Preparing for an Unpredictable Holiday Shopping Season

Drawing on data from 14,000 retailers globally, Criteo found that online sales were 30% higher in the Americas, and 17% higher worldwide, during the two weeks from June 15 to 28, compared with the pre-pandemic average from February 2 to 14. The numbers suggest that consumers who were compelled to switch to e-commerce shopping during the height of the lockdown will likely be inclined to conduct a majority of their peak holiday shopping online.

Brands are making the Black Friday peak season longer every year, especially in e-commerce, and supply chains need to be ready in order to maximize sales opportunities. Brick-and-mortar sales will be challenged this year due to repercussions from the pandemic, and are likely to see lower revenues from their usual channels than in previous years.

Open communication and planning among suppliers, retailers, carriers and logistics partners about capacity constraints will be pivotal this peak holiday season. Smart logistics providers began conversations with brands in July. The usual carrier networks are already full, and e-commerce volumes will only increase throughout this peak season. Carriers will be highly selective about whom they work with, as they prepare for capacity restraints and more volume than they can handle. For high-volume shippers, “it’s imperative to forecast and act now to lock in cargo capacity through the end of the year,” says Sean Stokes, director of transportation and logistics at Arvato Supply Chain Solutions.

UPS chief financial officer Brian Newman recently suggested that the carrier’s strategy will change. "As we're not chasing any volume or any package at any price, we think we'll be selective in terms of what goes through the network," he said. Large carriers will no longer act like utility companies, offering more capacity whenever a customer flips the switch.

Logistics teams need to be invested in carriers’ success, and should have multiple contingency plans in place with additional service providers. They also need to be prepared for the inevitable peak-season fees that will be levied on volumes. Measuring and monitoring of carrier performance are key to peak-season success.

Through collaboratively defined service-level agreements and key performance indicators, both shippers and carriers can manage expectations. In the event a primary provider is unable to meet its commitments, a secondary provider might be needed. Regional carriers can provide one alternative. An average of 17% of retail volumes were shipped via regional carriers in the first seven months of 2020, compared with 3.8% in 2019.

Brands need to prepare their supply chains for increased demand, and diversify omnichannel solutions to drive customer satisfaction. We’re likely to see exceptional growth in online sales this season, especially in those regions hit hardest by the pandemic. Statista reports that e-tail sales accounted for 14.1% of retail sales worldwide in 2019. Salesforce.com Inc. predicts that up to 30% of global retail sales will be made through digital channels this upcoming holiday season.

Some U.S. retailers are already announcing that they won’t be open on Thanksgiving. Those stores that are staying open will be offering omnichannel shopping solutions, to adhere to social-distancing guidelines and keep shoppers safe.

This doesn’t mean that traditional retailers will necessarily suffer. Quite the opposite, in fact: They’re expanding their holiday seasons and investing more in e-commerce. Salesforce predicts that sites offering store pickup, in the form of curbside, inside or drive-through options, will see a 90% increase in digital sales over the previous holiday season.

Traditional brick-and-mortar retailers will need to deploy new strategies, such as using stores as fulfillment centers and creating new order-management processes. By partnering with a logistics provider that offers advanced technology to keep deliveries flowing, they can meet increasing consumer expectations. Having a logistics partner with a presence in major metropolitan areas can enable a brand to execute same-day courier delivery service, just like the largest e-commerce providers. Additional services offered by third- and fourth-party logistics providers include inbound and outbound transportation, warehousing, returns management and customer call-center support.

Retailers and brands could face difficulties processing a rush of returns during this peak holiday season. With return rates of up to 30% for Black Friday purchases alone, revenue lost from returns adds up to billions of dollars globally. Unable to inspect merchandise in person, e-commerce shoppers are likely to purchase more sizes or options than they actually need, knowing that excess product can be easily returned. Supply chains need to be prepared for the volume of returns that coincide with the anticipated explosion of online sales.

It’s imperative to have supply chains in order, to deliver customer satisfaction and fulfill the expected wide range of orders and returns. Third-party logistics providers can help by directing shipments to those carriers that are performing to expectations. Retailers and brands need to start preparing their supply chains now, to ensure success during what’s shaping up to be the most disruptive peak holiday season the logistics world has ever seen.

Konstantin Bohmeyer is vice president of consumer products at Arvato Supply Chain Solutions North America.

 

 

This article was published exclusively on Supply Chain Brain

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