The Charles Dickens’ novel, A Christmas Carol, Ebenezer Scrooge gets a visit from the ghosts of Christmas past, present and future. They all take their turns trying to melt the dark heart of Scrooge. Eventually Scrooge wakes up with a whole new outlook on Christmas. So what does this story have to do with retailers and their Christmas? A recent story in the Wall Street Journal points out that retailers, while trying to resist it, have looked to employ deep discounting to flush out inventories and to capture customers this holiday season. Click here for article.
Retailers, as we have stated on this blog, have been scrambling to keep up with customer demands and the shifting sands of retail. We witnessed this even more so this year during the beginning of the holiday season – Black Friday. Retailers were scrambling to allure customers to both their brick and mortar stores as well as their eCommerce assets. Clearly they are continuing to scramble to figure out what is the best combination of discounting and holding the line. The challenge for retailers is that the ghosts of retail past are exactly that…the past.
Consumers have become accustom, if not expect to see discounting take place early and often. Why would the major gift giving season of the December change this mentality? If everyone is discounting…is there really any discount? So what are retailers to do?
- Consumers expect discounts…so you will have to provide them. But can retailers be savvier with them? Follow the Jet.com model – provide discounts but some caveats such as non-returnable. Rather than simply discounting, bundle items. The article points out discounting done at Ralph Lauren on a scarf, what about bundling it with gloves. Discount the bundle but look to capture a higher amount of revenue.
- Lean on your supply chain network for greater nimbleness – the ghosts of Christmas past never had to deal with such new fulfillment models as deliver to home, order on line and deliver to store…add these to the traditional brick and mortar distribution methods. Underlying all these new models are retailers’ supply chains. The ability for retailers to position inventory, respond to demand and fulfill more effectively is vital. As consumers expect more from their experience, retailers need to keep pace. The supply chain is the best way of doing so.
No one wants a visit from ghosts, let alone during Christmas. Retailers are seeing ghosts themselves. They are reacting to consumers’ demands and leaning on discounting to draw them into their stores. The ghost of Christmas past when they had control of their pricing is exactly that, the past. Focus on the future, the game is constantly changing. Nimble retailers, who leverage their supply chain network will have the opportunity stay ahead of their competitors.
You better watch out
You better not cry
You better not pout
I’m telling you why
Santa Claus is coming to town
Santa Claus is coming to town
Santa Claus is coming to town
Yup, the big guy dressed in red is getting ready to make his annual appearance. Bringing all the girls and boys, as well as some lucky moms and dads, presents and gifts for their Christmas trees. And all he expects in return is maybe some milk & cookies or even a carrot for his reindeer. But did we ever expect Santa Claus to provide us with some simple lessons that are applicable to our supply chains?
He has the global fulfillment thing down…
- He makes and list and checks it twice. Sage advice about how to handle all the data and information that extended supply chains produce and leverage on a weekly and daily basis. Many of the conversations I have had with supply chain practitioners and service providers comes back to getting a cleaner and more complete view of all the data that their supply chain produces on a weekly and daily basis. Look at what Santa is able to do – put all those wish lists in one aggregate list. He does check it twice to ensure consistency and correct for errors. Also good advice. Since we all know what garbage in gets us…companies like Avaya have worked with solution provider Kinaxis to create a more clear and single view of their distributor network and the data that is the connecting glue. One clean and unified view! Make sure to clear out that garbage before it gets into the system – or on Santa’s list.
- Gonna find out who’s naughty or nice. Yup Santa also looks at his data to segment his customers. Granted he has two simple categories. Our supply chains’ customers and suppliers are also segmented and they do not fall into simple “naughty” or “nice.” But maybe the simplicity of how Santa does his segmentation should drive our own. The key is identify what key variables matter to our businesses and supply chains. Determine which variables you need to identify and focus on to create the most effective segmentation. Santa might not explicitly state it, but his segmentation like our supply chains leverages a greater number of predictive analytics to drive better clarity. For example service providers such as Infosys work with a large office products manufacturer to better understand customer segments to establish service level engagements. Santa and our supply chains need to lean on tools and service providers that can help identify the variables to effectively and efficiently segment our target audience.
