The holidays are the busiest time of the year, as consumers continue to do more shopping online than ever before.
Ecommerce holidays sales have continued to rise over the years – and despite current industry challenges, 2020 will be no exception.
For 2020, per Deloitte’s annual holiday retail forecast, ecommerce sales are predicted to grow by 25% to 35% YoY this holiday season, compared to last year’s 14.7% increase.
The holidays present a huge opportunity for ecommerce brands, but they must be prepared for an influx of orders and all that comes with it.
Not only do you need an amazing website, email marketing, social media, and other creative means to reach customers, but you need the back-end logistics to leave a lasting impression and make this holiday season your best ever.
This means alignment across every part of your business, especially between supply chain leaders and your marketing team.
Everyone must be on the same page leading up to and throughout the holidays to ensure your business is a well-oiled machine.
You can receive all of the orders in the world, but if you run out of stock, can’t ship packages out quickly, or fail to get gifts to recipients in time, you’ll risk losing these customers forever and damaging your reputation.
We’ll walk you through how to prepare your holiday fulfillment strategy so come Black Friday and Cyber Monday, your entire business — and your customers — will have a great experience.
It can be challenging to plan for peak season, as your order volume is not representative of any past linear growth and no two businesses look the same. Even the best planning requires continuous oversight of inventory levels and order volume throughout the holiday season.
It’s critical to get demand forecasting as accurate as possible to ensure you have the correct stock levels on hand in time for the holiday season. This means having a deep understanding of sales velocity at the SKU level, as well as a breakdown of where you’re shipping your orders to optimize storage location.
Too much inventory, and it can take some time to see a return on investment or cause you to pay high warehousing fees. On the flip side, stockouts can lead to unhappy shoppers and less revenue for you.
Here are some tips to optimize your inventory planning:
Look at sales data from previous holiday seasons to help predict sales this year, also accounting for any new products you’ve introduced, new channels you’re selling on, changes in ad spend, and the general growth you’ve seen month-to-month.
Determine the number of days of inventory you have until you are expected to run out and establish timely reorder points that account for lead times, inventory receiving timelines, safety stock, and any other potential delays that can be common during the holidays.
If you’re using multiple fulfillment centers, understand where your customers reside to strategically store inventory near common shipping destinations to reduce shipping costs and transit times. Remember, carriers not only apply surcharges and higher rates during peak seasons, but also experience delays due to the holidays — so do anything you can to keep deliveries speedy and affordable.
Communicate early and often with your supplier or manufacturer about the status of inventory and any potential delays on their end. Share specific figures around predicted order volume so that you can make sure to produce and order enough product well before the holiday shopping season is underway.
Use inventory management software or inventory forecasting tools to help you analyze your historical inventory and sales data.
Evaluate your existing inventory levels. If you have some SKUs that haven’t sold as much as expected, use Black Friday or Cyber Monday to discount those items and diminish excess stock.
If you work with a third-party logistics (3PL) provider, proactively communicate any major spikes in demand to them so they can plan for the increase and better support your business.
You can use the best inventory planning tools and methodologies in the world, but forecasts can be wrong and the unexpected can occur. For example, your product could get featured in a few major gift guides, receive an organic celebrity endorsement, or suddenly became the must-have gift for a certain age group.
That’s why you need to continuously review inventory turnover, stock counts, and daily order performance. To do so, you need accurate, timely data. Real-time inventory tracking lets you monitor actual stock levels to see how you’re trending against your estimates.
Here are some tips for what to keep an eye on:
If your estimates were off, examine the root cause and readjust your forecast for the remaining period.
If sales are ahead of projections, reorder more inventory or slow down promotions.
If you’re behind your projections, think through what more you can do to ramp up sales.
Increase your reorder notification point for the holidays. If you’re selling through inventory even more quickly than you thought, consider adjusting your reorder points or safety stock even more.
Monitor if any orders get held up and which items are driving a backlog so you can prioritize the replenishment of stock that is affecting sales.
If you sell in multiple stores or use multiple fulfillment centers, keep an eye on stock levels for each, and transfer inventory or ship from your backup warehouse if needed.
