In conjunction with last week’s Annual National Retail Federation (NRF) Conference held in New York, retail sales figures were released for the previous November-December 2014 holiday sales period. With the price of gasoline plummeting in the last two months of 2014, there were a lot of pent-up expectations that holiday retail sales would exceed the NRF’s original forecast of a 4.1 percent increase in 2014. The actual NRF figures came in at $616.1 billion, a 4 percent increase which shook Wall Street investor confidence for about a day before economists and forecasters eased speculation that consumers held back spending more than expected. According to NRF, the November-December sales data marked the first time since 2011 that sales has reached this level.
A separate ShopperTrak report, which tracks primarily brick and mortar sales at malls and retail outlets reported growth of holiday sales at 4.6 percent, higher than that firm’s initial forecast of a 3.8 percent increase and representing the largest increase since 2005.
From a supply chain lens, 4 percent retail sales growth was very good, given the challenges of retail inventory either arriving earlier or far later than expected because of the backlogged slowdown conditions among U.S. west coast ports. Online and brick and mortar focused retailers were influenced to run product promotions earlier rather than later, with some retailers kicking off holiday promotions in October. Other reports indicate that retailers were conservative on their overall holiday inventory investments, not wanting to end-up with overly excessive unsold inventory by the end of December. Considering another short holiday shopping interval between the Thanksgiving and Christmas holidays, coupled with all the logistical challenges that occurred, B2C supply chain teams deserve a pat on the back.
Of course, the real benchmark comes in the coming weeks when retailers begin to formally report their financial performance spanning the critical holiday period. The question is whether logistical challenges led to higher unexpected costs and lower margins.
Obviously, the most sensitive metric affecting global supply chain planning and budgeting activity is the cost of energy. The economics related to the cost of energy drive global product sourcing, transportation and forecasts of retail sales spending on consumer goods. What about all of the fuel surcharges currently tacked on existing transportation rates?
The most significant question for supply chain leaders, planners and sales and operations planning forums in 2015 is how long will the extraordinary lower cost of oil last? Will it be the rest of 2015? How will it impact product demand and product margins?
Beyond retail and online B2C supply chain product demand planning, assumptions on the cost of energy are going to be fundamental aspects of this year’s business plans.