Tag: supply chain

  • 2021 Cost-Push Inflationary Trends Ran Rampant, Impacting Holiday Discounts

    2021 Cost-Push Inflationary Trends Ran Rampant, Impacting Holiday Discounts

    Business has been anything but usual this holiday season, especially in the digital retail world. The holiday hustle and bustle historically seen in stores was once again occurring online, but not as anticipated given the current strength of consumer demand and the reemergence of COVID-19 limiting in-store traffic. While ‘Cyber Weekend’, Thanksgiving through Cyber Monday, continues to further its importance to retailers and brands, this year’s performance fell short of expectation due to product shortages and earlier promotions that pulled forward holiday demand.

    Holiday promotions were seen beginning as early as October in order to compete with 2020 Prime Day sales, but discounting, pricing and availability took an opposite direction from usual. This shift influenced our team to get a jump start on our 2021 digital holiday analysis to assess how drastic the changes were versus 2020 activity, and to understand how much of this change has been influenced by inflationary pressures and product scarcity.

    Scarcity Becomes a Reality

    Our initial analysis started by reviewing year-over-year product availability and pricing changes from January through September 2021, leading up to the holiday season, as detailed in our 2021 Cyber Weekend Preliminary Insights blog. We reviewed popular holiday categories like apparel, electronics, and toys, to have a broad sense of notable trends seen consistently throughout various, applicable marketplaces. What we found was a consistent decline in product availability over the last six months compared to last year, alongside an increase in prices.

    Although retailers significantly improved stock availability in November and early December 2021, even digital commerce giants like Amazon and Target were challenged to maintain consistent product availability on their website as seen below. While small in magnitude, there is also a declining trend occurring again closer toward the end of our analysis period, post Cyber Weekend, across all websites included in our analysis.

    Inventory Availability 2021 Holidays
    Source: Commerce Intelligence – Product Availability insights for Home & Garden, Jewelry & Watches, Clothing & Shoes, Bed N Bath, Lighting & Ceiling Fans categories

    Greater Discounts, Higher Prices?

    With inflation at a thirty-nine year high, retailers and manufacturers have realized they can command higher prices without impacting demand as consumers have shown their willingness to pay the price, especially when threatened by product scarcity. Our assessment is that while some products and categories have responded drastically, manufacturers’ suggested retail prices (MSRPs) have increased nearly seven percent on average from January to December 2021. MSRP adjustments are not taken lightly either, as this is an indication increased prices will be part of a longer-term shift in product strategy.

    2021 MoM Retail Inflation Tracker
    Source: Commerce Intelligence – Pricing Insights for Bed & Bath, Electronics, Furniture, Healthy & Beauty, and Fashion categories on Amazon.com & Target.com each month in 2021 comparing price increases from January 2021 base

    Our 2021 pre-Cyber Weekend analysis reviewed MSRP changes for select categories (Bed & Bath, Electronics, Furniture, Healthy & Beauty, and Fashion) on Amazon and Target.com, and found around forty-eight percent of products on Amazon and thirty-five percent of products on Target.com have increased their MSRPs year-over-year, but kept pre-holiday discount percentages the same.

    Looking more specifically as to what year-over-year changes occurred on Black Friday in 2021, we observed MSRPs increasing across the board for all categories at various magnitudes. This indicates why 2021 discounts appeared to be greater than or equivalent to 2020 for many categories, when in reality consumers paid a higher price than they would have in 2020 for the same items.

    2021 Black Friday MSRP Increases
    Source: Commerce Intelligence – MSRP Pricing Insights for Bed & Bath, Electronics, Furniture, Healthy & Beauty, and Fashion categories on Black Friday November 27th, 2021, versus average MSRP pricing for the same SKU count from November 20-26th 2021

    On Amazon.com, categories like health & beauty have already increase MSRPs by a much greater percentage and magnitude versus Target.com leading up to and during Black Friday 2021, while other categories like furniture have increased MSRPs evenly on average across both retail websites. The below chart cites a few specific examples of year-over-year SKU-level MSRP, promotional price, and discount changes within found within the electronics, furniture, fashion, and health & beauty categories.

    Black Friday 2021 vs. 2020 SKU-level Price Changes
    Source: Commerce Intelligence – MSRP Pricing Insights for Bed & Bath, Electronics, Furniture, Healthy & Beauty, and Fashion categories on Black Friday November 27th, 2021, versus average MSRP pricing for the same SKUs on Black Friday November 26th, 2020.

