With the holiday season in full swing, the consumer packaged goods (CPG) industry is geared up for what has traditionally been its most critical period. For good or bad, the dynamics of the holiday shopping season have shifted in recent years, driven by both evolving consumer behavior and demographic changes. No longer confined to the December rush, the peak shopping period now begins in October or earlier and extends well beyond the Christmas season to other peak seasons. This extended shopping window brings new challenges and opportunities for retailers and CPG brands, particularly when it comes to managing inventory and ensuring on-shelf availability.
Historically, the retail calendar has seen a clear pattern during the holiday season: October's traffic doubles that of September, November sees twice the footfall of October, and December builds on that trend, with twice the traffic of November. The current landscape shows a more nuanced pattern, with consumers shopping earlier in the season due to extended promotions, cultural shifts, and the rise of digital commerce. According to recent North American statistics, peak store traffic is nearly back to pre-pandemic levels and now starts in October, with retailers seeing an increase in both foot traffic and online orders leading into November and December.
A growing multicultural population also plays a role in reshaping the retail holiday season, as diverse cultural groups bring new celebrations and observances into the fold. This requires retailers to stock a wider variety of products almost year-round, from traditional Christmas fare to Diwali and Hanukkah items, and everything in between. Brands must now cater to a broader range of cultural preferences, offering tailored products and promotions to ensure that all customers feel represented during this critical season.
On-Shelf Availability Challenges
One of the most persistent issues retailers face during the holidays is ensuring that products remain in stock and available to customers. On-shelf availability is critical, particularly during the peak season when consumers expect a seamless shopping experience, but several factors contribute to ongoing challenges:
- Labor Shortages and Training Issues: The current labor shortage has left many retailers struggling to maintain adequate staffing levels, leading to issues with stocking and restocking shelves. Retail employees are often stretched thin, with insufficient time for proper training. This leads to mistakes, such as expired products remaining on shelves or fresh stock not being replenished in time. For example, a regional manager at a major
brand highlighted the need to prioritize removing expired products and ensuring that shelves were adequately stocked, especially in high-traffic stores. Yet, this remains a challenge for many retailers, especially when labor is scarce.
- Shrinkage and Inventory Discrepancies: Another issue that affects inventory management is shrink, which has increasingly been a challenge for retailers. Shrink leads to discrepancies between what is recorded in inventory systems and what is actually on the shelves, complicating the reordering process. In some cases, retailers are resistant to correcting on-hand inventory counts, further exacerbating the problem. The result is
frustrated consumers leaving stores empty-handed, negatively impacting sales and customer satisfaction during the peak season.
Data-Driven Merchandising for Peak Season Success
In response to these issues, retailers are turning to data-driven merchandising strategies to improve inventory management and capitalize on sales opportunities. The integration of AI and predictive analytics allows retailers to flag specific SKUs and stores that require immediate attention. For example, by analyzing POS data in real-time, retailers can identify trends and adjust their inventory accordingly. This approach allows for on-demand merchandising, where stock levels are optimized based on current sales data, reducing the likelihood of stockouts or overstocks.
Retailers are also focusing on improving promotional compliance during the holiday season. Historically, promotional compliance rates have hovered around 70-73%, meaning that many promotions fail to achieve their full potential. However, with the help of advanced analytics and targeted interventions, retailers are now aiming for 90%+ compliance. This not only boosts sales but also ensures that customers have access to the promotional items they expect during the holiday rush.
Multichannel Fulfillment and the Rise of In-Store Picking
As consumers shift to online shopping, retailers are increasingly focusing on multichannel fulfillment strategies to meet the demand for convenience. In-store picking for online orders is a key component of this strategy, allowing retailers to fulfill e-commerce orders directly from their brick-and-mortar locations, which presents new challenges for inventory management, as the same products must be available for both in-store shoppers and online customers.
To address these challenges, retailers are adopting new technologies that improve the efficiency of in-store picking. For example, blinking shelf tags can help employees quickly locate items for online orders, reducing the time spent searching for products and ensuring that orders are fulfilled promptly.
As the holiday shopping season continues to evolve, trading partners must adapt their inventory strategies to meet the demands of a diverse, multicultural consumer base. By leveraging data-driven merchandising, embracing new technologies and addressing on-shelf availability challenges, retailers ensure they are well-prepared for the peak season. The result is a seamless shopping experience for consumers and a successful holiday season for retailers and brands.
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