£1.87 Billion Gamble for UK Retailers This Christmas

British retailers may be taking a big risk and could potentially lose significant sales this year to consumers who are waiting to do last minute Christmas shopping.

Christmas shopping got off to a sluggish start in the UK this year, with sales falling by 0.1% in November compared to October, according to the Office of National Statistics and growing less than expected in the first part of December, according to a survey by the Confederation of British Industry. Most retailers (and industry experts) are now banking on the weekend before Christmas and Christmas Eve to boost their sales figures, as shoppers rush to buy gifts and take advantage of last minute sales. In fact, research by Sainsbury’s Bank reveals that consumers may spend a whopping £1.3 billion in these last few days before Christmas. 

If this prediction comes true, retailers may breathe a sigh of relief, but consumers are taking a big gamble by leaving their Christmas shopping so late. Our recent research, which we conducted with Vanson Bourne and the Centre of Economic and Business Research (Cebr) reveals that almost half of consumers said that a gift they had planned to buy over Christmas was out of stock. With so many of us leaving our shopping to the last minute, we really are gambling on getting the gift we want for our friends and loved ones.

But it’s not just consumers who are gambling. The research also found that UK retailers could lose an estimated £147 million of revenue this Christmas due to missed sales opportunities through out-of-stock products, and an additional £1.7 billion to their competitors, as consumers shop elsewhere for their Christmas gifts. More than half of retailers surveyed (66%) experienced stock-outs of particular products last Christmas, with these retailers not being able to fulfil an average of 21% of their Christmas orders due to a lack of product availability.

Getting to grips with demand planning

Perhaps the most shocking fact was that half of the top causes of stock-outs are entirely within the retailers’ control, meaning that retailers don’t need sacrifice this revenue.

More than half (52%) of retailers put their insufficient supply and stock-outs down to inaccurate demand planning. A failure to have the right products in the right place at the right time was also a contributing factor, with 42% of retailers saying products were in the wrong place at the wrong time – either online or in-store.

Manual, disjointed processes, which are prone to human error, are also key contributors to stock-outs. The survey showed that 40% of retailers manually manage demand planning while one in four (25%) admitted they manually calculate average trends based on current and historical data. A third (34%) admitted that they manually process and submit orders.

The figures from the Cebr demonstrate the cost for retailers if they take a gamble this Christmas when it comes to demand planning. Action must be taken. To  remain competitive, retailers must invest in their inventory management systems and processes to ensure that they have full business information transparency, greater customer insight and better demand planning capabilities.

While no retailer can predict exactly how many consumers will come through their doors this weekend and on Christmas Eve, being able to align sales forecasts with inventory replenishment plans and move stock around different channels depending on demand will help eliminate stock-outs, improve customer satisfaction, whilst ultimately ensuring a retailer can remain competitive during such an important shopping period. What would you rather place your money on?

About the research

The research is based on economic models provided by the Centre for Economics and Business Research (CEBR) and primary research with 100 IT decision makers at UK retail businesses, as well a nationally representative study of 2,000 UK consumers conducted by Vanson Bourne. The findings are available for free download as part of NetSuite’s latest retail report The Christmas Gamble at www.thechristmasgamble.co.uk.

-Andy Lloyd - GM of Commerce Products

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