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12/13/2021

Three ways DTC brands can combat holiday supply disruptions

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supply chain concept
DTC brands need to counter supply chain disruption.

This year’s holiday outlook is merry and bright, with sales anticipated to rise at least 7%, according to a recent report from Bain and Deloitte.

However, a perfect storm of labor shortages, port congestion and unprecedented consumer demand is creating a dilemma for direct-to-consumer brands. As of early November, there were more than 70 container ships anchored off the coast California, whereas under normal circumstances, there are usually only one or two.

Although President Biden recently mandated that the Port of Los Angeles remain open twenty-four hours per day, experts predict that the supply chain crisis will linger until at least the first quarter of 2022, leading to a shortage of available products, along with high prices.

[Read more: Biden meets with CEOs about supply chain issues]

The good news is that there are several strategies direct-to-consumer brands can implement to help combat the supply chain conundrum while still experiencing a successful holiday season.

Effective advertising amid product shortages
Despite widespread shortages, maintaining a consistent advertising spend is essential, but direct-to-consumer brands should avoid pointing customers to items that are out of stock.

For example, a brand with 600 items in its Amazon Seller account may have 10 items that generate most of their revenue. Let’s say one of the top-selling items is a unique whiskey glass featuring a design of the Grand Canyon. If this brand finds that it cannot get enough of the product into their Seller Account to meet customer demand, it will need to figure out how to allocate the limited stock it does have. 

When dealing with inventory shortages, the whiskey glass manufacturer may want to consider:

  • Pointing shoppers to other items that are in stock. This will help the brand avoid going out of stock on high-demand products, simply by encouraging shoppers to buy other items instead. 
  • Using responsive programmatic ads and over-the-top (OTT). By leveraging responsive e-commerce ads, which rotate up to 20 products in the creative execution, brands can spread traffic to various product detail pages, thus keeping the flywheel going. Amazon Demand-Side Platform (DSP) is a way for brands to programmatically reach relevant audiences, using highly targeted display ads, both on and off Amazon.
  • Slowing sales of high-demand items by increasing the sale price. Although this may impact conversion rate, it will not harm traffic to the brand’s store, which is crucial for keeping search rankings intact.

Cross-platform strategies for the holidays and beyond
Creating a cohesive cross-platform strategy is important under normal circumstances, but imperative during the holiday season.

By differentiating assortment across platforms, brands can more effectively allocate their limited inventory. For example, a hot cocoa manufacturer might offer Target an exclusive line of organic hot chocolate for a holiday promotion, while offering Walmart an inexpensive line of its traditional hot chocolate.

It’s also important for brands to consider cross-platform fulfillment strategies and how they’ll get their products from the warehouse to the customer. All retailers have their own ordering patterns and brands must ensure these are sustainable for long-term success. For example, retailers such as Costco tend to make larger, less frequent buys; while Amazon is well-known for its just-in-time inventory model.

Nimble brands will thrive this holiday season
Balancing supply chain challenges and holiday sales strategies is a tricky proposition. However, if brands can develop effective advertising, cross-platform and hybrid selling strategies while tailoring their promotions to their existing inventory, they can become more resilient to the challenges. And brands that embrace these unique opportunities will not only set themselves up for success during the holiday season, but well beyond that as well.

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