What does unpredictable Black Friday demand mean for retailers’ supply chains?

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Retailers are facing another tricky Christmas period for sales, with consumer confidence having taken a nose-dive and retail sales slumping to the lowest level since the February 2021 lockdown in October. Shoppers are forecasted to buy and spend less this year as the cost of living crisis continues to bite, while we’re seeing growing scepticism about whether consumers are really getting a deal on Black Friday. As such, many retailers will be holding their breath to see what the annual milestone will bring.

For manufacturers and retailers, a lot rides on this period. Many of those we speak to are increasingly seeing sales front-loaded into November, with the festive shopping rush now peaking earlier as people look to bag Black Friday deals. Some retailers may well have a backlog of stock to be sold in the sales, following a challenging year for trade. Others – particularly those who trade directly with the consumer or via platforms such as Amazon and depend on this quarter – will have invested in stock which is currently sat in warehouses. This is particularly the case for companies with manufacturing operations based in the Far East which forecast months ahead of demand and may have been particularly optimistic to try and cash in on the traditional peak.

But if sales don’t convert as hoped, retailers will be forced to make quick and critical decisions regarding prices – think flash sales and dramatic cost dips to avoid getting stuck with excess stock. Agility across the supply chain will be key to flexing operations and navigating this uncertain terrain.

If spending remains subdued, retailers may then need to pivot and bring out additional offers in the run-up to Christmas and Boxing Day sales. Those working in warehouse fulfilment operations for such suppliers will experience a volatile few weeks in turn.

Looking beyond the festive season, post-Christmas inventories will be interesting. What we’ve seen over the last year has been declining inventories and less demand for warehouse space, but excess stock might change this situation in the first quarter of 2024. Many third-party logistics providers (3PLs) operate on very thin margins and have already been hit by lower volume demand, high inflation, and high interest rates. A price war on warehouse space would only add to this headache going into the new year.