Supply chain issues threaten holiday sales and profits
The most important season for sales is arriving, but retailers may have back-end problems, including excess inventory, to contend with.
According to “Economics of Holiday Sales,” a new survey of 200 retailers and brands from Creditsafe, 88% of respondents are counting on holiday sales driving up to 40% of their annual sales. But nearly half (46%) either don't have enough cash in their accounts to finance their holiday orders or are unsure if they do.
The study found that 78% of the respondents still have 50% of their stock leftover from the 2022 holiday season. And 23% reported that excess inventory from the 2022 holiday season has resulted in increased maintenance and storage costs, with 22% seeing their their profit margins decline as a result. This will be a problem if this leftover inventory doesn't sell this holiday season, noted Creditsafe.
While 24% of respondents are worried about seeing lower order volumes and average order values for the 2023 holiday season, another 22% are concerned they won't be able to get enough stock from suppliers to meet customer demand. And 22% are worried they will lose out on sales to competitors who offer better prices and deals.
Suppliers pose financial, ethical concerns
More than eight in 10 (83%) respondents have had to diversify their supply chains in the last 12 months because their suppliers had financial issues or went bankrupt. Despite this widespread issue, more than half (56%) don't run credit checks on suppliers to make sure they have strong enough finances to complete holiday orders.
In addition, 52% of respondents said they would immediately cancel contracts with and payments to suppliers who use forced labor and/or child labor. But roughly the same percentage (53%) admitted they don't run compliance checks on suppliers to prevent this from happening.
[Read more: Consumer responses to supply chain disruption are…]
"It's a positive sign that brands are setting ambitious goals for the holiday season," said Matthew Debbage, CEO of the Americas and Asia for Creditsafe. "But achieving these goals doesn't just depend on offering steep discounts and selling higher volumes. Other factors will play a major role, especially since it's been a rough few years with a pandemic, recession, rising inflation, rising interest rates and decline in consumer spending."
Creditsafe surveyed 200 business professionals in the U.S. who work in finance, accounting, operations, procurement, sales/business development, management and executive leadership roles to understand the underlying economics behind how brands and retailers finance their holiday orders, the state of their financial affairs and how their financial management could affect their success in the 2023 holiday season. The survey was fielded in September 2023 and included companies across the following industries: retail, wholesale, consumer electronics, consumer packaged goods, fashion/apparel, manufacturing, automotive, computer hardware, and computer reseller.