Stuart Greenfield looks at the trends that will shape retail supply chain trends in 2023.
Big sheds are a big expense for retailers and brands, whether rented or owned – a major reason we’re likely to see a shift to outsourced warehousing in 2023. Retailers will be keen to reduce operating costs and strengthen cash flow, as they adjust operating models to accommodate lower retail selling prices that appeal to squeezed consumers.
Warehouses weigh heavily on balance sheets and outsourcing to utilise shared, third-party space can deliver immediate and significant savings, without negatively affecting stock inventory and supply chain management. It’s because of this that ASCG research found warehousing ranks as the top priority for retailers looking to reduce costs to protect margins in 2023.
Growing volumes of customer returns
ASCG’s research of 1,000 consumers shows the cost-of-living crisis is causing 29% of consumers to trade down on non-food shopping, with around six-in-ten planning to spend less each month in 2023 compared to their typical levels of spend.
Understandably, consumers are looking for better value, which is likely to lead to a higher number of items being returned. Online shoppers will be trying different items and putting products they are less familiar with in their baskets. They’ll be experimenting, meaning they’ll add more alternatives to their orders as they’re unsure about what they’re buying. Similarly, some trade-down purchases won’t meet their usual expectations. The result will be a higher percentage of goods going back into retailers and brands, with returns processes needing to be optimised to avoid costly margin dilution.
Faster customer returns and refunds
Retailers and brands will focus on making the whole process of customer returns speedier and slicker so they can quickly refund customers. Consumers are much more likely to shop and respond with a retailer following a return if they get their money back promptly.
According to ASCG’s research, half (51%) of consumers will spend between £50 to £200 less each month next year on non-food shopping, as they face higher energy bills and the impacts of inflation. Every hard-fought sale will become even more valuable for retailers, and quick returns and refund processes could help to lock in sales by ensuring that an item being sent back doesn’t mark the end of a shopper’s transaction.
Decentralised European-wide fulfilment
Although global supply chains have been impacted by the war in Ukraine, they have started to stabilise. Retailers and brands are experiencing a greater degree of reliability and are having to invest less time and resources in reacting to disruption. This is creating appetite and opportunity for teams to take a step back and rethink their approach to Brexit.
The global impacts of the pandemic meant that many supply chain management strategies took a needs-must approach to handle Brexit. Companies now have the bandwidth to review this, which is driving demand for bonded warehouses throughout the EU and a knock-on trend of decentralised fulfilment across Europe. This is likely to accelerate in 2023 as retailers aim to further reduce costs to give them the flexibility to adjust retail selling prices.
A bonded warehouse can remove the complexities of cross-border trading, enabling retailers to better manage the payment of duties. It can also provide a cost-effective storage solution for goods that are located closer to shoppers to allow more customer-friendly options for final-mile delivery. As retailers utilise bonded warehouses, they also see the advantage of processing order fulfilment from these locations.
Honing in on in-country freight
Rising and record shipping prices during the past few years have been a big priority for retailers and brands. Attention has been focused on finding efficiencies to mitigate costs, whether that’s shipping container optimisation or smarter route planning. International freight prices are showing a downward trend, returning to pre-pandemic levels. This is already starting to see retailers hone in on the costs of in-country transportation.
Route planning will come under the spotlight in 2023 as retailers aim to minimise mileage. However, this is just one part of the transportation equation. We can also expect to see the growing emphasis being placed on cube optimisation of in-country freight. Efficiently and effectively utilising every square foot of transportation space can yield time and cost savings that complement the smartest route planning. Accurate, real-time data will be key to this, with it creating visibility for finding space-saving solutions.
Software and data overhauls
Two key factors will see retailers and brands overhauling supply chain management software in 2023, and the data they rely on to forecast and manage stock inventories. The first is at-capacity warehouses full of slow-moving stock and the second is product diversification.
ASCG’s research highlights that around a third (31%) of retailers plan to diversify their product offer over the next few years to increase reach and sales amongst shoppers. Introducing new types of products will act as a catalyst for retailers to revisit supply chain processes and software, whilst full warehouses and the risk of stock depreciation will encourage retailers to sharpen their focus on data. They’ll question what supply chain data they have access to, its accuracy and where there are gaps.
Our research shows most retailers are increasingly taking a medium-term view of how the cost-of-living crisis is affecting sales, with many thinking about making supply chain changes over the next two-to-three years. There’s more inclination to replace ineffective legacy supply chain software in favour of more bespoke solutions that will deliver data that yields sustained performance and productivity benefits.
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