Last week, we covered an overview of some notable takeaways from the 2013 holiday shopping season. Today, we’ll take a more in depth look at the holiday shipping delays that affected many retailers this year.
The holiday season, particularly Christmas, is an extremely stressful time for retailers, online stores and shipping companies due to the strain on capacity. However, Christmas this year even caught online retail giant Amazon off-guard. The company announced sales of 426 products each second, so it’s no wonder that it struggled with shipping customer orders on time. Other major online retailers experienced the same struggle, some notable ones being Kohl’s and Wal-Mart, which are also known to have large (and reliable) operations.
Causes of Delay
Consumers tend to shop more online during the holidays and it can put a lot of pressure on Ecommerce merchants.The National Retail Federation estimated that online sales this holiday season would account for approximately 14% of retail sales; the overall yearly average is closer to 6%.
There was a rise in last minute shopping. Exacerbating the effect of the surge in online shopping was the fact that many customers waited until the last minute to shop. IBM reported that during the last weekend of shopping before Christmas this year, online sales were 37% higher than the previous year. The unexpected surge in online buying coupled with bad weather led to some packages not getting delivered on time. The wave of shipments was so large that Natalie Black, UPS spokeswoman, announced that the volume of air packages in their system surpassed the capacity in their network. Consumers who ordered products internationally or by air were entitled to refunds. The last-minute flow that jammed UPS systems is a sign that online sales (particularly last minute ones) surpassed even optimistic projections.
Another factor that may have played a role in the delivery crisis was the shorter holiday season. There were 6 fewer days between Christmas and Thanksgiving this year compared to last year. Based on the survey done by the National Retail Federation, over 30 million Americans did not start shopping until after December 9th. Almost half of the respondents said that they intended to do that last minute shopping online.
Delivery carrier constraints are outside the control of retailers. UPS stated that holiday demand was higher than predicted. The company, which had expected to ship over 132 million packages, said on its website that it was still making efforts to deliver packages to their destinations as fast as possible. FedEx, on the other hand, said that it didn’t experience any major service interruptions. The two companies, FedEx and UPS, did not specify the number of packages that were not delivered on time.
How Retailers Responded (and How They Can in the Future)
With the high influx of orders arriving and the number of deliveries going out during the holiday season, it’s no wonder that shipping delays are bound to happen occasionally even for the most prepared retailer. However, shipping delays can create disappointed consumers who are upset that their orders didn’t arrive on time for Christmas, and they may turn to competitors.
The delays were particularly problematic for consumers who ordered items at the last minute, relying on online retailers’ shipping guarantees and for Amazon, their famous reputation for competence to hold true. To address customer dissatisfaction, Amazon and UPS said that they would provide refunds for shipping costs to consumers who didn’t receive their orders on time. Those who failed to get their orders by Christmas day will receive $20 gift cards plus refunds on shipping costs. Similarly, a spokesperson for Kohl’s apologized for disappointing customers and said it would pay the full cost of all items not delivered in time. Wal-Mart also offered gift cards to affected customers. Gift cards can be a good way to get the customer to shop from you again despite any disappointment they may feel. FedEx didn’t guarantee refunds, but announced it would work with those who were affected by delays.
It’s clear that people are moving into a new age of shopping. But as more and more people turn to online shopping, delays are expected to happen particularly during the holiday season. What online retail stores can do is be prepared for it and work with reliable delivery carriers. Monitor sales velocity trends and don’t let the acceleration catch you off guard. Understand your capacity constraints and manage your demand. Make sure that the guaranteed delivery dates are feasible, with some leeway to handle greater than expected demand. Strategic repricing can be one way to mitigate the surge in last minute shopping (for example, offering more appealing deals earlier in the shopping season to entice customers to shop earlier). As for the customers, planning ahead is surely one of the best ways to get your order on time.