If there’s one thing about the upcoming holiday that everyone in apparel can agree on, it’s that the season is going to look different than years’ past. For one, the shift to digital throughout the Covid-19 pandemic is likely to result in an even bigger e-commerce bonanza, which retail warehouses and distribution centers have been scampering to handle ahead of anticipated demand spikes.
The expected digital jump is pronounced—online sales are seen growing 30 percent year over year to a projected high of $940 billion, up from the 8 percent growth that occurred last year, Salesforce calculated in its holiday insights.
But this season’s changes aren’t just about the obvious of where, but also when, the dollars are being spent. Because this year, October now is shaking out to be an official holiday shopping month whether retailers are ready to handle it or not. This year, nearly two-thirds of consumers plan to begin holiday shopping well before Thanksgiving— with 35 percent saying they will start as early as October, according to a survey from Listrak. A shopper study by Affirm, which just raised $500 million, was even more upbeat on the early start, finding that 50 percent want to get a head start on their holiday preparations in October.
Salesforce said that 10 percent of Cyber Week sales—accounting for as much as $6 billion in the U.S. and $26 billion worldwide—would be pulled into October, indicating that the traditional top spending days will more likely than not take a hit.
And even without taking forward-looking projections into account, 49 percent of shoppers already say they’re shopping online now more than they were pre-Covid, according to a consumer survey from Bazaarvoice.
“Holiday shoppers are going to be shopping earlier than ever before and purchasing more online than ever before. In order to make sure they avoid large crowds of people, that number is likely to increase during the holidays,” said Suzin Wold, senior vice president of marketing at Bazaarvoice. “Brands and retailers need to ensure they have their holiday plans put into place earlier than ever, with an unprecedented and robust digital strategy that is a worthy replacement for the in-store experience that shoppers will be missing out on.”
Amazon Prime Day announcement pushes holiday ahead
When you think of e-commerce these days, Amazon is likely the first thing that comes to mind, so it’s only fitting that it plays a major part in the big October push.
Amazon’s disclosure that its annual Prime Day event would take place on Oct. 13-14 certainly fueled the fire that the season is starting early for many shoppers. With estimates from Internet Retailer projecting that Amazon made more than $7.1 billion in sales throughout the 2019 event, and 57 percent of consumers shelling out as much as $100 more than they did in 2018, according to Kearney, there was a massive shopping gap that wasn’t quite filled for a lot of consumers over the summer and back-to-school seasons.
On average, consumers anticipated budgeting 55 percent of their total holiday season spend toward shopping on Amazon, and this climbs to 60 percent for anticipated Prime Day shoppers, a September survey from CouponFollow says.
RetailMeNot expects Amazon’s event will draw a frenzy of activity from an influx of brands hoping to cash in. “We are going to see more brands participating during Prime Day competing for Amazon sales on October 13 and 14,” said Sara Skirboll. senior director, marketing and communications at RetailMeNot. “In fact, our research suggests that 46 percent of retailers are more likely than they were in 2019 (38 percent) to offer their deepest discounts during Prime Day rather than Black Friday or Cyber Monday.”
While the beast that is Amazon is certainly an intimidating tone setter, retailers still can learn from the e-commerce giant, and even lean into what they are doing, to kick off the holiday season.
“My advice to retailers—don’t fight it, piggyback off of it,” said Kirsten Newbold-Knipp, chief growth officer at deliver and fulfillment platform provider Convey. “Certainly, timing will be a huge boon for Amazon as many consumers will take advantage of the deals to kick off their holiday spending. Instead of worrying about the potential cannibalization of your sales consider what unique or cool thing you can do for your customers to show them appreciation during October as well. We’ve already seen Target and Walmart announce their own massive sale events to overlap with Prime Day; if a sale isn’t it, consider other options like a ‘free gift with purchase’ or lowering your threshold for free shipping during that time.”
Also, brands can still have the chance to capitalize on the subset of consumers who have been disappointed with the e-commerce giant. More than 33 percent of consumers are shopping online at top competitors like Walmart, Target, and eBay instead of Amazon due to out-of-stocks and delayed shipping times, according to an August CommerceHub study.
Not only are there expectations that shopping will be earlier and more digital, it seems one of the nation’s biggest retail trade groups is hoping that scenario plays out. The National Retail Federation (NRF) is pushing shoppers to get their holiday shopping taken care of ahead of usual with the launch of its “New Holiday Traditions” campaign encouraging consumers to “shop safe and shop early” this year to avoid overcrowding stores and take advantage of early discounts.
Shipping delays must be counteracted with BOPIS/curbside pickup
As retailers anticipate more shopping earlier and away from the store, supply-chain operations are admittedly tasked with the difficult issues. Challenges such as shipping delays and inventory shortages, which sprang up at many points throughout the pandemic, are expected to rear their ugly heads again if e-commerce surges to unmanageable volumes. Up to 700 million packages face potential shipping delays as orders are likely to exceed shipping capacity by 5 percent, says the Salesforce study.
