The context
In all sectors, retailers are faced with availability issues, linked to the complexity of supplies, which generates turnover losses. They must secure the upstream part of the supply chain to avoid availability problems at the end of the chain. At the same time, while the issue of unsold goods is nothing new, the Covid-19 Pandemic demonstrated the risks of globalised supply chains and buying commitments made too early.
With the end of the Covid-19 restrictions and an inflationary trend, retailers faced a sudden change in demand from the second quarter of 2022, particularly in the U.S.A. The phenomenon will continue in the first half of 2023 as retailers dispose of excess stocks with a series of promotions. This is the case for Kohl’s, whose stocks jumped by 48% in Q2, for brands like Macy’s, Gap and Bed Bath & Beyond.
As we move into 2023, the supply chain is confronted with squaring the circle. It must expand to allow more programmable flows, whilst remaining agile. It must secure the upstream, while allowing for flexibility at the end of the chain. In addition, designs must combine “on demand”, but reduce the high cost of urgent goods sent by air.
If the business of retailers has long been selling, it is now a question of having the right back office support to enable selling more. “Retail is a turnover and a cost structure”, summarises Stéphane Lederlé of Nextail. “You have to invest enough, not only to improve the topline, but also in the back-office operations”. At a time when retailers stated in their 2023 budget that they will not be able to maintain margin levels, the supply chain is becoming a performance lever. “Optimising sourcing to limit unsold goods is a major challenge, as gross margin will suffer the most in Q4 2022 and 2023,” explains Cédric Rossi, Senior Equity Analyst at Bryan Garnier. “It is a question of not producing items that will remain on the shelves”.
Relocate or nearshoring. Depending on the vertical and price positioning, these scenarios are more or less relevant. “The redeployment of production has become necessary in the face of Chinese protectionism, which increases the level of risk,” summarises Arnaud Gangloff, C.E.O.
