The cost of living crisis has made managing Christmas supply chains trickier than ever
It just isn’t Christmas without hunkering down with a mince pie in my hand and watching the Christmas classics. Christmas always seemed too opulent to me on the telly, especially comparing the enormous tree and mountain of presents in Home Alone 2, a personal favourite, to more traditional tales like A Christmas Carol. But they reflect the times. And, while never reaching Home Alone standards, each year the tree and pile of presents in my own home grew slightly larger. A variety of factors drove these times of plenty, not least the complex modern supply chains making it increasingly easier for parents to buy even more gifts at even lower prices.
This year, however, we are seeing signs of a return to a far humbler Christmas. Think less Kevin McCallister and more Tiny Tim. Financial pressures are increasing for many and, in an attempt to take control after years of uncertainty, shoppers are micromanaging their costs. In fact, just last year the average Brit had spent around £642 on Christmas shopping, whereas this year our research found that 13 per cent of shoppers expect to spend a maximum of £80 suggesting a lower average spend this winter.
There are several factors that play into the tightening of purse strings in the UK. But the undeniable consequence is that gifts and toys won’t be flying off – or onto – shelves this year.
Filling big baskets with small prices
There has been increasing pressure put on suppliers and retailers to offer the lowest price this year. And we have seen customers switching from high-ticket electronics items to lower-ticket essentials and treats – in the form of own-brand food items, lower priced clothing and cheaper alternative electronics. The real challenge, however, is predicting how and where these demands will occur, especially for non-food items with long supply chains where holiday season stock is typically set long in advance.
Although these larger scale events like the rising cost of living, Covid and Suez Canal blockages significantly impact both spend and supply chains, issues often start on a much smaller scale and closer to home. Unexpected changes in customer demand can cause equally severe disruptions. Even when there are no critical shortages of goods, certain items can become low in stock due to challenges forecasting and managing inventory.
Demand and social media frenzy
Social media has a huge influence on driving demand. A product can become extremely popular, spread and sell out within seconds. We’ve seen this happen repeatedly in 2023. In fact, some shoppers have spent years on the lookout for viral items, as demonstrated by the ongoing Stanley Tumbler hunt which started in 2022.
While we can’t always predict what items will be in demand, actively designing your supply chain to exhibit resilience and consciously incorporating that design thinking into your ongoing processes are the first steps in managing these challenges. It will put you in a much stronger position to quickly respond through smaller supply chain adaptations as you closely observe consumer spending habits, and monitor social media trends in your given industry.
Supply chains have had to adapt in unprecedented ways. And this Christmas shows us that there are still lessons to be learnt. Businesses must adopt new ways of monitoring and predicting local demand fluctuations on top of the major, global disruptions we have unfortunately grown accustomed to in recent years. And, whether it’s a Christmas of McCallister-sized budgets or not, they need to actively manage their supply chains to ensure customers have the greatest range of choice, whatever their price point may be.
Mat Woodcock is RVP supply chain strategy at Coupa