How disruptions will impact the 2023 holiday shopping season

In the world of retail, they say Christmas starts in July, but it looks as though the summer heat has brought a flurry of issues into fall that could send this year’s holiday shopping season off the rails once again.

Supply chains haven’t been “normal” for some time now, and the latest wave of labor challenges, shipping delays, and economic uncertainty have retailers exercising caution and bracing for a blizzard of backlogs.

It’s not all doom and gloom, however. By identifying key trends and solutions now, just on the cusp of peak shopping season, companies can be better equipped to navigate disruption and ultimately shape more resilient and advanced supply chains.

Here’s what retailers need to know for the 2023 holiday season and beyond.

’Tis the season for disruption

We continue to see our new normal of supply chain disruption in 2023, from the United Auto Workers strike and the narrowly averted UPS strike to the severe drought in the Panama Canal. There’s even been a cyberattack on Clorox, hindering the company’s ability to make its popular cleaning products.

In particular, ongoing labor issues underscore the importance of talent in retail supply chains and how disruption of any kind will wreak havoc on operations. There's simply no supply chain success without talent, which means it’s essential we train and upskill new generations of logistics and manufacturing professionals, ensuring their ability to use more advanced technology and tools in today's digital world.

The drought in the Panama Canal, on the other hand, has served as a fierce reminder of the devastating consequences of climate change, with water levels hitting historic lows and vessel wait times increasing more than 40% in August.

Back in the spring, early signs of a drought flew under the radar and went largely unnoticed — and the world was not prepared. The combination of these issues will impact businesses and consumers alike for months to come.

It’s beginning to look a lot like ... product shortages.

Anytime there’s a major geopolitical event, the economy dips, or a disruption occurs, consumer confidence takes an unfortunate hit. After showing signs of improvement in July, consumer confidence fell in August, thanks to factors such as rising interest rates and a cooling labor market.

With continued supply chain disruptions poised to impact brand reputation and consumer sentiment, retailers must proceed with caution and prepare their inventories accordingly. Panic buying and irrational shopping behaviors lead to the bullwhip effect, showing how fluctuations, big or small, have on retail supply chains.

Unfortunately, product shortages aren’t just a ‘covid-era’ issue. The continued conflict between Russia and Ukraine is impacting the price and availability of foods like corn and wheat, and as restrictions tighten in the Panama Canal, everything from clothes, toys, and electronics could be delayed in the weeks leading up to Christmas.

Make a list, check it twice

To strengthen supply chains and mitigate the impact of disruption ahead of the holidays, there are a few actions retailers must check off their to-do lists. First, they should implement scenario planning to measure risk and adopt technologies in automation, IoT and AI to create efficiencies. Technology-powered solutions will be key to maintaining reliability and creating the agile environment needed to be successful.

With improved tracking and forecasting, retailers can proactively prepare their assortment for unplanned demand. Too many retailers lack advanced continuity plans and the tools needed to stave off the impact of disruption — overall, it will be critical to keep a close eye on inventory networks and prioritize risk management strategies to keep operations running smoothly this year.

Next, retailers should explore a modified version of just-in-time, where only highly vulnerable items are stockpiled, helping to diminish the fallout of disruption. Consumers are still looking for high variety, rapid delivery, and reasonable costs.

Additionally, it will be important to adopt a hybrid retail approach, optimizing physical, digital, and virtual channels to service customers in today's unpredictable market and support the next-generation retail experience. Consumers no longer see a distinct line between online and offline shopping experiences.

According to McKinsey & Company, 75% of consumers want a seamless omnichannel experience. To be competitive this year, retail supply chains must offer unparalleled levels of visibility and coordination.

The busy holiday shopping season is quickly approaching, and businesses of all types and sizes need to plan now to meet customer demands and diminish looming risks.