Coupa’s research shows supply chain issues will bite again, while cost of living is a top concern for consumers and retailers this holiday season
Supply chain disruptions and the rising cost-of-living are expected to have a severe impact this holiday season, according to new research from Coupa Software, a leader in Business Spend Management (BSM).
The survey conducted among 300 supply chain leaders at retailers in the US and UK, and over 2000+ consumers, found that UK retailers expect up to 30% of revenue losses this holiday season as they prepare for another wave of supply chain disruptions and reduced consumer spending.
Holiday revenues will be hit as retailers expect another wave of supply chain disruptions
Nine out of ten UK retailers (86%) are concerned about hitting holiday sales forecasts this year, with 75% expecting to lose between 5 and 30% of their revenue, translating into billions lost for UK businesses and the economy.
Coupa’s survey shows that 82% of retailers anticipate another wave of supply chain disruptions this holiday season. As businesses prepare for the last leg of 2023, 78% expect to experience product shortages where food (51%), household goods and décor (38%), apparel (32%) and toys (31%) top the list of categories where the UK is set to have its most serious supply issues.
Cost of living puts the screws on consumer spending
As UK economic turbulence continues, cost of living is a top concern for both consumers and retailers. Coupa’s research shows that eight in ten (82%) retailers fear it will have a negative impact on the consumer’s ability to spend this holiday season.
Decreased consumer spending (61%) was the top concern for businesses, followed by meeting delivery deadlines (52%) and lack of sufficient labour (46%) as they approach this critical period.
Cost of living will dictate purchasing decisions for 76% of consumers. Nearly half (40%) of UK shoppers expect to spend less money on holiday groceries, travel and gifts compared to last year. Two thirds (65%) plan on reducing their budget between 10 and 50%, with some (13%) saying their holiday budget won’t exceed £80.
With expectations for continued cost-of-living challenges, consumers are having to rethink their holiday spend and cutting down on non-essential item purchases. Toys aren’t expected to fly off shelves this year – as only 25% of consumers surveyed indicated that toys were a priority for their holiday shopping in 2023. Instead, we can expect to see UK shoppers prioritise food (76%) and clothing (46%) this holiday season.
“As supply chain issues and cost of living put the squeeze on revenues this season, retailers will be in a race to maximise profit margin and meet demand, while still keeping prices down for consumers,” said Matthew Woodcock, RVP Supply Chain Strategy at Coupa.
“With product shortages likely to impact consumer access to essential goods, now is the time for retailers to capitalise on recent supply chain learnings, what-if scenarios and rapid response processes they established over the past years, and act quickly to minimise potential disruptions during these critical last months of the year.”
Price caps on essential items will tackle only one side of the issue
As conversations around putting a price cap on essential food items continue, 78% of consumers agree that introducing price limits might ease cost of living pressures.
To reduce revenue risk and put a halt to soaring prices ahead of Christmas, nearly three quarters (72%) of UK retailers support the UK government’s plans and say they’ll likely voluntarily introduce price limits.
Yet, half of them (50%) are worried that if price limits for essential items are introduced, they will need to absorb any price differences and offset the impact on their revenues elsewhere.
With looming supply chain issues, price caps may put further pressure on suppliers and retailers, who will be pitted against one another to offer the lowest price. Nearly half (43%) of UK retailers shared that their company is already experiencing out-of-stocks on key holiday items this year and 54% are concerned about one or more of their company’s suppliers shutting down.
“Introducing price caps on essential items might help to calm the storm on the surface, but that is a stop-gap solution to a much more complex problem,” Woodcock continued.
“As the UK braces itself for continued economic disruption and post-Brexit challenges, ensuring smooth supply chain operations will be key to minimising these challenges in the long term. It is essential for retailers to find ways to streamline supply chain processes, tackle any risks ahead of time and ensure they can keep prices down without compromising on revenue.”