Is discounting the answer to eCommerce's inventory challenge?

Many brands faced a tough few months of trading in the lead-up to November and December. Then, when the time finally arrived the eCommerce space was amassed with marketing messages; whether that was brands offering aggressive discounts in a ‘whoever shout the loudest’ approach or brands joining the anti Black Friday movement.

Despite the current economic conditions, Shopify reported a record-breaking BFCM weekend with global sales of $7.5 billion, a 19% growth on the year. However, peak trading wasn’t without its woes. Following 2021’s supply chain issues, brands were faced with the challenge of surplus inventory as a result of delayed shipments and over-ordering. The result? Further discounts.

That was the question on everyone’s lips at our January Ecom Leaders session, hosted in partnership with 3PL, ILG. With reduced marketing budgets and a surplus of Black Friday stock, many of our Ecom Leaders are having to rethink their strategies:

“Promotional strategies for DTC are often dictated by our retailers as we are seen to cannibalise their sales, we tried tactics to drive traffic to their site but it ended in us seeing an increase in direct revenue with it being seen as an added proof point”.

“We’ve opted not to discount our products, instead we keep them full price as customers will purchase regardless”.

As our Ecom Leaders filed in and took their seats overlooking the morning London skyline, it was clear that last year’s challenges have left their mark, however smart marketers are already bringing customer centricity and loyalty front and centre to avoid history repeating itself.

Below we pick apart how these questions were answered, with insights from retailers ranging from The INKEY List to Self-Portrait, Lulu Guinness to Hair by Sam McKnight, giving you inspiration for your DTC strategy for the year ahead.

As the DTC landscape plateaus, building out strategies that streamline the relationship between DTC and wholesale is a huge challenge for brands, predominantly when it comes to discounting.

Often it’s a case of who can pit the other to the post and offer the best possible price. It’s becoming increasingly more difficult to compete against with little to no indication that retailers are altering their promotional strategy. This is especially apparent across premium brands, where, when it comes to discounting, there is often nervousness to run on-site sales over concerns it devalues brand image.

To offset this, we’re seeing a number of premium brands opting to run in person sample sale style events. However, addressing the wider challenge brands need to focus on loyalty and community building. Pulling on tactics such as on-site surveys, social media and email & SMS will help foster strong relationships with customers by engaging them regularly and gathering feedback to inform future products and initiatives.

In today's fast-paced ecommerce world, it's crucial for companies to align their marketing strategies with inventory levels. We’re all too aware that digital marketing and fulfilment are intertwined having significant impact on one another, and as such brands need to be mindful of how they approach both areas.

What exactly does this look like? Here’s what our Ecom Leaders came up with:

Ensure campaign messages match up with the stock available and monitor this regularly to pull back if needed. Avoid going in with sitewide flat discounts and instead tailor this to specific collections/skus based on inventory levels. By doing this, companies can avoid disappointing customers and potentially losing them to competitors from a poor shopping experience.

The use of technology is also critical in ensuring that marketing and inventory strategies are aligned. With real-time data visibility, companies can streamline processes and make informed decisions about marketing campaigns, such as adjusting bid prices based on stock levels. 

Take Shoptimised, for example, whose real-time data integration monitors stock levels enabling the platform to make informed decisions on bidding strategies for certain products and campaigns. If inventory levels are high, bidding will increase to drive more sales and take advantage of the available stock, whereas if inventory levels are low bidding will decrease therefore utilising budgets more efficiently.

Whilst initially supply chain issues and delays were to blame for overwhelming surplus inventory, many retailers were unable to predict the shift in consumer demand for products following the pandemic. 

Purchase patterns shifted away from goods and instead towards the service industry - dinners, holidays and experiences - this ultimately also resulted in changes to product popularity for example, loungewear to occasion wear. 

Now, with the challenging economy and shoppers more considered in their spending, big retailers are being extremely cautious about buying stock, having been burnt from rapid consumer changes before. What this means is that DTC will have more stock to fall back on and can therefore go bigger with their promotional strategy.

We asked Chief Operating Officer at The INKEY List, Suzanne Coulton, what changes she was seeing across retailers following the shift in inventory buying and  her predictions for DTCs outlook:

“At its broadest level, the Global Retail industry has suffered from delayed stock and recessionary shifts in shopper behaviour. They are often choosing to clear through excesses at low cost to mitigate increasing stock levels, especially in fashion and seasonal items. They therefore remain cautious committing to inventory, and in some cases reducing their assortment altogether. With long supply chains this can lead to poor on-shelf availability, which particularly affects consumers when they cannot buy their favourite products”

She went on to say: “D2C remains well placed to optimise availability utilising real-time data-led insight on demand to drive controlled stock levels. They can run seasonal campaigns without seasonal packs, and bundles without the need to create sets. With the consumer execution being “on-screen” versus with physical packs, this agility will be pivotal in creating enhanced consumer value.”

As the session wrapped up we were left with the parting thought that while marketing and logistics haven't historically collaborated, it's so important for brands to be linking these two sides of the business together.

If marketing is fully across stock levels at all times - marketing can be aware of what products to push (based on high stock) through Paid Social and avoid discounting. On the flipside if there's delays in product, how can marketing package this up as "being high in demand" and capturing emails for when the product's back in stock. Either way, there is ample opportunity!

Do you agree with the opinions above? If you’ve got anything else to share, why not join our next event? Enjoy insights from industry peers, lively debate and good coffee. Join our Ecom Leaders to register your interest now.