The ongoing war in Ukraine and the continued effects of COVID-19 have exacerbated issues in what was already an uncertain supply chain. New Zealand’s retailers are struggling to get the stock they usually sell – but this does not have to negatively impact your customer experience.
Fortunately, there are ways for you to front-foot supply chain disruption and form even stronger bonds with your customers. The second article in our retail thrive series explores what you can do to overcome supply chain issues and see your retail business prosper.
1) Open communication is key
Your customers know about the disruption – the news is full of stories about supply chain constraints. They also understand that things have been tough for retail. This means when you are facing stock issues, if you are open and honest with your customers, they will normally empathise with you.
“If they come in looking for an item you don’t have in stock, ask them for their contact details, (or if online create a button on your website that enables them to submit their email address). That way you can tell them you’ll let them know when the stock comes in,” explains Justin Martin, BDO Retail Sector Lead. “Make sure you’re giving regular updates, telling them when you estimate items will arrive, and helping them find alternatives if they need to. Be ready to give refunds where necessary.”
It’s important to be honest and up front, and reassure them you are doing your best – if you can get your communication right, it provides an opportunity for you to form a closer bond to your customer – often this is something they will remember a long time into the future.
2) Get analytical and strategic with your stock management
While uncertainty can cause cash flow problems, now may not be the time to order less stock. Review sales from previous years to forecast sales trends, which will enable you to buy enough stock ahead of when customers will demand it.
“Planning ahead is essential – we know the disruption is not going to ease any time soon,” says Anna Kuzmich, Associate, BDO Retail Advisory team. “For example, you know winter is coming up. If you’re a clothes retailer and you haven’t already, now is the time to order winter pyjamas and jumpers, not in two months’ time when it starts to get really cold and your customers want these items immediately. If you feel you are holding the wrong type of stock, consider holding a sale to get rid of it, so that you can then make room for the items customers will want."
Navigating this supply chain crisis is about creating that balance between having sufficient stock to leave your customers satisfied while not overstocking on items that may not be needed. It’s therefore a good rule of thumb to work out where 80% of your profits come from and then only purchase those items. This will enable you to streamline your product offering and simplify your supply chain.
3) Conduct a supply chain audit
Knowing where your stock is coming from is key. If the majority is manufactured overseas, and you know businesses there are continuing to face the threat of lockdowns, consider trying to find local alternatives. If you buy from another company that imports, talk to them and find out where they source from and whether they believe they will be facing issues soon – this will enable you to plan smarter and find alternatives where necessary.
4) Use data to understand your customers’ needs
“There are a number of different customer feedback tools available to retailers,” says Greg Harford, Chief Executive, Retail NZ. “Some work via your EFTPOS machines – when your customer buys something, you can programme your EFTPOS machine to ask if they found everything they were looking for. Then you can request specific feedback on different alternatives to work out whether there are items your customers will want in the event that you can’t procure their usual favourites.”
As with everything in retail, supply chain management all comes back to understanding your customers – communicating with them, knowing what items they will want throughout the year and front-footing that in your stock management so you’re buying inventory ahead of time.
If you need help with inventory management, cash flow forecasting, retail technology systems or are just looking for someone to bounce ideas off, BDO’s specialist retail advisory team can help. Reach out today to find out how we can help your retail business thrive.
Read the first article from our retail thrive series, on staffing, here!