The Road Ahead: How to Anticipate and Plan for Cyber Weekend Shipping Challenges in Light of the Coronavirus
When the coronavirus began to broadly impact the US in March 2020, the greatest pain felt in the retail sector, beyond store closures, was in the supply chains of companies across the country.
Manufacturing facilities outside of the US (mainly in China at that stage) had closed or dramatically reduced production. Warehouses in the US were seeing closures or serious restrictions. And shippers (including parcel delivery companies like FedEx, UPS, and others) were hurt by illness and fear across their driver and facilities staff.
Product shortages and long delivery delays were common throughout the spring. Now, consumers are worried it may happen again.
In a recent survey of online shoppers, 75 percent of respondents said they’re worried about delays in receiving their products or having a lack of clarity around shipping timelines.
So, what’s changed? Have supply chains and shippers, in particular, adjusted to the likely demands on their people, processes, and facilities?
With this year’s Cyber Weekend looking to be unlike any other in history and only three months away, how should brands be preparing now to anticipate supply chain and shipping challenges?
The time to prepare is now: Black Friday deals will start earlier than ever
The same Cyber Weekend playbook brands have been using over the last few years won’t apply in 2020.
Kohl’s Chief Executive Michelle Gass said to anticipate “a holiday season like no other.”
Although the struggles in the retail sector long pre-dated the coronavirus, those struggles have accelerated to existential threat levels. Additionally, public health-related concerns with crowds will redefine the Cyber Weekend shopping experience in 2020.
Black Friday—a shopping holiday that’s usually marked by long lines of shoppers waiting for doors to open and “doorbusters”—will see many more retailers closed this year.
Walmart started a trend of closing their doors on the biggest shopping day of the year, with other large retailers following suit, including Kohl’s, Target, and JCPenney.
Each of these retailers is still counting on a massive surge in sales during the holiday season, so without the draw of the actual day, many retailers will start their holiday selling season earlier—closer to Halloween.
“Everything has changed and retailers are having to reinvent themselves. The deals will start in October, and retailers will re-up week after week—they’ll have one limited edition on week one, and week two it’ll be something else so they can get consumers to keep buying, notes Marie Driscoll, managing director at retail advisory firm Coresight Research.
Diversify your supply chain risk
Spring of this year saw many brands with overly-concentrated sourcing, warehouse, or inventory management struggle as facilities and entire workforces were negatively impacted by closures or, worse, illnesses.
“COVID was the big wake-up call,” according to Ronald Leibman, a partner leading the transportation, logistics, and supply chain management practice at law firm McCarter & English in New Jersey.
In particular, the pandemic has highlighted the importance of a resilient and nimble supply chain.
The consequences of an inflexible supply chain can be seen in your local bike store, where bikes are hard to come by, and, perhaps, in your local school where the laptops that students will depend on for remote learning this fall and beyond are in short supply.
Specifically with warehousing and inventory, failure to diversify creates serious “business continuity risk,” according to Dhruv Saxena, CEO and co-founder of ShipBob, a technology-enabled third-party logistics provider that fulfills ecommerce orders for direct-to-consumer brands.
One specific tactic to reduce this risk? Diversify beyond a single facility to a distributed network of fulfillment centers.
Not only will this lower the consequences of any single facility shutting down, Saxena notes, “It may also help brands get their products to their end customers faster because fulfillment centers are regionalized.”
And if a brand owns and operates their own facilities, there’s an additional risk beyond closure and illness: can they actually compete with the big players like Walmart and Amazon in the hiring of the seasonal workers they’ll need?
“Consider the role outsourcing can play in your business now,” said Saxena.
Are shippers already at a breaking point?
A brand’s advanced preparation for Cyber Weekend shouldn’t stop with warehouse and inventory plans; it needs to include a shipping strategy, as well.
“Shipping providers have been at or over peak for months now,” says Ryan Kelly, vice president, global ecommerce marketing at FedEx. “We conduct extensive planning for peak every year, and we’ve been investing for the significant, long-term growth in ecommerce for years. What’s different this year is that COVID pulled peak to March from November and accelerated several years of base ecommerce growth. We’re continuing to add capacity and work with our customers to help manage their holiday shipping volumes.”
Despite ongoing, massive hiring efforts at FedEx (more than 70,000 positions are expected to be added in the lead-up to the holidays), UPS, Amazon, and others, demand for shipping services continues to outpace supply.
Having the drivers and facility workers is only part of the equation, Kelly says. “There are only so many loading dock doors, sorting facilities, and trucks. The system needs physical capacity.”
"Shipping providers have been at or over peak for months now…We conduct extensive planning for peak every year, and we've been investing for the significant, long-term growth in ecommerce for years…COVID accelerated several years of base ecommerce growth…We’re continuing to add capacity."
Ryan Kelly, vice president, global ecommerce, FedEx
“We know that online shopping picks up over the holidays and the system is already pressed to meet that sort of demand,” said Mark Mathews, vice president of research at the National Retail Foundation.
“If you’ve got a situation where you’re adding another 10 or 20 percent to that, which is well within the realm of a possibility, that creates real challenges,” Mathews added.
Evidence of the strain is already clear.
Shippers, including the USPS, are applying surcharges to their delivery rates. And retailers are adjusting some of their offers to include benefits like same-day delivery, which is typically handled by local delivery services and gig workers, and also reduces some of the burden on the large shipping companies.
These challenges will only grow over the holiday shopping period, so how should brands react now?
Kelly recommends a few tactics.
1 | “Plan your promotions in light of shipping constraints.”
Shipping demand is highest on Mondays, so promotions launched over the weekend are likely more problematic. Like many retailers have already announced, move your sales up earlier in the fall—or even August. An earlier start to the season may also save on costs as certain surcharges apply later in the peak season.
2 | “Offer flexible delivery/pick-up options.”
Merchants who are open to shipping to centralized pick-up locations near their end customers’ locations (e.g., a FedEx center or a Walgreens), will reduce logistical demands on FedEx and also save the additional cost of a residential drop-off. Promotions can even be used to incentivize lower-cost delivery options like centralized pick-up or even buy online, pick-up in-store (BOPIS).
3 | “Think ahead.”
Coronavirus-related challenges have added to the volatility the retail sector was already experiencing. Merchants and brands need to have their shipping options, rates, and terms in place before they launch their holiday promotions so that they have the options and flexibility they need to execute decisions in real-time as facts change.
Some of the changes sparked by the pandemic may stick with us long after the virus itself has been tamed by a vaccine.
“Fast, no-strings free shipping may be a thing of the past,” says Kelly, noting that even though ecommerce and direct-to-consumer brands, in particular, have seen great growth, there are still significant costs and profitability challenges across the sector.
Shipping offers may forever change as a result.
Build flexibility into your supply chain.
Over-reliance on a single facility or provider for sourcing, warehousing, or fulfillment creates critical levels of risk for a business.
Leverage outsourcing options, third-party logistics providers, and other tactics to spread out the risk of your company being paralyzed by a single shutdown.
Now is the time to make these changes.
With shipping providers already over-capacity and the height of an earlier and more-extended holiday selling season just weeks away, it’s necessary for brands to prepare now for challenges.
The good news? Customers may be able to help.
Brands that communicate openly and often about logistics challenges, including shipping, may find that their customers are willing to help through measures like longer fulfillment times, buying online and picking up in-store (BOPIS), curbside, and centralized pick-up.