Peak season is almost around the corner for retailers everywhere. Last year’s peak shattered both eCommerce and brick and mortar spending records, Amazon’s call for free, two-day shipping (for all, including non-Prime members) encouraged retailers such as Walmart, Target, and more to follow its banner of fast and free shipping during the holiday season.
With Amazon upping the ante with its new Prime offering of one-day delivery, as well as its expansion and control over its air fleet, retailers who want to compete and make a profit during the last quarter have plenty to worry about this year. To top things off, they have to account for rising holiday surcharges from UPS, and they face an immense pressure from their customers to make deliveries seamless during a time of year when over one-fourth of shipping exceptions occur. [See how retailers fared during 2018’s peak season.]
As retailers everywhere think about whether they should implement two-day shipping, or even next-day delivery this holiday season, here are four questions they should consider:
4 Questions You Should Ask Before Implementing Two-Day Shipping for Peak Season 2019
What Does Shipping Cost For Retailers During Peak Season 2019?
Retail peak season typically lasts from Black Friday up until December 24. During this time, logistics teams should understand which delivery options are available to them, and what they may be charged, in addition to service fees and Holiday Surcharges from parcel carriers such as UPS and FedEX.
While carriers have not released their Holiday Surcharge rates yet for 2019, logistics teams should be aware of service levels and rates for 2018 and plan accordingly. [Find UPS’s Holiday Surcharges here, and find FedEX holiday surcharges here.]
Wondering what service levels are available to your team, and what each costs? Check out our chart below:
[You can find more information about peak season service levels here.]
2) What do supply chain experts think? When do retailers choose fast shipping options, such as same-day delivery?
In our most recent survey of over 200 supply chain leaders, we uncovered how top retailers are tackling this topic with their teams. Here are three tips from the experts for this year:
- Matt Bergerson, REI’s Director of Omnichannel Operations says that fast shipping is table stakes during the holidays in order to drive website conversion and win customers over Amazon.
- He says, “[We prioritize last mile speed over cost] when it drives a measurable change in customer behavior, or when there is a unique event with special expectations (like Christmas).”
- Ashley Tyrner, CEO at FarmDirect agrees, and says that while peak season is a time when delivery speed trumps cost, retailers should figure out a more sustainable strategy for the rest of the year.
- She says, “I only prioritize last mile speed during the holidays, when we use the express network to ship our boxes due to holiday demand.”
- Brittain Ladd, a supply chain expert and former Amazon employee, wants retailers to realize the impact of the shipping speed on their margins.
- He says, “[Prioritize speed] when you have a high-value product with high margins that covers the cost of delivery. Another scenario is when a customer is willing to pay a delivery fee that covers the cost of the delivery while also generating the desired profit.”
3) What Were Peak Season 2018 Trends Around Fast and Free Delivery?
During 2018’s peak season, Walmart, Target, and Amazon raised the stakes for all retailers by offering free two-day shipping, so shoppers could get presents under the tree in time. As a result, we saw a 4X increase in two-day delivery. However, consumers started their shopping early on in the season, creating less of a demand for same-day delivery.
2018 holiday carrier performance indicated that Delivery Experience Management must be a priority for retailers who wish to be successful in 2019. During 2018, delivery delays and damages topped the list as the top reasons for both customer complaints and delivery exceptions. Shattered spending records and high carrier capacity lagged deliveries, resulting in spikes for carrier delays following Black Friday, and spikes in negative feedback following Cyber Monday.
Convey also saw a 638% spike in large-item shipments, indicating that those shipping LTL, or freight shipments, had a bigger opportunity to reach customers last winter, past “patio season.” [Read our overview of 2018’s peak season here, or learn how freight shippers can beat the peak season blues].
4) What Are Retail Customer Expectations and Shipping Trends around Two-Day Shipping and Next-Day Delivery?
Amazon continues to evolve consumer behavior toward faster, cheaper options. According to our annual consumer surveys, shoppers prioritize cost and speed in last mile shipping, and they are willing to prove it with their dollars, only shopping with retailers that can provide them.
As it gets closer to Christmas, the stakes heighten for consumers who want their gifts in time. Shipping cost ranked highest in importance for shoppers when the majority of shopping was planned for Cyber Monday or earlier, while dates ranked higher for those shopping later in the season. Shoppers were 30% more likely to report same-day delivery as the most important factor if they planned to complete the majority of their purchases after December 18th.
Consumers also indicate time and again that delivery dates matter. When asked to choose the most important delivery factor during the holiday season, 29% reported a desire for a specific promise date and another 23% reported a delivery date range, bested only by cost at 33%. After all, as a consumer, what good is it to have a ton of shipping options available, and yet, not be able to get those presents under the tree in the event of a delay or a damaged package?
The repercussions from consumers are severe if they do not get their deliveries on time during peak season. Over half of shoppers (51.4%) now expect appeasements like a refund or discount on their shipping cost if a shipment is late, which eats into top line margins.
Positive Shipping Experiences Ensure Customers Come Back Throughout the Year
Even if businesses use the holidays like Black Friday to “get into the black,” and use the quarter to turn a profit, a poor customer experience can cause a fair amount of damage to both profits and customer loyalty. During this time, seamless execution and proactive communication are essential to ensuring that customers will come back during the rest of the year. While 83% of customers are not likely to return after just one poor delivery experience, those who expect more frequent, and more timely, notification about shipment issues are 23% less likely to blame the retailer for failed deliveries during the holidays.
In a time when “Retail Apocalypse” has become the vernacular, retailers shouldn’t have to make tough choices between their margins or their customers. Brands such as UncommonGoods are making good on their delivery promises by analyzing shipments destined to miss EDD and expediting new shipments. As a result, they’ve gained a cult following. Grove Collaborative uses analytics and a dedicated Exception Resolutions team to understand when top exceptions happen, and they fix the situation and alert the customer to the problem. As a result, they save costs related to exceptions and boost Customer Satisfaction scores.
What is your team doing to ensure that you save your margins and customer experience this year?