Why Christmas will never be the same

Next year it's Santa Claus who'd better watch out ... because Christmas shopping may never be the same, thanks to new applications for smartphones. With its ability to instantly check online pricing, the smartphone is changing shopping habits, and that's resulting in more pressure on inventory availability and is ratcheting up the drive for faster replenishment in retailing.

This past Christmas the smartphone began to have an impact on shopping behavior, according to the Dec. 16, 2010, The Wall Street Journal article "Phone-wielding shoppers strike fear into retailers." Shoppers in a store who are considering a purchase can use a mobile phone enabled with special applications to go online and check the price and availability of the item they want at other bricks-and-mortar and online retailers. If the desired item is available at a lower price from another source, the shopper could elect to put the product back on the shelf and make that purchase elsewhere. Noam Paransky of the consulting firm Kurt Salmon Associates told the Journal that this ability to make instant comparisons while shopping will accelerate the demise of retailers that either don't have competitive pricing or don't provide an outstanding shopping experience for the consumer.

The emergence of mobile price checking should put supply chain managers on notice that things will be very different next Christmas. Stores will be forced to maintain in-stock positions to avoid lost sales. If they aren't doing so already, companies will need to use point-of-sale data to drive inventory replenishment. And retailers may have little choice but to up the frequency of store deliveries to keep shelves stocked, creating a challenge for transportation departments that are already dealing with high fuel prices.

But the biggest issue may be that smartphones are likely to exacerbate already intense pressure to drive down costs. If shoppers can easily use smartphones to check prices, then "big box" retailers in particular will be forced to reduce their margins to compete for the consumer's dollar. That means fiercer boardroom demands that supply chain managers restrain costs. Supply chain managers will have to scrutinize their sourcing, distribution, and inventory practices and strategies for ways to shave a penny here and a penny there.

The good news is that supply chain managers—and Santa—have a year to prepare for the new world of shopping. Innovative supply chain executives will surely be making a list of new ways to cut costs in 2011.