    Fewer, but Deeper Discounts

    From October through early November 2021, fewer products were discounted compared to this same period in 2020, and the few that were saw much deeper discounts apart from the home improvement category. The most extreme example we saw in discounts offered was within furniture where only three percent of SKUs were on discount in 2021 compared to twenty-six percent in 2020. Interestingly, the magnitude of discount was also higher pre-Cyber Weekend 2021 versus 2020, but this trend was not exclusive to furniture and was also seen within electronics, health & beauty, and home improvement.

    Pre-Black Friday 2021 and 2020 SKUs on Discount and Magnitude
    Source: Commerce Intelligence – Pricing Insights for Bed & Bath, Electronics, Furniture, Healthy & Beauty, and Fashion categories on Amazon.com & Target.com Pre-Black Friday average selling price during November 20-26th 2021 versus average selling price from November 13-19th 2021 compared to Pre-Black Friday average selling price during November 19-25th 2020 versus average selling price from November 12-18th, 2020.

    Within the furniture category, the subcategories offering the greatest number of SKUs with price decreases on Black Friday 2021 were rugs by a wide margin, followed by cabinets, bed and bath, and entertainment units, but the magnitude of discounts offered were all under twenty percent.

    2021 Black Friday Furniture Category Price Decreases
    Source: Commerce Intelligence – Pricing Insights for Bed & Bath, Electronics, Furniture, Healthy & Beauty, and Fashion categories on Amazon.com and Target.com on Black Friday November 27th, 2021, versus average pricing for the same SKUs from Pre-Black Friday November 20-26th 2021 and Black Friday November 26th, 2020, versus average pricing for the same SKUs from Pre-Black Friday November 19th-25th 2020

    Accounting for this phenomenon could have been retailers’ attempts to clear inventory for SKUs which hadn’t sold even during the period of severe supply chain shortages. With more products selling at higher prices this year, retailers were also able to use fewer SKUs with greater discounts to attract buyer in hopes of filling their digital baskets with more full-priced goods, helping to protect margins heading in to Cyber Weekend. Scarcity threats also encouraged consumers to buy early, even when not on promotion, to ensure they would have gifts in time for the holidays.

    The same trends seen pre-Cyber Weekend 2021 were also seen on Black Friday with a year-over-year decrease in the percentage of SKUs offered on discount versus 2020, and steeper price reductions for the discounted products which can also be attributed to the increase in MSRPs.

    Black Friday 2021 and 2020 SKUs on Discount and Magnitude
    Source: Commerce Intelligence – Pricing Insights for Bed & Bath, Electronics, Furniture, Healthy & Beauty, and Fashion categories on Amazon.com and Target.com on Black Friday November 27th, 2021, versus average pricing for the same SKUs from Pre-Black Friday November 20-26th 2021 and Black Friday November 26th, 2020, versus average pricing for the same SKUs from Pre-Black Friday November 19th-25th 2020

    2021 Black Friday Price Increases?

    We all know Black Friday is all about price reductions, discounts and deals and so it’s rare to see actual price increases, yet for Black Friday 2021, trends ran counter to this. We observed price increases across all categories for around thirteen to nineteen percent of SKUs, with an average price increase of around fifteen percent in 2021 versus an average of only two percent in 2020.

    SKUs with Price Increases Black Friday 2021 and 2020
    Source: Commerce Intelligence – Pricing Insights for Bed & Bath, Electronics, Furniture, Healthy & Beauty, and Fashion categories on Amazon.com and Target.com on Black Friday November 27th, 2021, versus pricing for the same SKUs from Pre-Black Friday November 20-26th 2021 and Black Friday November 26th, 2020, versus average pricing for the same SKUs from Pre-Black Friday November 19th-25th 2020

    At an account level, we noticed a few interesting differences happening on Black Friday 2021 versus 2020 regarding category price changes. On Target.com, almost ninety percent of the bed and bath SKUs analyzed had a price change on Black Friday in 2021 versus 2020 with eighty-two percent presenting a higher price year-over-year versus only around seven percent showing a decrease, where on Amazon nearly forty-four percent of bed and bath SKUs showed an increase in price and around thirty-eight percent showed a decrease. Except for the health and beauty category on Target.com, more than half of the SKUs in each category saw a price increase on Black Friday versus a price decrease.

    2021 YoY Price Changes on Black Friday
    Source: Commerce Intelligence – Pricing Insights for Bed & Bath, Electronics, Furniture, Healthy & Beauty, and Fashion categories on Amazon.com and Target.com on Black Friday November 27th, 2021, versus average pricing for the same SKUs on Black Friday November 26th, 2020.

    The magnitude of year-over-year price changes seen on Black Friday 2021 was significant across all categories, but the magnitude of price increases found on Amazon.com within the health and beauty category outpaced the rest by far. We reviewed three hundred and sixty-five SKUs on Amazon.com within the health & beauty category and saw almost eighty-three percent of them had a price change with around thirty-one percent decreasing prices and around fifty-two percent increasing prices. This means that within the health & beauty category on Amazon.com, more than fifty percent of the SKUs tracked were sold at a one hundred and seventy-six percent higher price on average during Black Friday 2021 versus 2020.