To fight off this harsh reality, retailers have it in their best interest to remind and incentivize shoppers to buy early and highlight shipping cut-off dates so that consumers can avoid last-minute purchases and reduce fulfillment strains during the busiest weeks.
On the shipping end, retailers must leverage their store base more than ever for online purchasing to reduce the burden on shipping networks. As many as 80 percent of shoppers expect to increase BOPIS and curbside pickup over the next six months, according to a third-quarter survey from Manhattan Associates and Incisiv.
“BOPIS and curbside may also offer retailers one of the few opportunities to re-introduce joy into shopping experiences that is so critical to holiday shopping,” Giri Agarwal, chief strategy officer at Incisiv, told Sourcing Journal. “Retailers may employ outdoor entertainment, food stalls, and be able to create a more festive atmosphere outside their store.”
Unfortunately, retailers have plenty of work to do in nailing the BOPIS basics. Overall curbside pickup experiences rated 3.53 out of five stars and overall BOPIS experiences rated 3.56, according to the joint study, so there’s a lot retailers must improve on if they really want to resolve their back-end problems.
Agarwal offered some recommendations for companies serious about maximizing omnichannel opportunities. Ahead of the holiday, retailers should fix aspects of the process they can still control, Agarwal suggested, such as displaying accurate store inventory online, increasing availability of pickup dates and times, establishing narrower and more accurate pickup windows. They might also want to reduce wait-time at store and instill better communication measures regarding order status, such as with a store associate about an order.
With Covid concerns driving customers’ interest in new or different ways to receive orders, retailers must examine all relevant factors to ensure they’re leveraging the most profitable strategies and tactics, according to Amy Tennent, senior director of product management at Manhattan Associates.
“We often talk about this in terms of ‘fulfilling from the best location,’” said Tennent. “By that we mean taking into consideration customer expectations of when their order will arrive, where the inventory currently is, the product performance based on forecasts, price markdowns, and more to ensure that both shoppers are happy with their experience and the retailer is maximizing the value of each sale.”
Inventory shortages remain ‘elephant in the room,’ so transparency is key
The notion that inventory simply may not be available for shoppers is a harsh but realistic reality. Adele Harrington, chief development officer of United National Consumer Suppliers (UNCS), told Sourcing Journal that inventory shortages have been the “anticipated elephant in the room” for the past six months.
“The paradox was we all knew we needed to increase sales, but we also recognized supply chains and manufacturing ceased to operate during Covid-19,” Harrington said. “We see shortages every day—home décor, storage, organization, small appliances, giftware, power tools, etc. are occurring due to the fact that supply chains and manufacturing haven’t caught up to pre-pandemic levels. Unfortunately, many retailers planned fall very pessimistically, and sales are outpacing their plans, and demand for pandemic-related commodities/chemicals and product generally is outpacing supply.”
If there are inventory shortages, at the very least, retailers must be transparent about any issues that may arise. Consumers have been more understanding of Covid-19’s effect on the supply chain, with 89 percent willing to give retailers extra time to deliver packages this holiday season, according to Convey’s holiday survey. Seventy-four percent are willing to grant sellers one to four extra days, while 15 percent are even willing to wait five or more additional days for delivery.
Keep a close eye on product
Scott Fenwick, senior director of product strategy at Manhattan Associates, argues that the top inventory challenge now is making sure that the goods are in the right place. In the joint Incisiv and Manhattan study, shoppers rated in-store product availability a mere 1.86 out of five stars since they often can’t pick up the product they found at their local store.
“If retailers misread the levels of demand to expect online versus in-store, that could be as impactful as not having the inventory at all,” Fenwick said. “It is important for retailers to keep a close eye on their sales numbers to have products in the right place to reach their customers. Additionally, retailers need systems in place that enable the agility and fluidity to make adjustments because, even if forecasting is mostly right, there will always be more opportunity to maximize sales as real-time information becomes available.”
Fulfillment side ramps up hiring to handle e-commerce spikes
The usual suspects have bolstered their holiday employee count, and third-party logistics and fulfillment players are beefing up their manpower as well. Warehousing and storage payrolls jumped by 32,200 jobs in September, according to seasonally adjusted preliminary employment figures the U.S. Bureau of Labor Statistics.
In August, DHL said it will hire 7,000 associates through the end of the year to meet demand fueled by the peak holiday shopping season and the response to the pandemic. The logistics powerhouse has had to redesign existing infrastructure and processes, and to build out additional capacity to handle the upcoming peak.
More recently, omnichannel commerce technology and operations platform Radial said it plans to bring aboard more than 25,000 entry-level fulfillment center workers across North America to support the anticipated e-commerce demand this holiday season, up 19 percent since 2019. These seasonal workers will be responsible for processing online orders, including picking, sorting, packing and shipping, while leveraging cutting-edge technology.
Third-party logistics companies XPO Logistics and Geodis in Americas are both preparing for the peak season with the aim to add 10,000 and 8,000 seasonal jobs respectively through the end of the year.