November 8, 2022
Challenges with fulfillment and distribution due to inflation, omnichannel shopping behavior, labor shortages and trucking capacity during peak season.
It’s no secret that the big news for this holiday season is inflation and its impact on fulfillment and warehousing. With prices increasing faster than they have in the last 40 years, consumer confidence is low — and they could become more skittish about discretionary spending. A Yahoo Finance article says that consumers are increasingly concerned about inflation and the economy, with three out of four believing the U.S. is already in a recession or will be soon. The survey showed that 84 of those polled “say inflation has affected their overall spending, a 9 percent increase from three months ago.” Those polled also revealed that 90 percent of shoppers “say they have noticed higher product prices in their day-to-day spending.” As a result, shoppers said they are cutting back on spending by buying items on sale and purchasing less expensive brands as well as buying generic brands which impacts managing fulfillment.
While the Consumer Price Index (CPI) showed inflation eased somewhat over the summer months, there is still significant upward pressure on prices. According to Business Insider, “The future remains uncertain, and several factors, including supply chain snags and holiday shopping, could lift price growth for some time.”
Inflation adds to the difficulty of predicting inventory as well. This has been a constant challenge throughout the pandemic — and continues into fulfillment’s peak season. Now, on top of continued supply chain woes, inflation has added another level of complexity.
Peak Season starts earlier than before
Throughout the pandemic, retailers have had trouble predicting the right inventory in the right amounts — and inflation has made that calculation even more difficult. Even when inventory is in stock, the pricing may not be right to tempt consumers. Shopping early is one tactic consumers are using to save money as retailers continue to mark down prices on excess inventory, having an impact on outsourced fulfillment and distribution.
Bloomberg reported that some Amazon third-party sellers fear they could have to cut prices "to move a mountain of unsold inventory," prompting earlier than usual discounts and sales. Early sales help consumers hedge against inflation and take advantage of discounts. According to Salesforce, “This year, the main motivating factor driving early purchases will be inflation. Our research shows 42% more shoppers worldwide and 37% more in the U.S. plan to purchase gifts earlier–the number one behavioral change this holiday due to inflation. They hope to snag their holiday gifts before prices rise too much.”
Yet buying early has been trending since 2020 — and more and more shoppers have been buying in early November due to inventory issues and fears of supply chain problems. Rising inflation is a new motivating factor. In a September 13th article, Yahoo Finance reported that early buying has already started, “With about 100 days until Christmas, 30 percent of respondents said they’ve already begun buying for the holiday, while 70 percent said they plan to do so before Thanksgiving.” Rising sales across the entire month of November in recent years is earning it the name “Cyber Month”. Stocking up inventory earlier might be called for, as consumers look to buy before the traditional peak season.
Can you count on more transportation capacity? The answer, hedge your bets.
According to the Wall Street Journal, both inflation and the Russia-Ukraine war will present challenges for carriers following the vigorous growth over the past couple of years. Yet with demand volatility and the risk of a railroad strike averted, it is still a good idea for companies to continue the best practices put in place during COVID.
The last two years have made it clear that planning and having backup procedures in place is critical to mitigate risks for companies moving goods of all kinds. Peak season is not the time to add any risk to your operations that could result in disappointed customers, out-of-stock inventory, and affect your biggest revenue months.
Good labor is hard to find
The tightness in the labor market continues to be a real issue for many companies — and nowhere is that more apparent than in warehousing, fulfillment, distribution, and transportation. This peak season, many retailers are struggling to keep up. Hiring truck drivers is even more difficult than hiring warehouse workers. And retailers, manufacturers and distributors are all competing for warehouse labor. According to Forbes, the US Department of Labor does not split out job openings for truck drivers versus openings for warehouse workers. Peak season, when warehouse operations are tightly managed, is a smart time to have a partner whose core competencies are planning for and providing these very services.
The line between online and retail gets fuzzier
As we move beyond the pandemic, online shopping demand is leveling off somewhat, as consumers find a balance between digital and physical channels. Physical channels have experienced a significant boost over the past two years due to creative store fulfillment options like buy-online-pickup-in-store (BOPIS). Online fulfillment through physical channels is expected to continue to propel growth, giving consumers the best of both worlds — both an in-store experience that they missed and the convenience of shipping online.
According to the National Retail Foundation (NRF), BOPIS improved the customer experience for 70% of surveyed consumers by increasing convenience. Fully 90% of consumers surveyed said they were more likely to choose a retailer based on convenience. That means providing these key services BOPIS and Buy Online Pickup At Curb (BOPAC) are essential for customer satisfaction and increasing sales during the 2022 peak season. Statista predicts that click-and-collect retail sales will keep growing at an annual rate of more than 15% until 2024. Results and forecasts like these continue to prompt more retailers and brands to implement BOPIS strategies.
All of these uncertainties mean that forecasting this peak season is trickier and riskier than ever. That’s why partnering with a reliable, experienced provider for omnichannel fulfillment is also more vital than ever. Over the last decade, Verst has fulfilled orders for customers during Peak Season, with a full range of B2B and B2C services in omnichannel fulfillment. Verst brings the assets, flexibility and expertise —- all with a central location for national reach — well beyond "just the basics" that most fulfillment solution providers have.
Verst has invested in automation in two of our 400,000-square-foot warehouses for faster, more accurate omnichannel fulfillment — including access to capacity for parcel and LTL delivery. Our fulfillment warehouses are strategically located to reach 85% of the US population within 1-2 days. With 24 central fulfillment center locations in the Northern Kentucky and Greater Cincinnati area, Verst customers have access to overflow inventory capacity to stock up key inventory to offset supply chain worries or peaks in demand. And, of course, our long history means we have the strategies and labor in place to meet the challenges of market volatility in the current economic climate. With Verst, you can trust that we’ll ensure that everyone’s holiday gifts arrive on
Need more advice for an exceptional Peak Season fulfillment solution? Learn more here or call our Fulfillment experts at 800-978-9307.
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