‘Shippageddon’ and the Challenge of Holiday Season 2020

By Thomas O'Connor | November 10, 2020 | 0 Comments

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The 2020 holiday season is certainly going to be different than years past. For many of us, who we are able to see and celebrate with will be more limited. There will also be more gifts shipped to loved ones than ever before as consumers purchase more online and send gifts to family and friends they’re unable to see in person.

In response, retailers have been investing to ramp up their service capabilities and expand fulfillment networks. Some retailers, such as Best Buy, are in the process of rethinking their online fulfillment model by designating 25% of their store network as hub locations that do high volume ship from store. Many retailers are pushing for temporary efficiencies in their fulfillment operations such as increasing packing table density in their facilities (although this is being challenged by social distancing requirements), higher use of night shifts in fulfillment centers or doing pre-packs for key products.

This is all to prepare for what Ryan Kelly, FedEx vice president of global e-commerce marketing, describes as a holiday season that looks like “a peak on top of a peak.” However, there is an increasing sense of foreboding among many of the retail supply chain clients I speak with as they highlight parcel carriers requiring firmer volume commitments than in years past. The term “shippageddon” is being used to describe what’s increasingly being anticipated as a year where a significantly higher than usual proportion of online orders are delayed due to a combination of product availability challenges, delayed order fulfillment or transportation issues.

Given this concern around shipping delays, many retailers have doubled down on efforts to smooth online shopper demand through new shaping initiatives to de-stress both retailer fulfillment and last-mile delivery. These efforts are focused on bringing forward consumer spending from the traditional selling peaks associated with Black Friday and the lead into Christmas. Consider, for example, Amazon’s Prime Day occurring in October for the first time or Alibaba splitting its Singles Day sales event into two, the first part running from Nov. 1-3 and the second on the traditional date of Nov. 11.

However, data suggests that retailers and carrier partners are starting to struggle to handle the volume of online orders they are receiving. Click-to-Delivery lead times — the time from when a consumer places their order to when it is delivered — have been steadily growing since mid-October (see graphic).

Given these challenges, what actions can supply chain leaders take to ensure that their brand does not bear significant consumer and media driven ill-will associated with holiday season shipment delays? Efforts need to start with:

  • Clear, visible and dynamic (updated based on changing market conditions) communication to shoppers of holiday shipment lead times and delivery cut-off dates to achieve delivery in time for gift giving. This is particularly critical when shipment lead times and/or cut-off dates are materially earlier than in prior years.
  • Promoting, where rapid fulfillment from store operations can be leveraged, same- or next-day pick-up offerings such as curbside delivery or buy online pick up in-store to provide increased shopper certainty that their orders will be available in time for gift giving.
  • Collaboration with commercial partners to avoid, where possible, incentives that drive additional last-minute sales activity on or close to shipment cut-off dates.
  • Updating online shopper communications after the transaction occurs, but prior to delivery. Are you communicating enough with your shoppers on shipment milestones, when an item departs a fulfillment center and when it is on board for delivery?
  • Anticipating potential delivery delays leading to higher return rates. This means both ensuring your returns process is sufficiently easy to use for consumers while being robust enough to handle a potentially significantly higher flow of return shipments.

If you’re not a retail supply chain leader, I’d suggest getting in early when it comes to securing this year’s must-have gifts (for those with kids I hear Baby Yoda from Disney’s Mandalorian is in hot demand) to ensure potentially limited inventory is available and your delivery arrives on time!

Happy holidays!

Thomas O’Connor
Senior Director Analyst
Gartner Supply Chain

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