By Mike Gregory, Kurt Salmon
As consumers busy themselves with spring gardening and plans for summer travel, their favorite retailers are already planning for back-to-school and the 2014 holiday season. And after delivery delays during holiday 2013 left many customers fuming, a core issue for retailers is how to optimize their peak-season order fulfillment and related customer service.
Omnichannel is both the challenge and the solution, consulting firm Kurt Salmon concluded after partnering with StellaService to analyze retailers’ peak-season shipping, fulfillment and refund processes. For while the seamless integration of sales channels has raised consumer expectations around the ordering and delivery of product, it’s also requiring that retailers’ step-up their integration of systems and processes in order to meet those expectations. In fact, as our analysis revealed that a number of peak-season omnichannel fulfillment best practices have already emerged.
Peak Season Top Performers
We reviewed orders containing multiple items from more than 70 retailers placed on Cyber Monday, the biggest online shopping day of the year, and then ranked the retailers based on their average delivery times (the number of days elapsed between placing and receiving an order). The top performers, including Under Armour, Brooks Brothers and Office Depot, averaged 1.6 delivery days for multi-unit orders. The average delivery time across all retailers examined in the study during peak season (between Black Friday and Christmas), however, was nine days.
After online sales outpaced in-store purchases over Thanksgiving weekend the year before, the top performers during Holiday 2013 made a point of adjusting their forecasts to prioritize resources and prepare for the influx to begin on Black Friday.
They did more than just fulfill orders quickly, however; top performers also emphasized free shipping and presentation. Notably, while many retailers tout free shipping for a limited time or once orders reach a certain price threshold, retailers including Zappos, Net-A-Porter — and, more recently, Neiman Marcus — offer it as a feature for all online orders. Giving a human touch to orders, such as with Zappos’ handwritten thank you notes, was another standout feature. This is especially important in light of omnichannel customers’ expectation that online customer service match in-store standards.
And, since the customer experience isn’t over once the product is delivered, we tested and reviewed the speed and related processes of post-holiday refunds as well. Among the 50 retailers we looked at, the best-in-class streamlined processes in three key areas: keeping it simple for consumers by including prepaid return shipping labels with all orders, reducing transportation obstacles by limiting the number of carriers who touch the process, strategically locating returns processing centers, and implementing systems and software to swiftly process both the financial transaction and move the merchandise back into circulation or out of stock.
Peak Season Pitfalls
A staggering 38% of orders in our analysis originated from two or more shipping points. Moreover, 42% of multi-unit orders arrived in multiple packages that originated from a single distribution center.
Such inefficiencies point to outdated inventory systems unable to keep up with consumer shopping habits. An efficient inventory system comprehensively tracks the availability of stock at both store locations and distribution centers, and it can nimbly identify those locations that can ship all units in a single order at the same time — whether it’s a store or a warehouse. After all, when retailers fulfill orders through multiple fulfillment locations or through multiple packages, shipping costs can double or triple, and those increases can’t be passed along to the customer.
In addition to identifying fulfillment inefficiencies, our analysis sought to uncover the causes of the last-minute shipping delays that made headlines at Christmastime. Indeed, we analyzed more than 175 online orders placed on the last day that retailers guaranteed delivery by Christmas, and 15% of those orders failed to reach their destinations in time.
But while major carriers like UPS and FedEx were accused of being ill-prepared for high volume and poor weather, we found that retailers were actually responsible for a majority (56%) of delays. The most frequently cited issue was failure by the retailer to upgrade an order’s shipping status (40%). For example, one retailer processed a ship-from-store order on December 19 for standard ground shipping, but the shipment was going from California to Connecticut, and the store staff failed to ensure that the shipping method would guarantee on-time delivery.
Preparing for the Next Peak Season: What Can You Do Now?
It’s never too early to begin planning for the peak holiday season. Many retailers have or are in the process of conducting a thorough review of their shipping strategies to determine what worked and what didn’t, and where there’s room for improvement.
For some retailers, a review starts with revisiting carrier agreements. The best way to get product to customers may involve contracts with multiple carriers, or exploring additional delivery options beyond traditional ground shipping with an exclusive carrier. To ensure a successful holiday season, retailers should be testing their fulfillment process by the third quarter, which means now is the time to have conversations with carriers about shipping options and the most efficient delivery model.
Such testing is especially important for retailers that are piloting ship-from-store programs, which can be very effective in reducing delivery times but can require specific agreements with carriers in order to be successful — agreements that may look very different from those designed for distribution centers. In the meantime, implementing effective inventory management software and processes are critical for in-store employees to fulfill online orders as effectively as their distribution center counterparts, as well as maintaining consistency in packaging, brand and quality of service across channels.
Better forecasting and a close look at omnichannel strategy before the next peak season will also be crucial for retailers. More consumers than ever are going online to do their holiday shopping, and as the 2013 season made clear, many wait until the last minute to place their orders. Retailers, then, need to adjust their peak-season forecasts accordingly. They must also make sure that their promotional plans are aligned across all departments, and are flexible enough to account for near-real-time demand and capacity signals.
The promise of omnichannel — a seamless retail experience regardless of the channel — has lifted the order and delivery expectations of customers higher than ever before, especially during peak season. By putting in place the appropriate systems and processes, however, and planning for peak-season increases in demand well in advance, retailers can not only deliver on the omnichannel promise, but reap the rewards.
Mike Gregory is a partner and director of the Supply Chain practice at Kurt Salmon. He can be reached at firstname.lastname@example.org.
By Mike Gregory, Kurt Salmon