The Biggest Challenges Retailers Will Face This Peak Season – And How To Overcome Them

A post-pandemic landscape, with a supply chain crisis and economic meltdown thrown in, means many of the issues overcome by retailers in peak season have snowballed into alarming trends for the next year, leaving merchants understandably concerned.

Let’s look at the five biggest challenges that retailers across the UK and US faced last holiday season, in no particular order:

  1. Increased costs
  2. Overselling, shortages and stockouts
  3. Delayed orders
  4. Stockouts

Holidays (and Challenges) Are Coming

These five challenges are all intrinsically linked to how a business successfully handles its inventory forecasting and planning. With the current geo-political issues and the cost-of-living crisis having a huge impact on retailers, these challenges are set to accelerate further as we head into this year’s peak season.

Since last festive season, a new challenge has also emerged: one that Retail Week has described as the ‘excess stock black hole’. As prices rise, and sales have dropped, excess stock has begun building up – which some retailers are struggling to liquidate with traditional tactics like promotions. Excess stock may turn out to be the biggest challenge of all in peak season 2022.

However, none of these challenges are insurmountable – as long as brands take action now to implement key tools and techniques.

As the saying goes, knowledge is power – and one of the smartest moves retailers can make right now is to be informed about the current trends and impending challenges, and ensure they have the insight – and the tech – to address them.

That’s where this blog comes in.

To help retailers be best-placed to enjoy a successful and profitable holiday season, we’re taking a closer look at some of the most pressing issues mentioned and how they can be addressed.

Top Holiday Season Challenges

1. Increased costs

The supply chain crisis has added 21% to retailers’ costs over the last year, according to research from our sister company, Brightpearl by Sage. With war in Europe and surging inflation added to the mix, retail brands now face the very real threat of financial disaster.

In fact, a quarter (26%) of UK brands are just four weeks away from ‘crisis point’ issues with cash flow. In the US, a third (31%) of US brands are eight weeks away from folding under the pressure of crippling costs.

Being able to accurately predict future demand for products is the key to minimizing the impact of rising costs and stabilizing your cash flow in these uncertain times.

The best demand forecasting software enables retailers to regain control over outgoings by making intelligent and accurate suggestions on when to order products, how much to order and how to make stocks last between shipments.

By connecting sales data, supplier timescales and factors such as seasonality and promotions, merchants can strike the delicate balance of avoiding running out of the most profitable items and avoiding having warehouses packed with inventory that can’t be shifted.

With container costs up by around 600%, it’s also time for retailers to get smart about the way they use this method of shipping stock. Containers are shipped at a fixed price for the space (and sometimes according to weight). This means merchants can save a ton of cash by calculating exactly how much of each product to buy in order to fill every last square inch of space in each container.

Unless you happen to have a degree in physics and lots of spare time, working that out on pen and paper isn’t an option. But it is possible with the right inventory demand planning software.

Simply enter the weight and/or dimensions of items to optimize shipping container usage in just a couple of clicks. You can even place a PO directly from the software – saving even more time and hassle.

2. Overselling, shortages and stockouts

The recipe for festive success as a retailer this year sounds perfectly simple. Step one: make sure products are in stock. Step two: sell the stock. However, in reality, it’s much more challenging.

During peak season 2021, almost a quarter of retailers (23%) were plagued by stockouts and product shortages.

In the last 12 months, nearly half (46%) have experienced at least one disruptive stockout event.

It’s a similar story in the US, where half (52%) of US brands have experienced stockouts resulting in a loss of sales over the last year and stockouts and product shortages were the leading challenge last holiday season, impacting up to 67% of merchants.

This year, ensuring stock levels are optimized will again present retailers with a significant challenge, especially with the ongoing pandemic-induced supply chain crisis further exacerbated by world events. However, it’s more likely to be a case of maintaining the right amount of inventory to avoid running out of stock and overselling as well as underselling.

It’s a major challenge but it’s one that merchants must rise to because ‘busy season’ can be make-or-break a brand’s overall success, accounting for a disproportionate portion of annual revenue. In fact, Research from GfK reveals that, during peak season, 20 percent of annual sales can be achieved in just eight weeks.

That means, as well as the chance to boost revenue, the holiday shopping season is also a prime opportunity to attract, impress and retain new customers that can stay with you for years to come. It also means that if you disappoint a shopper with an out of stock notification during peak season, there’s a high chance they’ll go away and never come back to your brand again.

It’s therefore essential that retailers are able to accurately predict exactly how much stock is needed to meet demand, factoring in seasonality and supply chain challenges.

3. Delayed orders

It’s supposed to be the most wonderful time of the year – not just for small children and big kids, but for online retail brands, too. However while the so-called busy season brings festive joy to some, it brings major holiday blues to others.

For the majority of UK brands (54%) in 2021, the magical Christmas period turned sour as they struggled to meet the challenging demands of increased orders. Some sectors were hit especially hard – 55% of fashion brands admitted they ‘simply couldn’t cope’ with online demand.

Similarly, in the US, 56% struggled with surging demand, with a quarter of firms (24%) admitting orders were delayed as a result – which is hardly good for reputation at such a highly-charged, stressful time of year.

The impact of all this on consumers was significant, with a third of shoppers on both sides of the Atlantic saying they were let down by an online order.

One of the main reasons orders are delayed is because merchants don’t have the right amount of stock on hand to ship quickly.

