As retailers face down a holiday season that will be impacted by a looming recession in the United States and ongoing global supply chain challenges, they’re doing everything that they can in order to get in front of potential inventory issues.
A lot rides on the holiday shopping season for retailers to meet their annual forecasts. And since the start of the pandemic, the holidays have become increasingly challenging to navigate. Big-box retailers like Target and Walmart are putting new measures in place in order to make sure they have what they need in stock from brand partners, and that their supply chains don’t break down when orders increase.
Last week, Walmart laid out its plans in a corporate communications blog post for navigating around supply chain problems this season, framed as an update for customers about how the retailer intended to fulfill demand with its “stable and strong” supply chain. That a company is sending out supply chain-centered messaging to customers is in itself a sign of the times – previously, people could just assume all was working as it should behind the scenes. That’s not the case anymore. Walmart listed all of the steps it’s taken to ensure its supply chain is ready for the holidays. These include:
- Closely working with carriers and optimizing the supply chain for in-stock items.
- Store fulfillment from Walmart’s 4,700 locations, which it notes are located within 10 miles of 90% of the population. It also promotes its express delivery, next-day and two-day shipping and store pickup options.
- Delivery through its Spark Driver platform, a local delivery service that can reach 84% of households.
- An extended return policy including curbside returns.
- In-home Delivery and return pick-up from home for Walmart+ members.
- Expanded DroneUp delivery network, which delivers packages via zone, currently available in 34 locations, plus its autonomous and electric vehicles.
- Four new fulfillment centers that will be build over the next three years. These next-gen centers put automation at the forefront. Automated technology will also be rolling out across distribution centers.
- And finally, hiring an additional 40,000 seasonal employees including supply chain associates and an additional 1,500 drivers.
These are the measures being taken to get in front of supply chain issues. Walmart’s investment in employees, technology, delivery and pickup options and more are this season’s customer sell: buy with us, and you won’t have to worry about out of stock notifications or delayed orders. That’s an advantage that only a few retailers have – in addition to Walmart, Target and Amazon are competing by throwing resources behind the looming supply chain problem and recession. Customers are more likely to buy with competitively priced companies. The pressure is on.
The pressure is also on brands who sell in these stores to not miss their own delivery windows. As 2PM has written about before, Walmart and Amazon are now attractive retail partners for all the reasons listed above in Walmart’s pre-holiday measures. They have the deep pockets to brace for impact.
Brands that are unable to meet their delivery windows will be hit with fines from retailers like Walmart and Target as they do whatever they can to keep products in stock. It’s an end to the leniency normalized earlier in the pandemic; now, if brands can’t make their orders, the retailers are hitting back. It marks a power dynamic shift. For years, brands have foregone retailers, and have become more selective about where they choose to sell, and have looked for more amenable terms in their contracts with retailers. Now, retailers have the upper hand again as external forces like inflation, the recession and supply chain tangles have made brands once again reliant on stores for max volume.
As Bloomberg reported today, Walmart and Target are cracking down on brands:
Walmart is telling suppliers that their shelf space will be reviewed more frequently than in the past, a person familiar said, and that vendors with persistent out of stocks could see their products quickly replaced. The retailer also is looking to capitalize on trends, including those sparked by social media, by quickly swapping items in and out.
Anything less than exact compliance can result in penalties from fines to losing shelf space when contract negotiations come up – a particular challenge for small brands that often have limited resources to scrutinize shipments.
The brands have become more replaceable while the retailers have become more selective. Walmart, with its vast store network and supply chain capabilities, could become the dominant marketplace this holiday season and beyond. Brands are recognizing that they need the mass retailer to survive. In a September report, we wrote:
Utility, not trendy exclusivity, has helped Walmart become a magnet for direct-to-consumer brands that previously resisted its gravitational pull. It seems that the company needn’t imitate Amazon or Target at all to get to this point. There are a few reasons: Walmart is recession-proof and it drives profitable sales (at volume) to the most important consumer audience – the American middle-class. It has the size and reach, even if it doesn’t quite have the sexiness of other retailers. With brands focused more on the bottom line, Walmart is an attractive partner to turn on the proverbial sales spigot to gain new customers.
As we head into the end of the year, the power shift will continue. It’s no longer up to the brands to decide Walmart is now worthy of their presence – they will have to prove their worth to Walmart as well. It has the control of its supply chain to tightly manage everything that’s coming in and being sold off of its shelves. This holiday season could set a new standard for the retailer-brand relationship, one that tips the scales back to mass retail’s favor. And Walmart is positioned to win over the rest.
By Web Smith | Edited by Hilary Milnes with art by Alex Remy and Christina Williams