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TrendWatch 2021: Retail Strategies for Shippageddon

Dec. 31, 2020
With e-commerce increasingly dominating holiday sales, the biggest hurdle retailers and consumers face is tied to timely shipping and fulfillment.

As retailers of all sizes prepared for a holiday season that largely took place online, many invested in their online channels, supply chain management, and other operations that would be impacted by a predicted surge in online sales. While there are several factors that retailers must consider as the holidays go online—such as e-commerce platform optimization, payment types and digital sales--perhaps the biggest hurdle retailers and consumers face is tied to timely shipping and fulfillment.

Delivery service providers have been bracing for what some are deeming “shipageddon,” with a potential shortfall of as many as 7 million packages a day during the holiday season. Now and in coming years, retailers will need to prepare for shipping delays and put a robust merchandise returns process in place to maintain a positive customer experience if purchases are delayed or if products end up not working out. 

Participating in this Q&A are: Megan Higgins, VP and GM of e-commerce and marketplaces at AvalaraKrish Iyer, head of industry relations and strategic partnerships at ShipStation; and Stuart Pick, VP of global alliances at Brightpearl.

What factors are contributing to added strain on fulfillment services this holiday season?

Megan Higgins: The COVID-19 pandemic has caused a seismic shift in consumer preferences from in-store to nearly exclusively online shopping. In fact, according to McKinsey, 10 years of e-commerce adoption was compressed into three months this year. Not only were some retailers caught by surprise by this influx of online traffic, but numerous supply chains weren’t prepared for the acceleration we’ve seen in 2020. Moreover, the increase in e-commerce traffic comes at a time where increased safety measures have had a slowdown impact on the efficiency of the supply chain.

As we’ve seen thus far, the holiday season strain is proving out. The pressure on fulfillment servicers to keep pace with accelerated e-commerce growth while increasing safety measures amid the pandemic are likely contributing to supply chain disruptions and delays.

Krish Iyer: Obviously, COVID-19 has meant a greatly increased level of online shopping, but a fear of a lack of inventory has forced many shoppers to stockpile not only essential supplies, but also err on the side of ordering more in terms of gifts, etc., due to a perception that inventory will run out. Additionally, the discomfort with in-person returns means that many shoppers are initiating the return process from home, thus adding to the volume that we would normally see.

Stuart Pick: Holiday spend in the U.S. this year is projected to hit a record $189 billion, as more of us are shopping online than ever before. On top of the excess demand and the speed with which consumers expect their goods, rules put in place to safeguard against the pandemic have also meant that many companies have had to reduce headcount and implement safety measures within the warehouse which is detrimental to the overall speed of fulfilment.

What are some shopping trends of 2020 that retailers should consider as they execute their future holiday fulfillment strategies?

Iyer: I believe an earlier shopping season is here to stay. Additionally, I believe the typical discomfort with initiating returns from home might be mitigated more. Thus, I believe both returns from home and an earlier shopping season mean that retailers will need to plan their inventory wisely.

The holiday shopping season now starts as soon as August! Curbside pickup was a common trend for retailers; consumers seemed to like buying online and picking up locally; this trend is likely permanent. Could we see a movement toward curbside returns too in 2021?

Lastly, the trend for retailers was to communicate shipping lead times before the checkout. Previously, many retailers thought of this as a potential barrier to the sale and wanted to be coy about it or not communicate the lead time until after the order was placed; this is no longer acceptable as a standard and the retailer must communicate it well in advance of the “moment of truth” checkout experience.

Higgins: Long before the pandemic arrived, consumers had the expectation that retailers should show up wherever they are shopping. The acceleration of e-commerce has only exacerbated this expectation, which forced retailers to adopt an omnichannel approach to commerce this season and into 2021. While omnichannel commerce isn’t necessarily a new trend, the adoption of technology to create a seamless experience across channels, streamline fulfillment processes, and manage data will be key for their holiday and long-term fulfillment strategy.

Personalization has been another trend that has influenced consumer behavior in 2020. Due to the number of options available when making purchases online, consumers had already become accustomed to being able to make purchases from nearly any channel, any device, and any seller they choose coming into 2020. Now, to stay competitive online, retailers are being pushed to provide personalized experiences for individual consumers—regardless of the channel or method they use to shop. At the end of the day, the pandemic-fueled acceleration of e-commerce has simply served as a catalyst for behavioral change that was already in motion.

Pick: Retailers mustn’t lose sight of the fact that stores are still very valuable e-commerce assets; as we know from our latest report 56% of consumers will increase their use of buy online, pick up in-store (BOPIS) services over the next 12 months, so it’s very important that merchants are able to offer these blended buying experiences over the holiday period and beyond.

What can retailers do now to mitigate shipping and fulfillment interruptions?

Iyer: Inventory, inventory, inventory. The retailer must become much more precise about planning inventory and forecasting demand. Additionally, retailers are going to need to finally adopt free/no hassle returns, if they have not already done so. The days of purposely adding friction to the returns process are over. The retailer who makes returns easy will be the one that gets the sale and keeps the customer.

Higgins: Retailers should be using technology that integrates inventory management into the point-of-sale to ensure that inventory is being managed correctly and that data from separate channels is being aggregated to prevent discrepancies For smaller retailers, consider offering curbside pick-up or local delivery options so you can prioritize getting their long distance orders shipped in time. We will likely see more retailers use storefronts as fulfillment and pick-up centers as e-commerce continues to accelerate and in-store shopping slows. The investments made today could set retailers up for success into 2021.

