We’ve talked about bots as a risk that retailers need to watch out for during the holidays — but this year, there is greater urgency. Keeping the most popular gifts in stock will be challenging for retailers as the chip shortage creates a backlog for electronics orders and other supply chain disruptions delay shipments.
Retailers: Beware of other fraudulent actors looking to capitalize on the crisis. Bot operators will inevitably cash in on the shortages, deploying bots to hoard and resell prized toys, electronics, and other desirable products. To mitigate the risk to their customers, retailers need to step up their game — quickly.
The Perfect Storm: Chip Shortage + Supply Chain Disruption = Soaring Bot Operator Activity
- Global chip shortage crimps product availability …
Semiconductor chips are a misunderstood commodity in today’s world. With all sorts of products now “smart” products, chips of many forms power those smarts. A global chip shortage has been big news for several months — and usually the general public doesn’t care much when a tech company can’t get their chips. But when people can’t get a Ford F-150, refrigerator, or toy because of a tiny chip, it becomes a big problem for society as a whole. A limited supply of chips amid the public’s insatiable demand for chip-powered products sets the stage for a crisis that will last into 2023. Some holiday gifts will be hard to get or expensive, adding frustration to shoppers and overall gifting. Worse, manufacturers are struggling to adapt, with some small manufacturers on the precipice of insolvency.
- … which is compounded by constrained supply chains.
Retailers have struggled to keep household basics in stock and on shelves since the early days of global pandemic lockdown. The industry’s long-standing love of just in time (JIT) traditionally kept inventory fresh and better aligned with customer demand while decreasing carrying costs and storage. But that only works as long as every aspect of the supply chain — from manufacturing to final mile — is humming along as planned.
Supply chains are interconnected networks that run on consistency, are highly sensitive to systemic risks, and send a domino of disruption when they buckle. For retailers, this means that the daily dose of unexpected, unplanned, and unmitigated changes to the availability/access/costs of raw materials, essential components, finished products, labor, logistics, and fuel will continue to impact what they sell this holiday season and how much they sell it for.
- Bots love e-commerce sites with scarce products like moths love flames.
Chip shortages and supply chain hiccups open opportunities for attackers who were already leveraging bots to hoard and resell popular items like sneakers and gaming consoles. As more of the season’s popular gifts become difficult to find, expect bot operators to step up their activities and target a wider range of inventory. Consumers will bear the costs in several ways:
- Customers who can’t find the product they want either leave disappointed or end up paying extra for the product on a resale website — often from the very bot operators that beat them to the product in the first place.
- Some tech-savvy customers have started to buy into bots as a service, wherein bots will help the customer procure the desired merchandise — for a price.
Both scenarios further incentivize the bots, as they make a profit for successfully procuring the merchandise. As bots have successfully grabbed merchandise, some customers have taken an “if you can’t beat them, join them” approach, buying into bot services. This tactic helps to fund the bots’ work and makes it ever more likely that bots will go after desirable merchandise, exacerbating the vicious cycle. Meanwhile, customers who are less tech-savvy are left out in the cold, as they don’t have the time to search for alternatives to their preferred retail sites and can’t afford to pay the markup to the retail price of the product.
Retailers don’t emerge unscathed, either. Even if they earn revenue by selling out their inventory to bots, they are paying dearly in the form of unhappy customers and lost peripheral sales. Humans buying the hot gaming console may also buy additional controllers and games — bots don’t do that. Retailers that don’t block the bots lose out … and those frustrated customers who didn’t get their desired item go elsewhere and might not come back (ever). The good news is that many retailers are already using bot management solutions to protect against attacks like credential stuffing, card fraud, and, yes, inventory hoarding.
Act Now: Manage Supply Chain Risks, Raise Your Bot Defenses, Prioritize Your Customers
Further good news: Retailers have options. Leading up to and during the holiday shopping season, retailer organizations can take the following steps to ensure the Grinch doesn’t steal the holidays.
Proactively manage your supply chain risks by doing the following:
- Identify and monitoring for changes in global risk factors that impact tier one and subtier suppliers, then create just-in-case contingencies to maintain your resilience.
- Promote/incentivize early shopping on inventory that’s currently available.
- When stock-outs occur, be transparent and timely in communicating the issues and how long it may take to resolve them. It may be wise to push scarce inventory to local stores and to limit the number of units that each shopper can buy to reduce the risk of hoarding.
- If you offer secondhand/refurbished goods in your assortment, promote those to customers who may be looking for sustainable (and available) options.
Proactively manage bots by:
- Planning for bots to target inventory that was plentiful in previous years. Importantly, expand your bot protections to make sure that your customers are getting what they need.
- Bringing together your security, marketing, fraud, and e-commerce teams to collaborate on bot threats and align on defenses — if you aren’t, start now.
- Bringing your operations team to this bot threat and defense coordination, too. Their insights into inventory and supply chain impacts will give you an early lead into which products might face shortages and therefore be the most attractive targets for bots. Use this intelligence to update your bot management configurations appropriately.
To learn more, please see some of the suggested research we’ve listed below. And if you’re already a Forrester client, please book inquiries about managing chip shortages (Glenn O’Donnell), supply chain risks (Alla Valente and George Lawrie), bot management (Sandy Carielli), and end-of-year holidays overall (Sucharita Kodali).