By Max Clarke

Research sponsored by NetSuite Inc., the industry’s leading vendor of cloud-based financials/ERP software suites, has today revealed that nearly a third of high street retailers are gambling with stock shortages over the Christmas period, despite looking forward to a better sales performance than in 2009.

The study, carried out among over 250 UK retailers by ORB (The Opinion Research Business), found that nearly one in three (29%) retailers would rather risk running out of supplies this Christmas than have excess stock on their hands. The move, which leaves customers in danger of leaving stores empty-handed, comes as retailers look to the future with renewed optimism. The research reveals that over half (55%) retailers are positive about current trading conditions. Looking specifically at Christmas, 40% expect festive trading in 2010 to outperform that of 2009.

The potential stock shortages during retailers’ traditionally busiest time of the year continue a trend for retailers to hold less inventory during the downturn. A third of survey respondents (34%) said that they had deliberately kept stock levels low throughout 2010 in response to the economic climate, and almost half (44%) reported they will be keeping stock levels very tight even in the run up to Christmas.

Retailers are passing the pressure onto their wholesale / distribution partners, with two in five retailers (40%) asking suppliers to maintain discounts or cut prices, even if they have been ordering lower volumes, and half of retailers (47%) are using more suppliers to enable price comparisons and help drive down costs. 30% of respondents are asking their suppliers for shorter order fulfilment times

Roman Bukary, Head of Industries Marketing, NetSuite, comments: “It’s hugely encouraging to see UK retailers take an optimistic view of trading conditions as we move towards 2011. However, keeping stock low and relying on suppliers to bridge any gaps in supply will stress retailer-distributor collaboration, require seamless communication and in case of any breakdown in the trading network, might leave shoppers disappointed.”

“The wholesale / distribution sector is used to pressure from their retail partners, but need to gear up for today’s unpredictable trading conditions,” continues Bukary. “Pressure to cut costs, accelerate fulfilment and increased competition within the industry means that wholesale / distributors need to ensure they have every tool at their disposal to streamline their operations and change the way they work to cope with what’s likely to be a stressful and competitive Christmas crush — even before the snow factors in.”

This survey also found that the UK high street is yet to fully realise the huge potential of the web to boost sales. While 80% of retailers questioned have some form of online presence, as many as 53% of these don’t actually generate any turnover from their e-commerce operations.

A general lack of awareness of social media is also apparent, despite an increasing amount of consumers using blogs and sites such as Twitter and Facebook to make purchasing decisions and feedback on what they buy: just one in five retailers (22%) seriously employ social media to tell people about their business, while fewer than one in three UK retailers (28%) properly monitor what customers are saying about them on social media sites.

“Over the last ten years, e-commerce has changed the face of retail and gets more and more popular every year. The fact that so few high street retailers are truly taking advantage of the Internet to engage with consumers in a dialogue, gauge feedback, enhance sales and increase geographical reach could be a worry,” continues Bukary. “As people’s shopping habits continue to migrate to the web, the risk is that high street retailers could be left behind.”

The full report, “The UK High Street: Squeezing the Supply Chain” is available for download here.