Supporting retail businesses through an overstocking crisis

9 十一月 2022

As Europe continues to battle through an economic crisis, it’s safe to say that all businesses and members of society are feeling the impact. From high levels of inflation affecting everyday costs to facing a future of growing uncertainty, no-one has managed to go the past year unscathed.

However, the retail industry is one of those to have been dealt a particularly raw hand during such turbulent financial times.

To start with, the Covid-19 pandemic saw e-commerce boom across Europe, with revenue rising by a significant 20% in 2020 according to Statista and a further 13% in 2021 (Ecommerce Europe).

That left the retail industry racing to keep up with astronomical surges in demand and piled a lot of pressure on global logistics. So when supply chain issues brought about by pandemic restrictions, manufacturing delays, port congestions, natural disasters and more occurred, retailers and manufacturers were left struggling.

Consumer spending shift

When pandemic restrictions eased and the world started to open up, suddenly consumers were shifting their spending habits to the travel and leisure industries as part of newfound freedom.

And now we find ourselves faced with record levels of inflation (10.9% in September 2022, as per Statista), consumers are once again changing their behaviour by investing in discretionary, more essential products rather than non-discretionary items such as furniture and home appliances.

Online, high-end furniture retailer Made.com, for example, achieved sales figures of £315m in 2020 and £110m in the first quarter of 2021, but now the company is on the brink of collapse as demand falls drastically (BBC).

Within discretionary retail, consumers are continuing to spend on the likes of apparel but are switching to cheaper brands in order to keep disposable income as high as possible in the face of economic uncertainty.

Online clothing retailer Boohoo reported a massive 58% drop in core earnings in the first half of 2022 according to Reuters. Revenue was also down 10% thanks to dwindling consumer demand, a significant increase in product returns and increased delivery times for products sold to overseas markets.

Supply exceeding demand across Europe

Unfortunately, this drop in demand hasn’t been mirrored by supply. So what’s now very apparent across Europe and the world is retailers having too many consumer goods in stock that aren’t moving quickly enough. Market Scale reports that some retailers are overstocked by as much as 30%, which has forced them to slash prices or increase stock at liquidators to keep the product cycle moving with the seasons.

In the world of logistics, this means warehouses are full of inventory and European terminals are piling up containers full of retail stock – potentially resulting in high Detention and Demurrage costs and adding disruption to companies’ supply chains. To put it simply, a great deal of retail companies are now faced with inventory traffic jams. So where does a logistics service provider come in? While it’s difficult to reverse overstocking issues and find immediate solutions from a supply chain perspective, there are things companies can do to soften the blow.

Containers at ports accumulating D&D costs can be moved to yard locations to make them more cost-effective, or indeed emptied at off-dock locations to give companies more visibility on the commodities and what the possible next steps are. Plus, returning equipment could reduce costs and would help to keep the global supply chain moving.

Flexible solutions are the key

Resilience and agility are fundamental within inventory management, which is why supply chain management solutions that allow you to speed up or slow down your logistics operations are all-important for getting the right levels of stock to the right locations at the right time.

One such tool that lets you manage your cargo flow in line with demand patterns is Maersk’s Flex Hub, which has been in frequent use for businesses in 2022 during such heavy fluctuations in consumer demand.

With the flexibility to store cargo at hubs close to key markets or indeed at origin, companies have control over when the time is right to deliver the order. This provides as much as a 70% reduction in order-to-delivery lead times, allows you to adapt to ever-changing market situations and prioritise cargo accordingly.

Add this to gaining real-time visibility over inventory in hubs and a potential cost reduction of 30% over traditional storage, and it becomes a very viable solution for the current retail market circumstances.

The situation remains very unpredictable heading in to 2023, and preparing supply chains for every eventuality remains the most resilient course of action. However, market volatility is expected to continue in the new year.

We’ve seen the retail industry face a number of challenges over the past few years, and the market situation will continue to pose tests for businesses in 2023. While middle market retailers face pressure, discounters and high private label retailers are viewing the current situation as an opportunity to gain the market share. With this in mind, we expect to see certain segments of retail move progressively in the coming months, and others to still be left in struggling situations. It’s very important to closely connect logistics and supply chain teams with your merchandising to achieve the best possible result for consumers going into the new year.

Johanna Hainz,

Global Vertical Head, Retail

Accurate data is a key priority when it comes to managing inventory in retail, as slight inaccuracies caused by shipment variances, misplaced products, returns and a multitude of other factors can cause overstocking issues.

As we move more and more into a digitalised future, the world of retail stock management will be shaped around data and fully connected to an integrated supply chain.

Solutions will not only offer transit and storage visibility, but full visibility end-to-end to gauge inventory levels in containers, in warehouses and at the final destination.

Maersk is already building visibility-focused solutions into its integrated logistics operations for customers, giving businesses the tools they need to avoid future inventory crisis and manage market fluctuations effectively.

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