At the end of the 2022 holiday season, many media outlets shared photos of warehouses overflowing with returned and leftover inventory. After retailers faced widespread miscalculations of how much and what inventory to carry, this year many are drastically scaling back. While it’s too early to know if the strategy will pay off, the retailers are relying heavily on demand forecasting that suggests supply chain management for the 2023 holiday season requires a much different approach than 2022.
Preventing Leftover Inventory
Over the past few years, forecasting consumer demand has become one of the toughest tasks of supply chain management. Buying patterns caught many companies off guard in 2020, and they’re still trying to get back on track. Consumers first pivoted from home improvement and decorating at the start of the pandemic, and then moved onto travel and experiences as the world re-opened. Now it’s 2023, and retailers are hoping they have the new consumer somewhat figured out. Still, most are struggling to figure out what consumers want versus how much to keep in stock. The roller coaster ride remains one of the constants in a post-pandemic world.
The risk to big box retailers like Target, Walmart, and Best Buy this year is identifying what shoppers will be after following the home improvement and travel streaks. While the economy has improved over the past year, there’s still a perception that it remains tight, and with continuing inflation, nailing what exactly will be in demand in challenging. Some of the big-box stores are reporting a demand for “fresh and clean,” on store shelves.
An Earlier Season Means Less Leftover Inventory
A recent report from McKinsey suggests that retailers began kicking off the holiday season earlier than normal, offering up promotions and sales to lure consumers in. That required a quicker turnover from Halloween to holidays on store shelves, and ensuring the appropriate items were in stock. Coordination across the supply chain was necessary for those retailers hoping to pull that off. There’s also a trend to “trade down” among consumers—they are more interested in cheaper alternatives than luxury goods this year. Along those lines, fewer consumers report plans to splurge this holiday season. Again, appropriate forecasting and coordination with supply chain partners could save the day for many companies.
When it comes to where consumers plan to shop, ecommerce continues to rule in the post-pandemic era. Having strong omnichannel tools in place is essential, with an emphasis on the ecommerce side of the equation. Young shoppers expect next-day deliveries and are willing to pay for that experience. Still, having an in-store presence with stocked shelves remains important, as the majority of consumers report planning at least one in-store shopping trip, and many others intend to pick up online orders at the corresponding brick-and-mortar store.
To prevent leftover inventory this holiday season, retailers will increasingly rely on new technologies—AI, specifically, will have a greater presence in the supply chain than ever before. Putting all the tools together—forecasting, AI, effective omnichannel management—and more, will be essential to managing the holiday 2023 supply chain.
