If there’s one motto for the upcoming 2021 peak season, it’s to expect the unexpected.
For emerging and established brands alike, peak season 2021 is going to be a minefield. While some product shortages have worked their way through and shuttered retail stores have reopened, consumer demand in many product categories is continuing unabated. There’s no doubt that the retail landscape has changed.
For the latest peak season insights, check out our Managing 2021 Peak Season eBook for 5 key control strategies for brands and retailers.
In the meantime, here are ten challenges that all retailers are going to face this peak season:
Whether it’s bottlenecks that are outside of a merchant’s direct control or those they can influence inside the four walls of a warehouse, back-ups in order processing or shipping create inefficiencies that add to costs. Against the backdrop of continued growth in direct-to-consumer (D2C) ecommerce, the pandemic and reopening has caused merchants to experience ongoing issues from labor shortages, squeezed carrier networks, and a whole lot more. Bottlenecks are everywhere, from choked parcel carriers that can’t keep up with volumes to historic delays at the ports of Los Angeles and Oakland.
From the warehouse down to the level of store-based fulfillment, typical bottlenecks include backlogged receiving and putaway, unprocessed orders due to inefficient picking and packing strategies, and returns awaiting processing. Add labor shortages and lackluster technology to the mix, and all bets are off for a successful peak season.
Costs are rising across sectors ever since 2021 got underway. Retail already has thin margins and inflation adds to the pressure that merchants face to avoid price increases. Rising commodity, labor, energy and other costs are contributing to consumer product price increases. The June 2021 core inflation rate, which excludes food and energy, was 4.5% over the prior-year period. In the energy sector, increases in fuel costs and capacity issues, among other factors, continue to drive up transportation costs, which are expected to rise further in 2021’s second half.
Labor shortages are an ongoing concern, and when combined with inefficient systems and processes, it’s a recipe for disaster at peak. Simply put, retailers, warehouses, DCs, 3PLs and short-haul ground carriers are having trouble filling jobs for both permanent and seasonal workers. As more retailers scale up for peak and the hospitality industry comes on back online, the balance may shift further away from logistics. Analysis by DC Velocity suggests that the transportation and logistics sector is one of the hardest hit.
Global, interdependent supply chains and unpredictable demand are the key reasons for widespread product shortages and stock-outs. The pandemic threw a monkey-wrench in normal cycles as many production lines slowed or stopped for certain periods, capital investments were stalled, and carriers cut back capacity. Backlogged supply chains and new demand stimulated by the reopening, among other trends, are currently resulting in long waits in certain product categories such as appliances. The 2021 vehicle shortage of new trucks and cars has skyrocketed the price of used cars. This has been caused in part by a shortage of microchips. (Only Toyota had strong reserves of chips to feed production lines).
A classic example of product shortages was the pandemic-triggered demand for toilet paper when stay-at-home orders came into place, which led to extreme shortages and hoarding. Demand for the product shifted from commercial settings to at-home consumers. The trouble was that many factories are tooled specifically for commercial or consumer product versions, and consumer-specific production lines couldn’t keep up.
All of this leads to backordering by merchants and product stock-outs which frustrate consumers.
In the first quarter of 2021 alone, U.S. ecommerce spending tallied over $196 billion, up a 39% from the year prior when many consumers had few other alternatives due to non-essential store closures. While many pundits say such rate of growth is sure to slow down, what hasn’t changed is that the consumer’s continued flight to online shopping is sure to capture a greater share of the pie. More D2C orders mean more packages —and more that can go wrong, especially during peaks.
Some might remember the runaway best sellers in the 1990s, like the Furby and Tickle Me Elmo toys that led to sell-outs everywhere. Anything from the economy to weather and pop culture trends can affect retail sales. Retail has always been a seasonal market, and D2C ecommerce is no different. It’s subject to great fluctuations in volumes accelerated by the ease and convenience of one-click shopping and social media influence. Whether it’s a specific product like the latest model of iPhone or hot categories like athleisure, the pandemic has made demand forecasting even more difficult.
For many ground carriers, peak is no longer limited to the typical August-October period, or for parcel carriers, November-December. The accelerated growth of D2C ecommerce and changed consumer shopping behaviors have put pressure on parcel carriers to expand their infrastructure and raise rates. Simply put: Their networks can’t keep up. Residential delivery fees and a host of ongoing rate hikes and surcharges are now the norm.
Many parcel carriers, regional carriers, and contract delivery van services are still recovering from the surge in pandemic-generated home deliveries and the 2020 holiday season – all the while trying to meet today’s demands. For the consumer, this equates to delays with more expected in the holiday shipping rush. In summer 2021, some online retailers sent delivery alerts to customers, such as: “Our shipping partners are experiencing delays nationwide, and your order may be in transit longer than usual. Please allow a few extra days for your delivery to arrive.”
The complexities of multiple shopping and delivery channels means more can go wrong when sales and shipping volumes surge at peak. Think ship-from-store, BORIS, BOPIS, and more fulfillment and returns options than ever before. While more distribution points and fulfillment options ideally get product to the consumer faster and cheaper because of shorter transit times, lack of visibility into inventory and constrained transportation networks can cause even more to go wrong.
Merchants can expect even more returns this year to stack up at customer service counters and in fulfillment centers. Why? D2C ecommerce is directly associated with producing more returns, according to National Retail Federation (NRF), and more consumers are expected to shop online this holiday season. NRF’s survey last year to retailers estimated the cost of holiday returns to merchants in 2020 at $101 billion, with the rate of ecommerce returns more than doubling in 2020. Those ecommerce returns add to the clogs in parcel carrier networks.
With kids returning to classrooms following the pandemic shutdowns and more adults heading back to offices, the back-to-school and fall shopping seasons have started early this year. Retailers and brands often choose to extend promotions by not limiting sales to just Black Friday, for example, which serves to create one peak period over several days, with ecommerce orders burdening carrier networks.
All of these factors have made managing peak a year-round job for retailers and brands of all stripes. Managing disruptions, avoiding distribution and fulfillment bottlenecks, and containing costs during peak have become the mantra for surviving and thriving. Fortunately, today’s advances in technology are bringing scalable technologies like order management automation and mobile warehouse management to the fore, with many affordable solutions for smaller merchants.
When merchants need to outsource as they grow and scale, seek out an ecommerce distribution and fulfillment specialist like Whiplash to ensure a manageable peak season. For 5 key control strategies to manage peak, download our Managing 2021 Peak Season eBook.