This past month was HUGE for online retail.
Seriously—record-breaking e-commerce sales filled my news feed immediately after Black Friday weekend and Cyber Monday. Even Thanksgiving Day turned around some unexpected results. According to Adobe Analytics, Americans spent a record $6.59 billion online on Cyber Monday alone.
Insane. As a result, this influx of online orders is already causing retailers to fall behind on their holiday deliveries. In fact, some of the country’s biggest carriers expect to deliver A TON of packages between Thanksgiving and Christmas:
- U.S. Postal Service: 850 million packages (already a 10 percent increase from last year!)
- UPS: 750 million packages
- FedEx: 400 million packages
To give you a little more perspective, that’s an average of more than 20 million packages delivered each day for the U.S. Postal Service. No joke.
The demand for online fulfillment is no surprise to retailers at this point. Nonetheless, a sense of concern to keep up with delivery speed expectations was absolutely prevalent in the months leading up to the holiday season. It’s already hard enough to keep up with standards set by e-commerce giants like Amazon and Alibaba, let alone having to meet these delivery expectations when demand is twice as high during the holidays.
As consumers, we rarely think about what it actually takes for retailers to meet this expectation—unless you’re in the industry, of course. ;P
It’s really really complex, a logistical nightmare, to put it bluntly. You have to take into consideration shipping costs. Shipping speed. Available inventory. The number of store locations. Distribution Centers. Split-shipments. Inventory turn.
The list goes on.
So many factors come into play, it’s no wonder traditional retailers have a tough time getting it right.
And it’s only getting harder.
The New Norm
Research indicates two-day delivery expectations have grown tremendously.
ATTENTION: This is now the norm everyone.
According to an IBM Consumer Survey, 72% of consumers factor in the two-day delivery option when deciding whether or not to make an online purchase.
What’s even more shocking is the 1-2 hour delivery window expectation also appears to be growing rapidly—about 45% of consumers surveyed believe this delivery option is important when deciding whether or not to place an online order.
We all know what this means. The 1-2 hour delivery window is working its way up to be the NORM for consumer delivery speed expectations. (*Gulp*)
Now, you may be thinking: “But e-commerce only makes up approximately 10% of total retail sales.”
Yes, you’re not wrong. However, a recent report by Fung Global Retail & Technology reveals the growth of online sales during the holiday season continues to increase each year, a sign that e-commerce will be much more than “just 10%” of retail down the line.
You can’t ignore the rapid growth from online sales, especially when you pair it with stagnant store revenue.
Proximity is Key
So what’s a retailer to do in order to compete? According to Gartner, they’re starting to leverage their biggest asset: their store network.
“The shift toward online commerce is driving many supply chain and operations leaders in retail to rethink the role of the store to improve all types of fulfillment performance.” - Gartner, Get Ahead of the Competition: How to Use Store Inventory to Speed Up Retail Fulfillment
Retailers can use proximity to their advantage.
There are so many more options for consumers when a retailer is able to leverage their stores effectively—including options like click and collect, reserve and collect, or ship-from-store.
It’s amazing and a super convenient option for many consumers. Boy, do we love convenience. These fulfillment offerings, paired with an accurate handle on inventory, can improve delivery leads times AND revenue.
Besides, these arrangements give retailers much more control over their customer’s deliveries:
“Retailers are increasingly taking matters into their own hands by encouraging shoppers to buy online and pick up in the store. Walmart offers discounts to customers who collect their own orders. Sears, meanwhile, allows shoppers to pick up items curbside, without ever getting out of their cars.” – The Washington Post
As you can see, a number of major retailers are embarking on these new strategies to meet consumer delivery expectations. For example, Target is one that’s gained quite a bit attention this holiday season.
They’re going all in when it comes to fulfillment, considering all the new offerings they’ve introduced this past year:
- Target Restock – a next-day delivery option for everyday essentials
- Acquisition of Grand Junction, a transportation technology company, to provide same-day delivery options
- Acquisition of Shipt to provide same-day grocery delivery
- Curbside fulfillment for 180,000 shelf stable items
- Expansion of ship-from-store and in-store pickup locations
Their ship-from-store fulfillment offering is killing it. Available at more than 1,400 locations across the country, the first half of the year accounted for more than 40% of digital units shipped.
With the holidays wrapping up, this percentage is expected to increase to about 80% in the days leading up to Christmas.
Data Analytics Powering Fulfillment
It’s all about speed, accuracy, and reliability.
And, let’s not forget, data.
Retailers have tons of data available, including POS data, social data, geographical data, and so much more.
The challenge is being able to extrapolate meaningful insights from all the available data to paint a better picture of shopper’s behavior and future demand. At first, the idea of predicting demand may seem a bit out of reach, but let me reassure you, it’s not. Not at all.
Predictive analytics technology is the way retailers will be able to accurately forecast demand and ensure the right inventory is placed at the optimal location for any future e-commerce order.
“By 2020, 30% of digital commerce revenue growth will be attributable to artificial intelligence technologies.” - Gartner, How to Apply Artificial Intelligence to Digital Commerce
The cost of failing to incorporate data into your strategy is mounting. This is clear from what we witnessed from 2017 alone, which was filled with numerous bankruptcies and store closures.
Along with the importance of data, the cost of executing your fulfillment offerings effectively is even more crucial.
Especially during the holidays, where one delayed delivery can ruin the chance for any future purchases from a customer.
The costs are high and Christmas is around the corner. Get fulfillment right before it’s too late.
The end of the year is creeping up quickly, which means the past 365 days are clearly up for review. Check out our webcast replay (below) with Fung Global Retail & Technology to review the biggest takeaways from 2017 and tips on how to succeed in 2018.