    Magnitude of Black Friday 2021 Price Increases
    Source: Commerce Intelligence – Pricing Insights for Bed & Bath, Electronics, Furniture, Healthy & Beauty, and Fashion categories on Amazon.com and Target.com on Black Friday November 27th, 2021, versus average pricing for the same SKUs on Black Friday November 26th, 2020.

    The subcategories offering the greatest number of SKUs with price increases on Black Friday 2021 were cameras, followed by men’s fragrances, laptops, and desktops & accessories, but the magnitude of discounts offered were all under ten percent.

    2021 Subcategories with Price Increases during Black Friday
    Source: Commerce Intelligence – Pricing Insights for Bed & Bath, Electronics, Furniture, Healthy & Beauty, and Fashion categories on Amazon.com and Target.com on Black Friday November 27th, 2021, versus pricing for the same SKUs from Pre-Black Friday November 20-26th 2021 and Black Friday November 26th, 2020, versus average pricing for the same SKUs from Pre-Black Friday November 19th-25th 2020

    The Aftermath Post-2021 Cyber Weekend

    Extending this analysis beyond the holiday weekend, we analyzed price change activity from December third through the ninth across the top US retailers (chart below) and found that price decreases have been very minimal, comparatively speaking. Though there was a spike in number of price decreases from December 8th to the 9th, the percentage of SKUs with price decreases was still very low (less than three percent). We anticipate this trend will continue into 2022.

    SKUs with Price Decrease Post Cyber Weekend 2021
    Source: Commerce Intelligence – Pricing insights for Home & Garden, Jewelry & Watches, Clothing & Shoes, Bed N Bath, Lighting & Ceiling Fans categories

    A Sign of Things to Come

    A confluence of inflationary trends, product shortages and consumer liquidity have driven many marketplace changes to occur simultaneously. Government programs in the form of stimulus checks, have put extra money in consumers’ hands, and so they’ve been more willing to spend. That, coupled with the shock in the supply chain, has motivated people to buy far ahead of the 2021 holiday season. Hence, retailers have needed to rely much less on across-the-board discounts. Promotions have been more strategic – we’ve seen deeper discounts over fewer products, likely used to draw consumers in to buy certain items, and once they’re there, customers are buying everything else at a non-discount level. When these factors once again normalize, we could see a return to the “race to the bottom” that has occurred since the financial crisis of 2008-2009, but for once, retailers may be able to maintain some pricing power as the 2021 holiday shopping season played out.

    Even though performance was not as anticipated and holiday sales did not grow as rapidly as they did in 2020, Cyber Monday was still the greatest online shopping day in 2021. Through it all, retailers managed to keep their digital shelves stocked and orders filled in time for the holidays for the most part, running the risk of housing aged inventory if goods didn’t arrive in time. Despite predictions for steep promotions in January 2022, with supply chains still challenged and inflationary pressures still full steam ahead, we don’t anticipate much in the way of enhanced discounts to continue beyond the holidays.

    Access to these types of real-time digital marketplace insights can enable retailers and brands to make strategic decisions like how and when to address inflationary pressures, while also supporting many other day-to-day operations and help drive profitable growth in an intensifying competitive environment. Continue to follow us in the coming weeks for a detailed 2021 year-end review across more retailers and categories. Be sure to reach out to our Retail Analytics experts for access to more details regarding the above analysis.         

  • Manage Your Supply Chain Like a Pro

    Manage Your Supply Chain Like a Pro

    To make faster, seamless deliveries possible, brands need to tighten their supply chain. The pandemic has put a lot of stress on the global supply chain. The supply shock that began in China in February and the demand shock that followed as the global economy shut down uncovered weaknesses in production strategies and supply chains. Temporary trade restrictions and shortages of pharmaceuticals, critical medical supplies, and other products, further added to the problem. 

    As a consequence of all this, brands have to reduce or even eliminate their dependence on sources that are perceived as risky and rethink their use of lean manufacturing strategies that involve minimizing the amount of inventory held in their global supply chains. In the post-pandemic world, the supply chain will take center stage, and managing it efficiently with technical support is going to be what gives one brand an upper hand over the others.

    1. Micro fulfillment is emerging as the need of the hour

    Micro fulfillment
    Emerging Micro Fulfillment

    Retailers are now faced with unprecedented omnichannel fulfillment complexities. Not only do customers expect faster order fulfillment and delivery, but they’re also opting to ‘buy online and pick up in-store (BOPIS)’ or ‘click-and-collect’. Amazon has spent billions of dollars on building its shipping infrastructure, including its existing operating 175+ fulfillment centers across the world and investing nearly $1.5 Bn to build an air hub in the US. Walmart, on the other hand, is relying on its existing footprint across 5000+ US stores to help deliver online orders faster.

