Black Fridays, Cyber Mondays, grey markets and blue supply chains - November 2015

It is that time of year again when retailers are heavily discounting their wares in a bid to get us buying ahead of the festive season. Whilst events such as Black Friday and Cyber Monday have led to an overall increase in consumer spending during this period, it also means people are spending what they have sooner and over a more concentrated sales period.

From a demand planning point of view, there is a risk that this just means a pull forward of demand rather any incremental volume. This is especially the case for those don’t necessarily experience seasonal demand. Nowadays it seems everyone has a Black Friday sales promotion, including businesses that you wouldn’t normally associate with the event such as trade supplies distributors. It is hard to see consumers spending more on paint in the year due to a Black Friday promotion, but they will do all their spending in November if it means they get a better deal. Businesses need to be honest during their demand review processes to ensure that they don’t end up with a surplus of inventories because they’ve not accurately planned for this shift in demand.

The impacts aren’t just limited to retailers. Manufacturers and producers also need to be aware of how their products are being pushed by downstream channels such as wholesalers and retailers this holiday season. There is a risk that any excess inventory will find its way onto the grey market and this could dampen demand in the new year. Take the example of our favourite festive fizz, with champagne and sparkling wines being on big promotions in the lead up to Christmas and New Year’s Eve festivities. But what happens if this stock doesn’t find its way into the end consumers glass? Why would bars and restaurants purchase at regular prices when they can get a nice bottle of bubbly from the corner store for a discounted price? Savvy buyers in retail and distribution also use this fact when negotiating with their suppliers.

It seems these events such as Black Friday and Cyber Monday are here for the foreseeable future. As such, businesses and their supply chains need to properly plan both in the lead up to these events, as well as the aftermath in order to ensure they aren’t left feeling blue in the new year.

 

– Duncan Boyd, Senior Consultant, Crimson & Co.

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