Buying in huge quantities of stock is one approach to dealing with rising costs, but it’s not the smartest idea unless you have clear insights on product performance over time and how things are changing in-line with new trends. You can end up with excess stock – and delayed orders – if one product proves to be much more popular than you forecasted for.

Inventory Planner offers a much less risky solution. It offers complete visibility across future estimated sales, as well as insights on the items that are not selling, which items are running low in stock and how much inventory is likely to be needed per product line. With this kind of data in your arsenal, you can avoid annoying delays altogether.

4. Stockouts

Retail Week recently warned that the post-pandemic problem of excess stock could be the final nail in the coffin for many retailers in the squeezed mid-market.

As inflation has taken hold and prices have soared, consumer confidence has dropped, sales have slowed and excess stock is building up.

In the US, retail stock levels have already risen faster than sales, leading to the likes of Walmart cutting the cost of high-margin items. Experts agree that the issue of excess stock is also becoming prevalent in the UK, too, and may be behind the drop in profits of retailers like Halfords and Asos.

In fact, one banking source says the 37 listed businesses that make up ‘UK retail plc’ have  £2.8bn in excess stock – a major concern when inflation is hitting 30-year highs, and for brands which can’t simply slash prices to liquidate stock.

Demand forecasting software, such as Inventory Planner, factors in promotions, historical sales, seasonality and variants such as supplier lead time in order to forecast future sales with astonishing accuracy.

This enables retailers to order the exact right amount of stock, at the exact right time – bypassing the risk of excess stock. The software can even analyze sales data to flag slow-moving items at the earliest possible opportunity.

The ultimate solution to peak season problems

Post-Peak Excess Stock Guide

Why It’s A Major Issue & What You Should Do About It

Download it here

While this peak season presents unprecedented problems for retailers, there is an obvious solution to each of the challenges we’ve highlighted: inventory planning.

With up to 80% of retailers impacted in the last 12 months by supply chain issues, demand forecasting software has come into its own, providing retail and wholesale brands with a smart way to avoid out-of-stock events and put an end to overselling.

Inventory Planner helps brands to:

  • Manage stock shortages

With Inventory Planner, brands can carefully plan the release of stock to keep customers happy and cash flow steady. It tells retailers exactly when to order to mitigate long lead times and even suggests when to release stock to make it last.

  • Easily order stock

Inventory Planner offers an at-a-glance view of all the items that need to be reordered. In just a couple of clicks you can create purchase orders in bulk. For many retailers, this prevents the hire of additional staff and saves hours every week.

  • Get advance warning about stockouts

Having demand planning data to hand is one thing – being able to interpret it is another. Inventory Planner provides intuitive analysis and automatic alerts so that you can know exactly when, where and what to order.

  • Avoid the risk of excess stock

Be alerted to slow-moving stock at the earliest opportunity and bypass the risk of excess stock by ordering the right amount of inventory, at the right time, with Inventory Planner.

However, despite these benefits, six in 10 brands (59%) don’t currently use demand planning software. This failure to invest means brands are missing the opportunity to easily avoid stockouts and shortages this peak season.

The reality is supply chain issues are predicted to continue into 2023 and even 2024, so companies must take action now. We know that a third (32%) of consumers chose to shop with a new online store in the last year simply because they had an item in stock and a quarter (27%) of consumers said being able to count on products being in stock keeps them loyal to a brand. Failing to invest in solutions that make it simple to manage stock risks frustrating customers at best – and losing them forever, at worst.

Top Brands Use Inventory Planner For Peak Season

Leading retailers across the world rely on Brightpearl’s Inventory Planner Premium to successfully manage stock during peak season – and all year round…

  • Blake Heiner, Owner of Cruiser Gear, says: “I love that Inventory Planner helps me know when to order new inventory and prevents me ordering too much. It’s truly changed our buying power in a matter of weeks.”
  • Monxi Garza from Sauvs Shoes reports: “Inventory Planner is the best forecasting and purchasing app out there. It connects directly to our Shopify and it literally takes me 15 minutes to create a new PO. Saves so much time and money!”
  • Bryan Chu, Owner of Bells of Steel, says: “With Inventory Planner, we can stay one step ahead of our inventory needs. Out-of-stock events are kept really low, so our growth rate is higher”

The bottom line: act now to avoid a nightmare before Christmas

As retailers head into preparations for this year’s peak season, they can do so with their eyes wide open about the challenges they will face. On top of the obstacles discussed in this blog, there will be additional challenges brought on by inflation, the possibility of a recession, a cost of living crisis and the ongoing war in Ukraine. The list is seemingly endless.

However, retailers should still be optimistic. As we’ve explored, many of the challenges this holiday season will bring can be avoided or resolved by using innovative demand forecasting software to avoid out-of-stock events and overselling.

Adding the best demand forecasting software to your tech stack doesn’t have to be overwhelming. It’s a much simpler and easier process today than it was a decade (or less) ago – or at least it is with Inventory Planner.

To win big this peak season, merchants should utilize the power of demand forecasting and other technology to proactively address the challenges that crop up, rather than being forced into taking defensive action, such as extending delivery timescales or ending promotions early to avoid being overwhelmed with orders.

With Inventory Planner on your side, your business will be free to adapt as needed and to seize the opportunities of peak season – and beyond.

See how Inventory Planner works with an interactive demo now!