omnichannel proposition to their customers. In addition, over half (55%) of those who invested in curbside pick-up and the same amount who invested in extra fulfilment capacity (55%) also benefitted from increased sales.
As a result, 52% stated they would be likely to begin outsourcing or change BPO providers for all or portions of their ecommerce operations in 2021 to meet changing consumer demand. Third-party logistics (3PL) acquisition, therefore, is a possible trend to watch for as retailers aim to have more control over their ecommerce fulfilment destiny.
Preparing for the unpredictable
Retail is now a ‘digital-first’ entity and for brick-and-mortar retailers, omnichannel capabilities are critical. The results of last year’s peak have also taught us that the supply chain must support multiple delivery options, with customers being allowed to drive those options. To support this, technology and operations must be aligned. Last year highlighted the detrimental effect not having these ducks in a row can have, with only 52% of retailers feeling that their technology stack was prepared for peak season volume.
Getting ready for another turbulent year of retail will by no means be easy. Rather than getting hung up on what the future may hold, retailers should prepare for the unpredictable by ensuring they have multiple contingency plans in place.
If we’ve learnt anything from the last year, it’s that fortune doesn’t just favour the brave; it favours the prepared. With peak promotions already in swing and Black Friday just weeks away, now is the time to look ahead and build a strategy based on agility, flexibility, and scalability.
Author:
Claire Grattidge, Manager, Business Management at PFS
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