Pick: Make use of their own product data to plan ahead, ensure that there are up-to-date stock levels across all channels and use the data to predict and avoid any surplus or oversold stock situations.

What types of technology can retailers leverage to navigate fulfillment challenges and maintain positive customer experiences?

Iyer: Self-service returns tools. It is simply too onerous for merchants to staff the returns process; having tools that allow the consumer to initiate the return on their own will become preferable. Tools that show the fulfillment lead times and the shipment lead times precisely based on historical data (perhaps even based on the seller’s history) will become a necessity in communicating the most precise order-to-fulfilment time.

Higgins: According to SearchNode, 44% of e-commerce companies are currently looking to implement, change, or improve payment technologies. One area technology can help maintain positive customer experiences is at checkout. Retailers should enlist technology to ensure that every line item on an invoice is correct to prevent delays and diminishing customer experience due to incorrect totals. Tax compliance software can help ensure tax calculations on sales are correct across channels, manage documentation needed for tax-exempt sales, and monitor changes in tax rules and rates to save businesses time and mitigate risk.

Pick: Automation always has a role to play here. When it comes to shipping speed, automating sales orders, stock updates and distribution decisions will improve this exponentially and enable retailers to avoid bottlenecks in their post-purchase journey.

Many businesses have concerns about USPS Priority Mail delivery during the holidays. Will these concerns create more pressure on private carriers?

Iyer: All carriers are facing pressure due to volume; obviously there was a greater impact in 2020, but all carriers are seeing challenges from the increased volume.

Pick: Private carriers certainly have to be on top of their game during the holiday season, and with the huge expected increase in holiday orders there’s almost no margin for error.

What can retailers do earlier in the customer journey to improve the fulfillment stage?

Iyer: First, inventory planning and visibility cannot be stressed enough. Second, a strong level of communication between the merchant and their suppliers is critical. Third, having technology tools that can clearly communicate the shipping lead times in the cart will allow the retailer to improve fulfillment as they will have greater visibility into what they can promise and not promise to a customer—and then plan accordingly to meet the promise. Lastly, the use of third-party fulfillment options to get inventory as close to the end consumer as possible will become more critical than ever in 2021; merchants of all sizes need to investigate adding these options to improve their fulfillment to their end consumer.

Higgins: Retailers can be transparent with their online customers by providing accurate delivery windows and overcommunicating any delays in fulfillment. Reaching out to your customers in advance and making them aware of delivery dates or delivery ranges at the time of checkout are essential when managing expectations during shipping and fulfillment interruptions.

Pick: Ownership of the entire customer journey is key. Ensure that the customer journey is as transparent as possible at every stage. Don’t for instance allow the customer to order an item which is out-of-stock without first notifying them that there will be a delay. The customer journey also doesn’t stop once they’ve clicked buy; sending real-time updates on delivery/pick up information during the fulfilment stage will also help to iron out any misunderstandings or delays.

What are retailers actively doing to get deliveries to customers on time?

Iyer: Retailers are communicating with their suppliers and carriers—old-fashioned people communication never goes out of style. Communicating their inventory levels has also been a common trend to get customers to order on time. Lastly, communicating the typical lead times on order fulfillment and delivery has meant deliveries are getting to customers on time.

Higgins: Retailers began preparing their inventory and e-commerce websites for the influx of holiday sales months beforehand to make sure they were able to get deliveries to their customers in a timely fashion. Predicting the inventory needed to meet the holiday demand is not as easy as it sounds. To determine their inventory levels, retailers must evaluate sales data from previous holiday seasons while also considering new products, channels, marketing spend, consumer preferences, and the general growth their business has seen each month. In 2020, we’ve seen more retailers turn storefronts into dedicated fulfillment hubs to reduce supply chain burdens and get products closer to the end user earlier in the delivery process.

Pick: I think this comes down to better demand management, and employing solutions that will allow you to be flexible enough to respond to fluctuations in demand. By strategically implementing automation into operations, supply chains can work continuously without passing on any delays to deliveries.

How can retailers diversify their fulfillment strategy in order to deal with holiday demand?

Iyer: Making use of a diverse set of suppliers is important, as is having precise insight into demand planning and inventory levels. Additionally, as mentioned above, old-fashioned direct communication with carriers, vendors/suppliers—and the customer—can help the retailer diversify and tailor their shipping options to satisfy customer demand.

Higgins: Retailers can diversify their fulfillment strategy by using micro-fulfillment centers, subscription service models, drop-shipping, and third-party provided last-mile services.

How can retailers optimize the post-purchase journey to avoid delays?

Iyer: The retailer can do many things. In addition to proactive email notifications on shipping and delivery, they can create their own tracking portals—this can help reduce “where is my order?” inbound calls. Additionally, the retailer can make returns simpler, thus avoiding the delay of a consumer returning the package itself. The faster the retailer gets the shipment back, the faster it can be processed to then be potentially resold—and still be part of the holiday season’s sale. As simple as it sounds, old-fashioned communication and “do unto others as you would have done to you” applies—your consumers want to be notified if there is a delay.

Higgins: If you’re fulfilling orders yourself, consider using a third-party shipping application or capabilities provided by your e-commerce platform. These applications help automate shipping for merchants of all sizes and offer small businesses discounted shipping rates with USPS, UPS, or FedEx, plus importantly can provide alternatives such as local regional carriers. By leveraging multi-carrier technology to handle shipping logistics, retailers can more easily offer merchandise returns, which is important for consumers shopping online.

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