3 Ways the 2020 Peak Season Will Be Different
It's been a rollercoaster ride for logistics and supply chain professionals this year, even by the dynamic standards of our sector. With physical retail forced into an extended shutdown and online brands scrambling to fill the void, the stage has been set for a very different 2020 peak season.
For starters, eCommerce is set to spike again. From a steady build to 10%-15% of holiday sales over the past five years, a dramatic surge in that market share is expected this year. Analysts predict up to 3x growth in eCommerce ordering for the 2020 peak, over and above the increases in eComm share of holiday retail sales that were anticipated before the pandemic.
That's not out of line with what we saw back in spring, as most of the country stayed inside and orders moved online. Blend in the deadlines and characteristically hectic delivery schedules of the holidays, however, and we see the potential for substantial disruption in some quarters.
Peak Season 2020 Is More Challenging Than Ever
Retailers have not rested on their laurels as eCommerce has expanded its piece of the holiday pie with every passing year. Some have acquired eComm expertise, as Walmart did by purchasing Jet back in 2016, while others have aligned with growing direct-to-consumer (DTC) brands in order to take their strongest categories in physical retail online.
While still dominant, Amazon is by no means the only viable choice that holiday shoppers now have when they want to order at home. In 2020, everyone from traditional big box stores to ambitious digital startups will vie for those online holiday dollars.
This would have occurred in any case, but a wider consumer understanding of their eCommerce options - and the sudden pivot it has demanded of many retailers - has catalyzed the channel. And while customers were willing to show a degree of sympathy and patience during the trials of April's shutdown, they're unlikely to be so forgiving the second time around, especially with gift-giving and holiday plans on the line.
What to Watch For During the 2020 Peak
These are the major changes we anticipate that will make the 2020 peak season different to any other we've seen:
- Retailers are likely to move more sales and promotions into October.
- Amazon's October Prime Day adds to the confusion.
- Carriers will eventually struggle to maintain service levels.
Let's dive into each of these differences to explain how they could impact your business.
Extending Into October
All the way back in 2015, we wrote about retailers blurring the traditional boundaries between Black Friday and Cyber Monday. The latter quickly became Cyber Week, while all but the most deeply discounted doorbusters were placed on sale well before Thanksgiving.
While that trend has continued in recent years, the 2020 peak season should see a shift from weeks to months, as sales typically reserved for November stretch all the way back into October.
One of the main reasons for retailers holding some of their promotions so early lies with parcel carriers. Anticipating an unprecedented and wildly unpredictable holiday surge, carriers have levied surcharges on even standard size packages, something that is new for the season and which will be attached to a range of volume thresholds. This means that large shippers will soak up most of the fees, while smaller retailers get a better break for once.
In a bid to avoid adding those extra costs to their order fulfillment expenses, brands who are able will attempt to do more of their holiday business in October. Although this is complicated by pre-arranged media buys and advertising plans that had been scheduled for the traditional holiday season, the potential to avoid passing costs onto the customer and maintain a reputation for delivering on-time means our sector will see much more action next month than usual.
Amazon Adds to the Shipping Stress Test
As speculation bubbled away all summer as to whether or not Amazon would run its annual online garage sale, we predicted that October would be the month that Prime Day hits. That was confirmed in the last few days, as the promotion is now on the calendar for October 13th/14th.
Why does this matter to non-Amazon retailers?
One, because it starts to drain consumer wallets ahead of the holidays and stretches the sales season well into October. Perhaps more importantly, it also injects a large chunk of online order activity into a month that some eComm brands want to use to offset the anticipated squeeze of the traditional November order spike. Factor in the inflated peak season surcharges covered in the previous section and October begins to look like a very attractive time to sell.
At a most basic level, an October Prime Day simply places another wild card into an already extended and uncertain 2020 peak season. It's another way in which this already challenging period will present different challenges that change consumer ordering dynamics and stretch shipping networks to a potentially concerning breakpoint.
Carriers Are Unlikely to Keep Up
Returning to parcel carriers, it seems unlikely that even aggressive surcharges will be enough to flatten out demand during the traditional shopping period. This has serious implications for delivery infrastructure in the US, which is already seeing more pinch points due to social distancing requirements and labor challenges.
Even with some sales shifted to October, old buying habits die hard. If most consumers hold on until the second half of November, as is typically the case, the combination of peak season order spikes, increased reliance on eCommerce, and pandemic-driven work practices will stretch the system more than ever.
When the business end of the holiday season hits, limited capacity could potentially see millions of gifts fail to reach their recipients in time for the holidays. Beyond the initial outcry that this will prompt across social media, the possibility that it damages brand reputation in the long term is something that every retailer must weigh as we approach this year's peak.
The 2020 peak season will be unlike anything we have seen before, with unprecedented eComm volumes clashing with the limited capacity of carriers to handle that volume and increased costs of doing so. Anything retailers can do to shift promotional activity and transactions into October/early November will save them money up in the short-term and avoid damage to brand reputation in the longer term.
Having a fulfillment partner in your corner with the right technology and passionate, experienced people is a proven path to less stressful peak seasons.
If you experience challenges with your order fulfillment this year, don't hesitate to contact us to discuss a custom solution that better serves your brand.