By Nick Lung

The year-end peak season always exacerbates the unpredictability of year-round sales. Retailers' biggest concern is exactly what type of merchandise will sell; are they betting on the right Barbie doll or the right sweater style? But the COVID-19 pandemic has not only brought about a wild ride in a rapidly changing demand landscape. On the supply side, it also creates enormous uncertainty, problems and confusion. And two problems will continue.

Unpredictable fluctuations in demand are already evident and affecting results. Data released by the U.S. Department of Commerce on August 15 showed that retail sales in the U.S. grew more than expected in July, including various sales categories such as sporting goods stores, clothing stores, and restaurants and bars. However, the rising tide did not make everyone have the last laugh. Home Depot reported second-quarter earnings that topped analysts' average estimates, and Walmart reported similar sales. But Target's revenue fell in the second quarter. The comparative results illustrate some fundamental differences among these companies, but also how some retailers are more successful than others.

Smart companies are investing in supply chain expertise to better control supply and artificial intelligence to better track and forecast demand at the SKU level. Overall, companies are paying more attention to supply chain and logistics issues, both in terms of procurement and delivery times. The focus used to be more on looking at the product from a buying perspective, as well as sales and marketing.

Other strategic shifts will broaden the field, with artificial intelligence having a major impact that will help people find and buy products they may not know about. A lot of people are doing research online, AI will help people discover products, 17% of consumers are already using ChatGPT or similar generative AI tools to find products, and 10% of them use the technology to compile holiday gift lists.

Additionally, predictive AI will be able to more accurately predict what people are going to buy. There will also be winners and losers, as not everyone integrates AI with the same enthusiasm. During the COVID-19 pandemic, people initially had too much stock, and then demand picked up, and they were conservative and didn't have enough stock. It's really like putting your money on roulette. You are never sure what to expect. That's why Walmart and Amazon created research engines that help them and third parties build these predictive AI platforms and sell them to others.

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