To put it mildly, 2020 has been quite a year, and “holly jolly” isn’t exactly how many people feel about the upcoming holiday season.
The pandemic has shifted the logistics landscape in major ways this year, and the holiday season is sure to push capacity to the absolute extreme. To manage the massively increased pressures on supply chains, many players in the space have already begun thinking about their holiday footing — in fact, some started as early as March.
Dim as it may seem, the bright spot on the horizon is that by letting go of expectations for how the season should go, you’re much more likely to come out ahead and — dare we say — enjoy the holidays. One thing’s for sure: This Christmas season will be like no other.
Here’s our holiday outlook for 2020.
Prediction No. 1: Even your best laid plans will go awry
The holiday outlook 2020 phrase to live by is “Expect the unexpected.” No matter how much you’ve prepared, this is an unprecedented time, and things are bound to go off the rails.
“The current situation requires merchants to prepare for a holiday season where historical trends are not as relevant, while maintaining the flexibility to adapt to today’s new economy,” said Steve Denton, CEO of Ware2Go. “Today’s market conditions require merchants to leverage a flexible supply chain as a strategic asset for commerce.”
The holiday shopping season will be tricky for merchants and fulfillment providers, not least because this year’s shipping volumes are expected to hit a new peak, Denton says. A September Ware2Go survey found that although warehouses and fulfillment centers are already operating at peak levels, 74% of merchants expect to see a holiday demand spike this year, with 56% believing that spike will be at or above peak 2019 volumes.
Half the merchants surveyed say they began holiday promotions in September or October, but since there are so many unknowns surrounding this year’s peak season, they’ll need to prepare for a variety of possible outcomes, the report suggests. Add in that 77% of merchants report changing their selling strategy in response to the pandemic, and 35% say they launched an online store for the first time, and it’s clear that everyone is navigating uncharted territory.
Organizations that focus on cultivating their ability to adapt to new, unexpected challenges will be better prepared and more likely to stay even-keeled in a constantly changing climate.
Prediction No. 2: E-commerce will continue to explode
Holiday shopping that usually happens in person will mostly transition to e-commerce this year, keeping shippers busier than ever to fulfill orders for the holidays.
E-commerce retail sales are expected to grow more than 40% this holiday season (November and December), up from 2019’s 14%, according to CBRE. This means e-commerce will account for 39% of the total $741.2 billion in retail sales expected this year. This also means that retailers must gauge consumer demand and prepare accordingly, improving their online presence, product availability, fulfillment efficiency, and value for price. According to an October report from Coresight Research, retailers who plan to hire this season are mainly aiming to bolster workforces to cater for the surge in e-commerce activity.
While the shift in shopping habits because of the pandemic has been a boon for e-commerce, it has also mercilessly impacted retailers’ margins, particularly in managing inventory and transportation costs, which are 10 to 15 times more expensive for a box to a door than what used to be a pallet to a store, according to John Morris, retail leader for CBRE.
“Five to 10 years ago, the Christmas transportation cost, to end the season, was simply to get a pallet of gifts to the back of the store,” he said. “It is now that piece of it in two more locations, with more inbound freight, and also small package freight and parcel freight, the boxes to every doorstep. That is an incredibly challenging part of transportation … and is what really makes that business hard to break even on sometimes.”
Morris says it’s imperative that retailers find a dedicated outsourced logistics services partner to help with fulfillment, in a retail fulfillment center, or from the back of a store, to help manage the holiday surge.
“Many of the bigger 3PL companies have [staff] dedicated to exactly this requirement,” he said. “Find the best partner to do your shipping for you so you can have something more like the major e-commerce companies.”
Prediction No. 3: Delivery costs will spike
As the popularity of e-commerce soars, retailers will need to factor in rising carrier surcharges and delivery costs added by companies like UPS, USPS and FedEx. Throw into the mix the capacity problems the industry is seeing, and it’s expected that the costs of delivering goods will rise in all areas of the industry.
“This is shaping up to be a very difficult season from all aspects, and the problem starts on the other end of the chain,” said Lee A. Clair, a managing partner at Transportation and Logistics Advisors. “That is on the truckload, intermodal, shipping, and airfreight. There are significant capacity problems from every aspect. … The net effect is everything has shifted, and the more you shift the flows, the harder it is to manage and get productivity out of the capacity and the more you’ll also shift the truckload to LTL.”
Maintain an open dialogue with vendors so you can see these changes coming down the pipeline instead of being caught by surprise.
If you’ve found 2020 to be intense so far, well, it’s time to reset your expectations for how intense things can get. The pressure this holiday season will be fierce and acute, so now, more than ever, it’s crucial to have the right partners in your supply chain.