Retailers are braced for a complicated holiday season. Shortages will affect many items during the season. Large retailers such as Walmart and Target insist they will not have any empty shelves, but smaller retailers have less control over their suppliers. They expect shortages.
There will be fewer deals this holiday season due to lingering supply chain disruptions caused by the pandemic, according to a survey by Coupa Software. The firm had Sapio Research talk to 600 retailers. The retailers anticipate revenue losses of 5-20% compared with pre-COVID revenues. More than half estimate losses over 5%, while a quarter expects losses greater than 10%. Five percent said their losses will be greater than 20%.
Consumers Are Expected to Shop Early and Pay Full Prices
Seventy percent of retailers usually offer Black Friday deals. This year they will not offer as many. A quarter say they will offer between 25-50% fewer deals. Ten percent say they will offer 50-75% fewer deals.
Nearly two out of three retailers are concerned that supply chain disruptions will affect their holiday revenue. Sixty-seven percent are encouraging customers to shop early. Fifty-one percent are offering promotions earlier and 46% are displaying products even earlier.
Chip Shortages Are a Big Issue for Back Friday
While the shortage of chips in the auto industry has been big news in recent months, disruptions in the chip supply extend beyond cars. Chip shortages are affecting consumer electronics, from game players and phones to smart speakers and streaming devices.
Yet not all products with a chip will be in short supply on Black Friday. The world of shortages is complex. In automotive, some newly produced cars are sidelined for the lack of one single chip among hundreds. Likewise with Santa’s gifts.
Many electronic products will not suffer shortages while others will, and it’s hard to predict which. Mashable has scored electronic products on their likelihood of experiencing shortages during the holiday season. Not only did it vary product-to-product, but it also varied brand-to-brand.
Some companies are more concerned about losing loyal customers than they are about losing money. So there have been instances of consumer electronics companies paying higher fees for chips and not passing that on to customers. It’s illegal to sell a product for less than it costs if you’re trying to damage your competitor, but if the reason is customer loyalty, you’re good to go.
Consumer electronic companies – unlike their automotive counterparts – are mostly mum about what products may hit snags during the holidays. The Black Friday sales or lack of sales don’t necessarily tell the whole story. The proof in this figgy pudding will be told over the holiday shopping season.
Blame it on the Pandemic
The shutdown due to COVID-19 was the extraordinary event that created the problem. “Ultimately it all stems from the shutdown last year and the subsequent actions and reactions. There was no way to predict or understand the consequences,” Lewis Black, CEO of Almonty Industries, told Design News. “We’re still discovering the implications of shutting down the planet and restarting it.”
The Coupa survey also revealed that retailers expect that supply chain issues will continue as a long-term challenge. Ninety percent of retailers anticipated supply chain issues for at least the next six months. “We’re going to have to ride this out this year and next, we’ll probably see balance in 2023,” said Black. “There is nothing you can do. This is not a domestic problem. It’s a global problem. People are terrified about not getting what they want, so human nature is to get it while you can and horde it. So there is a hoarding mentality.”
Black believes the problem will be corrected without long-term damage since consumers have the money and want the goods. “Demand is still strong, so this is merely the issue or restating. Shutting down was an extraordinary feat,” said Black. “You may have fewer choices in the short run. You may have to keep your phone a while longer, and you may have to wait a year for a new car, but the world will not come to an end.”
Cyber Monday Issues
For retailers engaging in cyber sales, uptime and safety will be the important challenges this holiday season. “Data and systems availability and security will play crucial roles in determining the success or failure of Black Friday and Cyber Monday for retailers in 2021,” Don Boxley, CEO and co-founder of DH2i, told Design News. “This is because consumers are savvier than ever. They know that should your onsite or online systems go down, your nearest competitor is only a few clicks away.”
The goal for online shops is to ensure unplanned outages don’t happen. “On Black Friday and Cyber Monday, retailers must deploy smart availability solutions that offer far more capability than just combatting unplanned outages,” said Boxley. “The ideal high availability solution must deliver an all-inclusive approach for optimization of the retailer’s entire environment. It must ensure both planned and unplanned downtime is kept to near zero while continuing to improve.”
Watch for Attacks on Cyber Monday
Cybersecurity is also paramount during the holiday buying season. “Leading up to Black Friday and Cyber Monday, consumers have been hearing about potential issues with retail and delivery supply chains,” Tom Callahan, director of operations at PDI Software, told Design News. “Although there are a lot of reasons why certain products might not be on store shelves or deliveries might be delayed, one possibility we can’t overlook is cybersecurity.”
Recent broad and targeted attacks suggest online retailers need to be hypervigilant. “Because the retail supply chain is increasingly digital and interconnected, the entire chain can quickly be impacted by a single cyberattack on one company along the chain,” said Callahan. “For instance, we’re now seeing what used to be simply ransomware attacks turning into extortion-ware attacks.”
Cybercriminals are happy to hit customers as well as online retailers. “If a business gets breached and decides not to pay the ransom to get their data back, cybercriminals are now using that data to extort not only the business but the customers and partners of that business as well,” said Callahan. “As a result, the blast radius of a cyberattack can escalate very quickly across a wide footprint. That has the potential to completely disrupt the retail supply chain.”
In the face of all this, online retailers need to beef up security going into the holiday season. “To guard against that, companies need to follow their established security best practices and maintain vigilance. But they must also be wary of how interwoven their supply chains are,” said Callahan. “They must be able to protect sensitive data and maintain secure access points as they interact with other businesses through the cloud.”