    All this is hinting towards micro-fulfillment emerging as a strategy retailers are using to make the fulfillment process more efficient and their supply chain more ready — from receiving an online order to packing it and offering last-mile delivery. This approach will certainly work towards imparting speed to localized, in-store pick-up and combine it with the efficiency of large, automated warehouses. Delivery speed and costs are more important than ever to retain customers and foster brand loyalty. In fact, this will become a big differentiator for grocery e-commerce as the number of people making online grocery purchases has increased drastically the world over and a recent report indicated that in the US, 46% of people use online delivery more now than before the COVID crisis, and 40% use online pickup more.

    2. Use big data to tie-in loose nodes

    The landscape of supply

    Supply chain management is held at the heart of every successful e-commerce company. Supply Chain efficiency always ensures that the right product reaches the right place at the right time. It ensures cost reduction and enhancement of cash utilization. That is why it is important to stay alert and tie-in all loose ends in the supply chain architecture. Big data can come in handy here and it is that quantitative method and structure that can be used to improve decision-making for all activities across the supply chain. While the role of big data is extremely exhaustive and full-pronged across the entire supply chain design, it is important to understand it in theory in a simplified way so that brands can incorporate it to make their backend operations seamless.

    Big data is all about real-time analytics and it primarily does two very important things in making supply chain management easy

    • It expands the dataset for analysis beyond the traditional internal data held on Enterprise Resource Planning (ERP) and supply chain management (SCM) systems. 
    • Big data apply powerful statistical methods to both new and existing data sources. This helps give structure to new insights. This in turn allows forecasting and helps improve supply chain decision-making capabilities for your brand, all the way from the improvement of front-line operations, to strategic choices such as the selection of the right supply chain operating models.

    3. Improve ROI by introducing automation to the mix

    Introducing automation
    Introducing Automation to Improve ROI

    Introducing automation will help take care of tasks usually done manually, such as placing orders, processing changes, data entry, and much more. This frees up time and cuts down on human errors leading to error-free, faster processes. Adidas for instance has been able to reduce 60% of its operational supply chain costs just by switching to end-to-end automation. The largest sportswear manufacturer used automation across 400 factories by bringing in standardized, reusable processes to deliver the best results in a cost-effective way across the supply chain, marketing, finance, retail, and eCommerce. On the supply chain part, with automation, the brand was able to globally attend to supply chain service desk management, vendor onboarding, PO change management, Contract form approval, product data verification, and other such tasks in real-time. This highly successful initiative helped the brand save a lot of time, it earlier lost in manually attending to internal processes and reduced the time to market for Adidas by two-thirds. Moreover, automating systems helps cut down slacks and in return allows the supply chain to stay agile and alert for any unforeseen situations. This readiness further boosts the framework towards growth. 

    4. Eye the future and introduce robotics

    Introduce Robotics
    Robotics is the next big thing in Future

    Autonomous technology is not the next big thing of the future but is the most important thing at present defining the face of the supply chain. Autonomous robots are expected to see strong growth over the next five years. In fact, according to the Boston Consulting Group (BCG), the global robotics market is estimated to reach USD 87 Billion by 2025. It is believed that more than half of this will be allocated for the retail market. In fact, it is not uncommon to find giant beetle-like robots moving around busily with vertical shelves stacked on them inside Amazon’s warehouse in southern New Jersey, US. Tesco for instance uses Radio Frequency Identification (RFID) robots who are used to scan inventories for entire stores in just an hour (as against seven hours for a store employee) with far fewer errors. 

    Even though every word of this sounds too futuristic to be believable, this is the reality for now and retailers are beginning to realize that innovation must set in holistically and extend far beyond just the warehouse or supply chain. Autonomous mobile robots (AMRs) are fast becoming commonplace in warehouses, helping warehouse workers to fulfill orders quickly and efficiently. There are a few different types of robots that companies are considering, and each has its own unique set of advantages. AMRs in totality enable workers to be more productive due to constant collaboration and promote agility, cutting down on slacks and errors. 

    A cohesive and well-defined supply chain where you can leave enough room for tweaks in the future owing to evolving trends will surely help you gain an edge over your competitors through the entire lifecycle of your product. Getting a grip over the supply chain is necessary now as, by 2025, many supply chains may shift from global flows of goods and services to national, regional, and local networks of buyers and suppliers. So, integrating the supply chain keeping an eye on the global and local is the real deal!