3 ways retailers can quickly build supply chain resilience for the holiday surge
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The 2024 retail holiday outlook is shaping up to be one of the most pivotal in recent memory for retailers. With fewer shopping days, new consumer habits, and a mixed economic outlook, the stakes have never been higher.
This complex combination likely will result in clear winners and losers this holiday season. As the countdown begins, one question looms large: Will your business be able to rise to the challenge?
In 2024, agility and strategic innovation are absolutely essential. The ability to make rapid adjustments with the latest innovations in data, the cloud, and AI will be the factor that decides which retailers score big holiday sales.
In 2024, retailers face a “vibe-cession”
The economic climate presents a challenging backdrop for retailers this year. Every holiday season is judged on comparable sales to the previous year, aka “comp sales.” In 2024, we’ll be comparing results against the past three years of highly unusual trends due to COVID. Adding to the pressure, Thanksgiving falls on Nov. 28, creating the shortest holiday shopping season in years.
We’re entering the season with some encouraging macroeconomic indicators like lower inflation and interest rates. But that’s offset by historically high prices, increasing credit debt, and low consumer confidence.
Similar trends are playing out throughout the globe, but here in the US, it’s created a “vibe-cession” where the consumer has some purchasing power but spends cautiously.
This causes a concentration of spending on have-to-haves vs want-to-haves. We’re also seeing consumers trade down to more value-oriented choices, shifting sales volume to discount retailers, store brands, and emerging direct-from-China retail juggernauts.
Add it all together, and the forecasts for 2024 holiday sales growth from last year reflect this tension:
- Bain: 3%
- Deloitte: 2.3%-3.3%
- National Retail Federation: 2.5%-3.5%
These projections fall below the pre-pandemic average of 5.1% annual growth. Even worse, 2024 holiday sales are likely to feature deep discounts – resulting in even lower margins.
For retailers, this underscores the need to be more efficient than ever before, lowering operating expenses and controlling costs, while simultaneously offering a rich differentiated customer experience. Not an easy task.
Early promotions impact holiday retail trends
Retailers kicked off the 2024 holiday season earlier than ever. Amazon and Walmart launched “pre-black Friday” sales on Oct. 10 and other retailers followed. “Holiday creep” has become a global phenomenon with retailers fighting to win share with budget-minded holiday shoppers looking for early deals.
In the US, this boosted October’s retail sales (not including automobiles, gasoline, and restaurants) by 5.4% year-over-year, well above the overall year to date growth rate of 3.5%. However, the strong October is likely the result of consumers deferring September spending while they wait for sales and pulling in November spending after the sales.
We’re already seeing the impact with Earnest Analytics reporting sales in the first half of November down 1.4% versus the same period last year. Let’s hope that late holiday weekend will trigger another round of consumer spending, but if the trend continues, we’ll have the first decline in November sales since the recession of 2008.Not all retailers are experiencing these trends equally. Morgan Stanley estimates that Amazon, Walmart, and Costco alone accounted for more than 50% of all Q3 growth, and Earnest reports that in November, sales from Chinese deep discount retailers Temu, Shein, and Tik Tok Shops are growing much faster than everyone else.
The formula for 2024 holiday retail success
Retailers that come out on the winning side this year need to accomplish two seemingly contradictory things: control costs and improve customer experience. They need to reduce costs as much as possible while offering a stellar, differentiated experience that’s capable of converting an economic-stressed, time-starved consumer.
Achieving both at the same time is a bit like remodeling your kitchen while you host a dinner party. Fortunately, huge technical leaps in data management, the cloud, and AI are enabling new business processes and customer experiences that weren’t possible just a few years ago, giving retailers a fighting chance this holiday season.
To thrive this holiday season, retailers must:
- Leverage AI and analytics: Use actionable insights to refine marketing and streamline operations.
- Boost omnichannel integration: Blend digital and physical experiences to meet customer expectations.
- Invest in scalable IT infrastructure: Ensure systems can support rapid shifts in demand, secure data, and enable virtual engagement.
- Prioritize customer experience: Build trust and loyalty through exceptional service and curated interactions across owned and influenced touchpoints.
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AI: The quiet partner in holiday success
AI is a growing trend in retail, which bodes well for the industry this holiday season. The technology can help retailers on a number of fronts:
- Operational efficiency with more accurate demand forecasting, optimized inventory management and supply chain automation. AI also can streamline e-commerce content creation, from e-mail to product content.
- Hyper-personalized marketing through advanced customer segmentation and data-driven campaigns that engage customers with precision and relevance.
- Improved customer service with AI tools that resolve inquires faster and more cost effectively. AI-enabled shopping assistants improve CX.
Omnichannel and experiential retail trends
While e-commerce has emerged as a highly efficient channel for buying, physical stores remain indispensable for enabling browsing and product discovery. Increasingly, social media has become the preferred means of digital product discovery.
This holiday season, successful retailers will leverage the best of all worlds:
- Create immersive in-store experiences to draw in and engage browsers
- Integrate digital innovations like virtual try-ons and augmented reality to bridge online and offline worlds
- Engage creators and influencer communities to amplify product discovery across social media
As shoppers continue to blend digital and physical channels, omnichannel excellence will be a key differentiator. Retailers must ensure a seamless transition across platforms, keeping customers engaged at every touchpoint.
The 2024 holiday season has its challenges but also presents opportunities for innovation and leadership. Retailers who embrace AI, leverage data-driven strategies, and invest in seamless customer experiences will shine.