Four in 10 Retailers Worry About Inventory Shortages for Holiday 2024
New research from Manhattan Associates shows that this holiday season is slated to be one of change for retailers and consumers alike.
Both groups, as well as supply chain leaders, face a new technology landscape, with rapidly evolving technology like artificial intelligence taking center stage; a precarious geopolitical environment and economic landscape impacting both sides of the shopping experience and more.
Inventory continues to be a top-of-mind issue for retailers and supply chain leaders alike; though it’s a sticking point all year round, holiday season only exacerbates anxieties over not meeting consumer demand—or overestimating how consumers might purchase.
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Nearly 39 percent of retailers said their biggest concern for the holiday season is not having enough inventory, though nearly nine in 10 retailers said they have processes and mechanisms to help make sure on-trend products are available to consumers during high-traffic shopping periods, whether online or in stores.
However, the level of alarm is higher among supply chain leaders, 62 percent of whom said they have worries over inventory shortages. Ann Ruckstuhl, chief marketing officer for Manhattan, said that may be due to a broader level of visibility into the landscape among supply chain players, as compared with retail planners and merchandisers.
“The retailers understand the consumer demand, the patterns, the merchandising, their forecasting, but then the supply chain guys have to make it happen. To make it happen, they understand it’s not just the science of the supply chain—warehousing, transportation, having enough ships, planes and automobiles. These guys have to deal with the economy, they have to deal with labor, they have to deal with geopolitics, they have to deal with infrastructure disruptions. They see every aspect of what could possibly go wrong,” Ruckstuhl told Sourcing Journal.
Seven in 10 retailers indicated that they plan to up their levels of in-store inventory to meet the demand for last-minute shopping among consumers. Companies reliant on the East Coast ports for shipping may be feeling relief knowing their last-minute orders from overseas suppliers will not be held up by a strike through this holiday season; just days ago, that prospect was looking likely, though most orders placed ahead of time had already made it through the ports in time for the holidays.
Part of the know-how in getting ahead of supply chain delays may have come from the integration of advanced technology. According to Manhattan, eight in 10 leaders in retail or supply chain will use AI to aid inventory management and forecasting. Startups like Flagship, Syrup and Particl have been vying to help retailers do so.
But Ruckstuhl said that, while inventory management and allocation may be some of the most practical use cases for AI in the retail industry today, they’re certainly not the only important ways to use the technology.
“AI plays a huge part in customer service…It’s always about the transactions you are making with a specific retailer. AI is, in a major way, going into that area, simply because instead of placing a call and waiting in the queue or getting a call back and going through a phone tree, people want to be able to interact with a chatbot that sits not on top of a knowledge base, but sites on top of a transaction database, and to be able to do self-service using AI to find out where orders are, how to make last-minute order changes, [and more],” Ruckstuhl said.
About half of respondents indicated they have already started using AI for customer interactions and better service.
As retailers and supply chain leaders prepare for what Ruckstuhl called a “unique” holiday season ahead, they also have to take more generalized consumer sentiment into account; Manhattan’s data shows six in 10 consumers plan to buy fewer gifts and just over half plan to scope out sales or deals.
That’s likely a lingering result of inflation—93 percent of consumers said the price increases handed down to them over the past several years have had “a moderate or strong negative impact” on their economic situations, and more than two-thirds of shoppers said inflation continues to get worse.
Consumer sentiment may also decline depending on the outcome of the U.S. presidential election, Manhattan’s data shows. Almost one-fourth of consumer said they would cut their spending further if their preferred presidential candidate loses the election. Baby Boomers led the charge, with three in 10 planning to snip their holiday spending in that case. Millennials worried less about the outcome of the election; 12 percent indicated the election’s outcome would change their spending habits for holiday.
For retailers, that level of economic uncertainty—whether caused by inflation, election or otherwise—could be a strong opportunity to bring in loyal, repeat customers. AI has made the ability to offer deals to a select subset of consumers easier than ever, and Ruckstuhl said companies may begin using that strategy to keep consumers in their grasp in a difficult spending environment.
“I would recommend retailers be creative and think about incentives, discounts and promotion,” she explained. “Do the first thing first, and focus on your more loyal and repeat purchase customers first, and then apply that across the board.”