If you have a brick-and-mortar location, you’ll need to connect your storefront with your ecommerce solution. A point-of-sale (POS) system will do just the trick. Plus, many POS systems also help with managing inventory and gives your customers a better experience regardless which channel they purchase in. Here are a few options to consider:
“Integrating point of sale with ecommerce is a must for any retailer that’s doing business online and offline. You want your channels to “talk” to each other, so that sales, inventory, and customer data flow smoothly from one system to the next. This saves you time, reduces double-entry, and minimizes human error.” — Francesca Nicasio, Retail Expert, Vend Point of Sale
Once you have your inventory ready to go, it’s time to fulfill your customers’ orders. But holiday fulfillment is much more complex than non-seasonal months.
Many companies experience the majority of their order volume for the year in Q4 alone. If you handle order fulfillment on your own or with a small team, you will need to call up all of your friends or hire temps or full-time employees — only to let them go as soon as the holidays slow down.
That’s why many brands outsource fulfillment to an established 3PL rather than spending time and resources to pack and ship an unprecedented volume of orders. The ability to scale up or down without having to lease your own warehouse, purchase land, or run a distribution network makes a 3PL a very appealing option.
Here are a few considerations for finding a 3PL:
Having multiple fulfillment centers, letting you store inventory near your customers.
Providing best-in-class technology that integrates with your store(s) and powers their fulfillment network.
Partnering with someone that helps you deliver on customer expectations.
Having inventory management tools and advanced analytics.
Working with the other tools and partners you already work with.
Getting a dedicated account manager and the support you need.
Just make sure you have a 3PL lined up as soon as possible, share any forecasting data you have with them, and understand their ecommerce fulfillment processes, timelines, and cutoffs for the holidays.
With the standards set by Amazon and other retail giants, it can seem daunting or impossible for smaller businesses to offer the same speed (without eating high costs) — especially when Amazon offers free holiday shipping even to non-Prime members.
You’d hate to see your customers go elsewhere because you don’t offer that same level of service. Here are some ideas to consider:
Leverage ground shipping, which is a fraction of the cost of air shipping.
Distribute inventory across several fulfillment center locations to save time and money by shipping from the fulfillment center closest to your customer.
Experiment with offering free shipping by using minimum spend thresholds to increase your average order value.
Be clear (and conservative) about order cutoffs for guaranteed delivery before Christmas.
Expedite or upgrade shipping if needed.
As the holidays wrap up and you think you can finally breathe, you may start seeing the returns pile in. Between recipients who don’t want their gift, items that don’t fit, products that were damaged in transit, or a variety of other reasons, there is an inevitable influx of returns immediately following the holidays.
The more you sell over the holiday shopping season, the more returns you can expect if your return policy allows for it. On average, shoppers return 15% to 30% of online purchases during the holiday season. In 2019, this amounted to roughly $41.6 billion in returns. As a result, returns continue to be a large area of concern for many e-tailers.
Create a straightforward returns process that is clearly communicated across your website. If you work with your 3PL, make sure you understand your options for product returns. And aim to automate the returns process in a quick and cost-effective way, including providing your customers with a shipping label and order tracking information once their return is shipped.
As the returns come in, you should collect the reason for the return and even encourage customers to purchase something else from you by offering discount codes to turn them into a year-round repeat purchaser.
You should also monitor your return rate and revisit your return policy to see if you should make customers responsible for covering return shipping costs. You may find that people who bought the most during a sale or free shipping promotion are the ones who end up returning the most. Keep an eye on how this impacts your margins.
The holidays can be a stressful time for ecommerce brands. There are so many moving pieces that require precision, execution, and a little bit of luck.
With online sales expected to break records again this holiday season, your business can’t afford to be unprepared. Be sure to plan and monitor anything that is within your control so that you can maximize your holiday traffic and create brand loyalty by delivering on customer expectations.
There will always be unexpected challenges that arise — especially in the busiest time of the year. But the best way to finish 2020 strong is to start preparing for the holidays now and making sure every part of your business is aligned with your supply chain.