Growth in sales channels causes supply chain issues for half of retailers

New research by Advanced Supply Chain Group shows that growing retail sales channels causes stock inventory management problems for 53% of retailers.

According to the international supply chain business, nine in ten retailers are planning to increase the number of their sales channels following the impact of the pandemic and Brexit.

Retailers now sell through an average of five channels, with 71% expecting this number to grow further in the next five years.  

The top five most-used retail sales channels include owned ecommerce stores (65%), bricks and mortar shops (48%), Facebook (47%), third party online marketplaces (41%) and Instagram (35%). 

Claire Webb, Managing Director at Advanced Supply Chain Group, said: “Increasing sales channels is helping retailers to mitigate the unpredictability and uncertainty caused by COVID-19 and Brexit. More routes to market can help to drive both sales volumes and value by reaching new customers and optimising retail selling prices.

“However, whilst expanding channels creates more opportunity, it can also bring with it more challenges. Over half of retailers (53%) reported stock inventory management problems caused by growing sales channels.”

38% of retailers highlighted managing stock levels as the biggest challenge of selling through more channels, with a similar number (37%) stating that forecasting stock became more difficult, while just over a third (35%) cited issues of overselling products through multiple platforms and this creating out-of-stock scenarios. Issues such as these negatively affect customer service and satisfaction for a quarter (26%) of retailers.  

The research showed that retailers have responded to these problems by recruiting more staff to handle stock (47%), expanding warehouse and fulfilment space (45%) and increasing the number of suppliers they source products from (42%).  

Claire Webb added: “Although increasing supply chain capacity is important, it is just one part of servicing growing sales channels. Different platforms and outlets have varying inventory requirements and place greater challenges on stock flow and forecasting. 

“Minimising errors and successfully managing stock requires technology and software that can integrate different vendors and suppliers that make up multichannel strategies. This ensures the right data, in the right format, flows to the right place at the correct time in a supply chain. It creates a control view of stock that’s built on accurate and real-time information to avoid costly stockpiling and out-of-stock scenarios.” 

Just 2% of retailers expect their number of sales channels to reduce in the next five years, while a quarter (22%) expect to be selling through three to four more channels. The top five priority channels for driving growth include owned ecommerce stores (43%), bricks and mortar shops (26%), third party online marketplaces (23%), Instagram (22%) and Facebook (20%). 

Dr Fahian Ansul Huq, Senior Lecturer in Operations and Supply Chain Management at Alliance Manchester Business School, said: “By constantly striving to make touchpoints with consumers increasingly shoppable, retailers run the risk of creating inter-channel competition. This can quickly lead to cannibalisation of sales, compromising both the value and volume of sales. Supply chain integration strategies can help overcome these challenges by improving transparency throughout the whole chain and the overall exchange of data.” 

Claire Webb concluded: “COVID-19 and Brexit are accelerating a trend of growing sales channels, which has been gathering pace in the past decade. This will intensify market competition and place greater emphasis on lean and accurate supply chain management to make sure every selling opportunity drives maximum customer satisfaction and revenue.”

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