Inventory supply, personal safety, and finances are just a few of the things on consumers’ and retailers’ minds this holiday season. As the winter holidays close in, the concern over packages arriving on time is likely to rank highest on consumers’ shopping lists.
According to a consumer survey conducted by Loquate, 88% of consumers expressed concern over packages arriving late. Last weekend while browsing Black Friday/Cyber Monday offerings, I found myself paying closer attention to product availability in-store for curbside pickups, and when not available, calculating shipping times. With good reason, as Salesforce expects holiday packages deliveries shipped mid-November through December may exceed shipping capacities by 5% globally, putting 700 million packages at risk of being delayed. What would Santa say!
In December 2019, 115.6 million Americans traveled to visit family and friends. With pandemic restrictions in place, that number will be dramatically lower this year, impacting how consumers manage gift-giving. This will include shipping gifts directly from retailers to their loved ones. However, one thing retailers can count on is that consumers are shopping.
Black Friday sales recorded a 21.6% increase year-over-year, with consumers spending $9 billion. As people start to shop online more often, Cyber Monday sales increased 15% year-over-year, fulfillment will be the critical mass indicator of retail success. Luckily, consumers (89%) are willing to give retailers a COVID-19 concession for extra time, but it comes at a cost – free shipping. To sweeten consumers’ wish list, retailers will need to offer free two-day shipping (44%), free shipping on returns (18%), and the ability to track packages (14%).
Retailers Under Pressure to Compete
Retailers are under considerable pressure to secure their fair share of the market while winning over consumers in an unprecedented shopping season. Despite having months to prepare, ramping up investments in supply chains, and strategically planning for merchandising inventory, retailers’ challenges include managing consumer expectations of quick and cheap delivery options.
These consumer expectations are set by Amazon, the biggest competitor on the scene with a strong foothold on delivery. Last year, Amazon delivered over half of its own U.S. shipments directly to consumers, harnessing control over their last-mile delivery to fulfill domestic and international orders. It also offers additional options, including its Fulfillment by Amazon (FbA) initiative, which leverages its vast network of fulfillment centers to process customer orders. They’ve also been proactively hiring full-time and seasonal employees this year with an average of 1,400 headcounts per day, in some cases offering a limited opportunity signing bonus to attract workers.
Target follows Amazon’s lead gearing up its same-day delivery service Shipt and handing out pre-holiday bonus checks to its frontline employees. In September, Walmart+ rolled out dropping its minimum purchase for members to receive free next-day and two-day shipping options. The retailer also purchased JoyRun, a community-based delivery company, to integrate into its supply chain platform. Macy’s, in their attempt to solidify holiday sales, partnered with DoorDash to power same-day shopping services nationwide.
The Elephant in the Mail Room
Social distancing protocol has impacted e-commerce warehouse productivity leaving delivery providers like DHL, FedEx, the USPS, and UPS in high demand and at a premium.
There are particular concerns about the possibility of ‘shipageddon‘–a perfect storm of activity where shipping capacity maxes out. Amid positive reports about a vaccine, there is speculation that an early distribution may unintentionally impact holiday shipping. When push comes to shove, disseminating a possible cure to the virus will trump your granddad’s request for sports socks.
Yet, FedEx (96.6%) and UPS (96.9%) on-time delivery rates were significantly higher than expected at the close of November, according to ShipMatrix. That might change as shipping services adjust in-real-time to meet the increased demand. UPS recently suspended pickups from large retailers like L.L. Bean, The Gap, Macy’s, and Nike as they exceeded previously negotiated volumes. The shippers’ intent ensures that shipping delivery support is available to small and medium-sized businesses, and the larger ones, too.
Keeping the Consumer Top of Mind
There is also the question of how to ease the checkout process to guarantee sales conversions. Right now, the most significant pain point for consumers is the laborious task of filling out shipping and billing addresses and credit card information. Retailers are actively investing in address verification technologies to ensure package deliveries are more accurate. They also minimize friction and enhance the consumer experience to maintain shopper loyalties.
Meanwhile, some retailers are thinking about what else they can put in a box. The convenience of ordering Christmas trees is causing quite a buzz with consumers amid rumors of tree shortages, on par with toilet paper scarcity earlier this year. This need has prompted Home Depot to launch a Christmas tree delivery service; Lowe’s, Target and Walmart plan to offer similar services.