This article first appeared on forbes.com on November 23, 2021.
The choked supply chain is driving both inventory and pricing problems, and it couldn’t come at a worse time as we head into the fourth quarter. This is when, typically, brands rely on the holiday season to power consumer spending, raising all ships, including the U.S. economy. Instead, Salesforce reports this year’s holiday season will bring retailers an added $223 billion in the cost of goods sold due to the sky-rocketing price of freight, manufacturing and labor.
Whether inventory arrives by land, sea or air, delays are expected into 2022. When tankers arrive, it’s difficult to get products delivered anywhere in North America because of a lack of delivery drivers. At the same time, the U.S Postal Service has raised shipping prices, and delivery now promises to be slower thanks to labor shortages. In the sky, cargo rates have increased by 40% since the pandemic, resulting in higher product prices for the end consumer. Despite these challenges, the holiday season will go on, as kids of all ages eagerly await this season’s hottest toys and apparel.
Consumer Sentiment Remains Positive
While this appears to be a perfect storm for retailers, it brings an opportunity to focus on brand loyalty and trust. During the pandemic, online consumer sentiment through product reviews remained high at 83% positive based on a dataset of 1.5 million reviews collected by our company. Why? Our research indicated that consumers could still purchase what they wanted, and what they wanted was walking and running shoes, athleisure apparel, bikes and other equipment to get outside. During this time, brands and their online retailers kept their fundamental brand promise of goods, services and pricing, and online shoppers hit the buy button. That may now change. In September and October, we saw very little difference in consumer sentiment via product reviews. Consumers can still, generally, purchase what they want, and early Christmas shopping is being fulfilled. So far.
Late-Season Shoppers Face Inventory Shortages
Thirty-seven percent of Americans will wait until after Thanksgiving to cross off their holiday shopping lists, despite warnings to buy early from the media. And with 81% of shoppers starting their searches online, product reviews are often the first step of the shopping experience, both in-store and online. Given the forces at work, consumers are likely to read reviews featuring real-world scenarios of sky-high prices, fewer alternatives and nightmare delivery issues.
As these challenges continue, the sales funnel comes into focus — and the growing importance of the bottom of the funnel: post-purchase consumers who publish product reviews. Seventy-nine percent of shoppers trust reviews to inform their buying decisions, reinforcing that consumers trust each other. Positive reviews help channel shoppers through the funnel and effectively speed the path to purchase.
Building Trust Through Transparency
With logistics out of their direct control, it’s time for brands to leverage the power of transparency to bridge this trust from consumers to the brand itself. According to Edelman, 81% of buyers need to trust a brand to buy from them. While the promise of goods, services and pricing may be temporarily impacted by global supply constraints, maintaining trust is crucial in both the near and long term.
Consumers are connected to the process and empathize with the brand when they receive direct updates on inventory availability and shipping times. Brands can also gain leverage by tapping directly into consumer sentiment through product reviews to understand what shoppers are saying about inventory, pricing, shipping, customer service and more. This knowledge empowers brands to make decisions in near real time and to be agile through the busy shopping season.
Building trust face-to-face with dependable customer service has long been part of the business model for brick-and-mortar retailers. But as the world moves online in higher numbers, maintaining this relationship proves trickier. Traditional and e-commerce retailers have found an effective solution. They are now asking permission to communicate with customers and inform them of product updates, special events, sales and inventory directly by SMS communication (text messages).
Fifty-six percent of consumers have now signed up to receive texts from retailers. This direct communication has positive consequences because it saves consumers time with online research and provides the information they need right when and where they need it.
As the calendar rolls forward toward mid-December, this communication strategy could potentially save a lot of Christmas gift-giving disappointment. Transparency helps set consumer expectations and allows holiday shoppers to benchmark expectations at home. The nightmare: Try explaining the supply chain to a five-year-old who didn’t get the gift she wanted. That needs advanced preparation, thoughtful communication and the skill of Socrates.
The damage to the brands? Those that have inventory and communicate that clearly to both their retailers and consumers will be kings. Yes, prices will rise, consumers will be forced to buy second- and third-choice products— but they will understand if they are well-informed before the point of purchase. They won’t understand continued product advertising, inventory shortages, poor communication and associated price hikes. The gift of transparency will deliver well beyond the holiday season for brands that embrace the opportunity.
Read the full article from Forbes.