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Samantha Moranville, who co-owns Revolution Bike Shop in Kingston, New York, along with her husband Mike, is eager for the holiday season to approach because they'll finally have inventory to sell. They've had the busiest season this year in their 11-year history, Moranville said, but it hasn't been without challenges.
Since June, Moranville has had to inform customers that they're sold out of bikes. Orders on waiting lists may take as long as spring 2021 to arrive, she told Business Insider, with some models unavailable until the fall.
Moranville typically orders winter products for the holiday shopping season a year in advance, and said she feels confident those items are already in the supply chain.
"We're hoping for a reprieve from having to explain to people that we're out of things," she said. "It is hard to tell a dozen people a day I don't have what they're looking for."
Moranville added that she anticipates gift certificates will be a popular item for shoppers, allowing gift-givers to enable recipients to get items they want as they become available and support businesses that need cash flow.
Daniel Robbins also sees gift certificates as an opportunity for the brick-and-mortar side of his business, OC Facial Skin Care Center, in Orange County, California. The state's governor has kept salons closed since March, and reopening regulations have made it difficult to welcome returning guests.
"It's hard to know when we can reopen," Robbins said. "We have been considering doing gift cards with the ability for a 100% refund if it doesn't work out for reopening."
The pandemic has driven changes in customer shopping habits, which has exposed weaknesses in the supply chain. Amid shortages and logistical delays, retailers are finding new ways to "stock" their shelves and sell to customers this holiday season.
Bigger inventories and a pivot to local offerings
Steve Szaronos, cofounder of Bespoke Post, a lifestyle subscription and ecommerce company, recognized early on that supply chain bottlenecks would affect product availability. In July, company leaders decided to increase inventory by 25% to create a buffer and have been ramping up on stock since then.
"We can reliably anticipate how many units we need in a given month," he said. "By purchasing products as backup in anticipation of supply chain challenges, we can replace a concept we had slated originally with one of our back-up products if an issue arises."
"In July, we added a second warehouse location for two reasons — additional capacity and geographic diversity," Szaronos added. "The additional capacity simply allows us to increase the number of orders we can ship in a day. Geographic diversity helps mitigate risk if there is a surge in COVID cases in the region of our primary warehouse, which could result in further reductions in throughput."
Don Brett, the chief digital officer of NBG Home, said that the company also placed larger orders to overcome transportation and logistics congestion associated with getting products from the ports to retailers.
"When anything goes out of stock online, it's not just about sales you lose, it's about the organic placements you also lose," he said, referring to search rankings on Google. "You're no longer in position three, now you're 10. If you go two days without an item, it bumps you down six organic placements. It's really important for us to connect sales, marketing, and supply chain in a coherent and coordinated fashion."
Smaller retailers, like Impressions of Saratoga in Saratoga, New York, don't have the capacity for increasing orders and were forced to decrease stocking orders or cancel some altogether. Instead, co-owners Marianne Barker and Maddy Zanetti focused on relationships with local vendors and created more locally-sourced offerings through a pandemic-inspired "Porch Package." The reusable tote bags are filled with locally-made food products and Saratoga-specific items and are available at a variety of price points from $25 to $300, Barker said.
"We bought more from one local supplier in the last six months than the last five years," she said. "It's given us a chance to promote local and we can turn around orders fast."
Forecasting as consumer needs shift
COVID-19 has made traditional demand forecasting models somewhat obsolete, according to Robert Gerwig, senior vice president of distribution at Sweetwater, an online retailer of musical instruments and audio gear. While Sweetwater experienced an increase in online orders early in the pandemic, he said it's still uncertain what will happen in Q4.
"We're continuing to use predictive modeling and are capitalizing on as much data as we can to forecast and plan outbound, downstream demand," he said. "We're evaluating trends, analytics, and historical data to be as accurate as possible as we work to forecast the outcome of the looming holiday season."
Brett added that NBG Home uses social listening to understand what consumers are looking for and try to get ahead of that with orders. Computer learning software CommerceIQ analyses a volume data that's not humanly possible to manage.
"The supply chain piece is particularly important and it affects advertising," he said. "We don't want to promote something that goes out of stock because it impacts our visibility."
Managing shopper expectations
Customer service and frequent communication is going to be more important than ever before, business owners told Business Insider. Gerwig is taking the approach of over-communicating with customers and vendors alike in advance of the holiday season. He said many customers have been understanding.
"You cannot afford to suffer from miscommunications," he said. "We're requesting honest and transparent feedback from these groups so that we can plan and forecast efficiently."
Moranville thinks retailers should also prepare shoppers for fewer deals leading up to the holiday because of the increases in shipping costs and supply shortages in some sectors.
"We're not going to be doing any Black Friday sales because inventory is so short we're not in a position to discount, especially since our costs like shipping are way up," Moranville said. Other retailers are offering promotions but extending their timeframes to encourage spending for the long haul.
There are so many question marks and so much uncertainty this year, more so than any previous holiday season. But retailers are hopeful that sales will be strong.
"We are cautiously optimistic and are very focused on the daily and weekly performance of our supply chain," Brett said. "We are optimizing what we currently have within our networks based on the bets we had placed a few months ago and are optimizing flow of goods coming into ports."
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