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The Key to Untangling the Holiday Supply Chain Knot Is This

While shipping challenges are nothing new in the post-COVID-19 world, this year’s holiday supply chain backlog is unique. “This has really been a year and a half in the making,” says Sidecar Director of Customer Strategy Caroline Overbey Abelson, speaking on Retail Uncharted. 

Many factors contributed to today’s holiday supply chain difficulties, including an unanticipated rise in consumer demand throughout the pandemic, low cargo ship reliability, and labor shortages. All of that has culminated in shipping delays and increased costs, says Caroline, which both retailers and consumers will need to navigate this holiday season.

In this episode, Caroline offers helpful strategies for retailers looking to mitigate holiday supply chain challenges, including starting the shopping season early, setting expectations with shoppers, and protecting product margins. She shares her holiday advice and predictions with Sidecar’s Senior Director of Growth Mike Perekupka.

During the podcast, he asked Caroline:

  • What does the shipping backlog mean for retailers’ holiday strategies?
  • Will President Biden’s order to operate major shipping ports 24/7 alleviate holiday supply chain issues?
  • How can retailers protect their margins?
  • How could shipping delays impact retailers’ online ad strategies?
  • Should retailers consider cutting back ad spend this year, particularly later in the holiday season?
  • Are promotional days like Cyber Five, Green Monday, and Super Saturday less important for retailers this year?
  • What is your biggest piece of advice for retailers going into the holiday season?

Top Sound Bites

On whether U.S. ports operating 24/7 will alleviate the holiday supply chain backlog:

Caroline: It will definitely help, but I think the biggest challenge is that we don’t just need these containers on land. We need truckers and availability in warehouses. There are a lot of other pieces of the supply chain that are still really strained. Freight operators are short on both labor and equipment, so even once we do have more of these containers in the U.S., it’s still going to be really challenging because of other parts of the supply chain.

On what retailers can to do protect their margins:

Caroline:  I would really encourage everyone to do another analysis of the returns that you need to see to be profitable this season. Consider if you’re going to absorb those elevated costs or if you’re going to pass them along to the consumer.

And then be strategic about how you’re allocating funds to certain channels. Maybe allocate more budget and inventory to where you see the highest return or where you know they can accommodate the realities of your inventory and shipping constraints. 

On some retailers’ strategies to manage shipping delays and high costs:

Caroline: Target is offering a holiday price match guarantee so they’ll match the price if it goes lower than Target’s price before Christmas Eve. That is a great strategy to give consumers the confidence to start shopping in October or early November and not be afraid of missing out on Cyber Five deals.

Walmart is offering early access to Black Friday deals for Walmart Plus members, and the top of their website actually has a banner for early deals as well. Some of these larger retailers are already getting ahead of these challenges and breaking that sentiment that shoppers only need to focus on Cyber Five deals.

How retailers’ holiday ad spend may change this year:

Caroline: I think retailers won’t be reducing ad spend, but shifting it around a little. I think we want to start earlier, and we might end up ending earlier. Typically, after Cyber Five conversion rates start to dip a little bit, we reduce ad spend. At Sidecar we really follow the data, so when we see that we do begin to pull back on spend.

I think the biggest thing about this holiday season is, we don’t know what’s going to happen or if there’s going to be additional delays that might impact shipping cut offs. So I think it’s important to shift that ad spend earlier while still allocating sufficient budget for Cyber Five and those key dates. 

But acknowledge the fact that December ad spend might look a little bit different. Maybe in January we might see an uptick in sales, if you were able to sell a lot of gift cards, or if you get that hot product back in stock.

 

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