Flexe Institute Market Watch: Peak Season Proves Unpredictable

December 13, 2022

After months of peak-season planning, the first round of Black Friday/Cyber Monday numbers are here.

Market Watch Collage Dec 2022

Online and in-store shopping set new records.

Key Takeaways

  • $9.12B in online sales—a record
  • 2.3% higher than in 2021
  • 196.7M people shopped in stores
  • 10% higher than last year
  • Numbers defied expectations that cited shoppers’ inflation concerns
  • 54% average forecast error rate since the pandemic

Despite economic concerns, consumers set Black Friday spend records. eCommerce sales topped a record-breaking $9.12B this year. That is 2.3% higher than 2021. Experts say the numbers are higher even when adjusted for inflation.

In-store shopping also increased. According to data from the National Retail Federation, 196.7M consumers shopped in stores. That’s up by 10% over last year—another new record.

These increases come as analysts (and even Flexe) called for tempered holiday spend. Shoppers once again defied expectations.

After the past two peak seasons’ unpredictable growth and bottlenecks, holiday shopping proves unpredictable.

Peak Seasons’ Course Impossible to Forecast #

Many factors add complexity to peak season predictions. Consumer behavior, supply chain disruption and global instability hamper plans, leaving organizations in a bind.

For a deeper look at how reality defies many forecasts, here are some factors that affected past peak seasons.

According to data from the National Retail Federation, 196.7M consumers shopped in stores. That’s up by 10% over last year—another new record.

Peak season 2020 #

In 2020, Covid pushed shoppers online. While some analysts believed the pandemic would deter holiday spending altogether, it reallocated dollars to eCommerce.

Shoppers spent $10.8B online on Cyber Monday—the world’s largest shopping day at the time. eCommerce sales increased 15.1% from 2019. Overall, retail sales grew by 8.3% that year and totaled $789.4B.

Consumer demand was at an all-time high, which eroded freight and parcel capacity. During peak season’s height, daily demand exceeded capacity by 7.2M parcels.

Peak season 2021 #

Following the demand explosion, supply chains buckled in 2021. Port backlogs and a trucker shortage prevented merchandise from making it to store shelves. Stockouts soared by 169% YoY.

Consumer demand set more records during 2021’s peak season. Total holiday spend was up 8.5% YoY, and 20.9% of total holiday sales were online.

In-store sales jumped 8.1%, and online sales increased 11% YoY. Early 2021 predictions estimated that eCommerce sales would account for 15.3% of total holiday sales, but actuals came in at 20.9%—26% higher than projections.

Correctly placing inventory ahead of peak season relies on past data to predict the future. But in 2020, the average forecast error rose to 54%. During the pandemic, businesses exposed to extreme error jumped 38%, up more than one-third from the baseline of 27%.

Peak season inventory forecast challenges #

After two years of unpredictable peak seasons, 2022 was similar. The muted holiday shopping many called for didn’t unfold. Consumers purchased more and through different channels than anticipated.

Correctly placing inventory ahead of peak season relies on past data to predict the future. But in 2020, the average forecast error rose to 54%. Businesses exposed to extreme error jumped 38%, up more than one-third from the baseline of 27%.

In 2021, consumers—spooked by supply chain disruptions—began holiday shopping earlier than ever before.

As a result, retailers built inventories earlier to prepare for the holiday surge. Some held as much as 40% more inventory at the end of Q2 last year. The inventory stockpile did not clear during the 2021 holiday season, and many dealt with bloated inventories and higher storage costs in 2022.

In 2022, brands canceled thousands of POs as a result of forecast inaccuracies and an impending bullwhip effect. However, consumers continued to spend despite recessionary concerns.

Balance forecast reliance with supply chain flexibility #

In the age of increasing disruption, forecasts aren’t accurate enough for supply chain strategies.

Leading brands embrace flexible and resilient supply chains instead of making decisions based on incorrect predictions.

Flexible distribution solutions #

Many distribute inventory to balance “just in time” and “just in case.” Adding additional nodes allows companies to react to demand fluctuations and reduce transportation mileage.

Flexible manufacturing solutions #

Another critical component of flexible solutions is shortening the supply chain. Businesses bring raw materials and production lines closer to regionalize supply chains. This reduces variability along with lead times and disruption potential.

Network diversification #

Successful shippers look to secondary and tertiary markets to find reliable warehousing. Similarly, leading enterprises identify additional carriers to offset capacity and rate difficulties.

A more diverse network provides businesses with capacity where and when needed.

Market watch: The logistics industry month-over-month #

Logistics Managers’ Index (LMI) #

Last month, the index fell again in all categories aside from warehouse capacity. The metrics suggest the capacity contracts.

Flexe Market Watch December Charts 01 Graph 2402x

Disposable Income vs. Durable Goods Spend #

Durable goods consumption and disposable income are intertwined. This month’s data shows that personal consumption rose, while disposable income fell. Continued consumption predicts the need for logistics services. But continued disposable income decreases will lead to less consumption.

Graph 3

Industrial Real Estate Vacancy Rate #

The lower the rate, the more difficult it is to find warehousing, distribution and fulfillment space. The market currently operates at an all-time low of 2.9%.

Graph 4

U.S. Manufacturing Purchasing Managers’ Index #

The index captures industrial output in the country during a given period. Like durable goods consumption, it provides context for demand forces: The higher the manufacturing index, the more volume enters logistics networks.

This month, the index fell. This indicates potential for economic contraction.

Flexe Market Watch December Charts 01 Graph 1402x

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