- He sees you when you’re sleeping …He knows when you’re awake. Maybe Santa has a secret deal with the NSA to eves drop on our calls…okay I joke…I think…but Santa makes sure he is aware of his consumers’ characteristics and where they are in the gift receiving pipeline. If we are awake he wouldn’t deliver our presents! Your supply chain needs to be sensitive to customers and where they are in the buying cycle. Think of how companies such as Steelwedge and Salesforce have worked together to help their customers better with the S&OP process by tying in the data coming from the Salesforce CRM to get a clearer view of where customers are with regards to the transactional pipeline. It is not simply about identifying our sleeping patterns, but understanding where we stand in terms of the buying cycle what our demand is and might be – are we in a position to have our gifts delivered by Santa?
- Santa’s a busy man he has no time to play…He’s got millions of stockings to fill on Christmas day. Wow, talk about solving the delivery to the home enigma. Santa and his reindeer are able to criss cross the global, in one night, and accurately deliver a vast number of packages, of different shapes and sizes, to millions of locations! Unbelievable. Santa is also ahead of the curve as he has been able to provide home delivery since day 1. Now I am not saying we can all find a Rudolfo with his nose so bright to guide our fulfillment and logistics departments, but there is something to say about how integrated Santa’s workshop is with his distribution center and his logistics. He cannot be expected to demonstrate this level of efficiency is he stocks the wrong goods, doesn’t properly load them to his sleigh and then takes poor routes to his delivery locations. Clearly the value for supply chains to integrate the warehousing and transportation is what Santa’s efficiencies demonstrate. Vendors like Oracle with their integrated WMS/TMS and now yard management (that is like what Santa does with regards to managing the elves and ensuring their are efficient) or JDA with their TMS integrated with the WMS acquired in the RedPrairie merger, are prime examples of solutions that even Santa would appreciate to ensure seamless optimization between the workshop and the big red sleigh – ensure the inventory that he has to haul around the world on the night of December 24th is properly slotted and routed.
The one aspect Santa does not seem to have worry too much about, is with returns. He does not seem to have a good reverse logistics or after sales service department. But since he has gotten so much of the upfront part right he does have to worry about delivering the wrong items! Alas our supply chains do not have that luxury, and our supply chains do need to take into account reverse logistics, returns, maintenance and other after sales issues. But thanks to Santa Claus we have something to aspire to with regards to our supply chains.
Merry Christmas! Happy Holidays!
Happy holidays and Merry Christmas to all. May the end of 2011 be full of joy and happiness and all the best wishes for a wonderful 2012
It is a bit unnerving to hear Christmas songs, see retailers with Christmas promotions and stores carrying Christmas merchandise! What is going on? Basically it is the fact retailers and CPG companies are trying to maximize the seasonality upswing that is Christmas. Of course that is not something we all want to be hit over the head with. But what about the supply chains? This could have another impact here as well. Retailers and the associated members of that supply chain always gear up for “Black Friday” in the United States, the Friday where retailers hope to generate enough sales to put them in the black. Yet could these earlier rounds of promotions throw off some of these historical demand patterns? Will consumers already feel some effects of being over promoted to once that day comes? What about the strategy of some retailers to start greater lay away strategies for Xmas – see Walmart.
Companies like Walmart are looking to stretch ou the strain on their inventory but hoping some consumes come in sooner to take inventory if they can hold off on the cash out (I am also sure that Walmart is happy to collect the extra $5 for the service as well as collect any interest rates that I am sure are in the fine print). I am certain that the other retailers are also interested in smoothing out the lumpiness of the season. Yet there could be an unintended consequence of driving consumers away due to promotional overload and fatigue. Maybe we should keep Christmas selling season to after Thanksgiving…it already feels too long.