Christmas in July? With supply chain disruption as bad as it has ever been, that could be a genuine prospect for some shoppers. But as Pitcher Partners Melbourne’s Mark Harrison writes, delivery logistics is now a key factor in retail survival.
Click Frenzy, Singles Day, Black Friday, Cyber Monday, Amazon Prime Day … oh, and Christmas.
Together these online sale events have combined to make November the busiest month of the year for eCommerce, with the value per transaction climbing and the percentage of shoppers shifting their purchases online at record highs.
It should only be welcome news for retailers, but for those who have stock sitting somewhere offshore, or who can’t speedily dispatch their products to the consumer, it’s another sign of why digital transformation doesn’t stop at the shopping cart — and over coming weeks, as disappointed buyers wait for furniture, clothes and presents that don’t arrive, how retailers manage logistical risk will be critical to their reputations.
There’s a lot of attention on the rise of eCommerce thanks to the pandemic, but let’s put the demand related to shipping into context.
The Pitney Bowes Shipping Index, which measures volume and spend for shipments up to 31.5kg, shows Australia’s parcels crossed the 1 billion mark in 2020, up at least 10% year on year.
That’s an average of 40 parcels per Australian — almost one per week — with 33 sent every second and 2.8 million sent every day.
But this year has been even stronger.
In the ACT, for example, online deliveries more than doubled in September year on year.
NSW was up 80% on its 2020 figures, according to Australia Post, which drives about 40% of deliveries.
The challenge for retailers to service customers has shifted thanks to that demand, coupled with a global shortage of freight containers and delays at ports.
The early pandemic challenge of how to sell effectively online has morphed into how to deliver on those sales without squeezing margins.
For the fashion sector, summer season stock usually lands July through to September.
Even if it is a few weeks late, most should have goods ready to go in store for the four weeks leading up to Christmas.
But some of those retailers will have incurred additional costs to get those goods here — the ACCC recently cited reports of retailers buying their own containers, or chartering ships to meet demand — which means we’ll either see margins squeezed or costs passed on to consumers.
There’s also a risk retailers will run out of stock on some items over the next six weeks.
Many retailers would have ordered conservatively, so consumers who put off their purchases to January are likely to be disappointed.
Other sectors are also likely to face unhappy customers if they have not carefully planned their inventory, been selective with the stock they put on sale, and looked for a variety of delivery options.
You can’t sell something if it’s not in stock, so that must be clear on a website before the sale takes place, and good inventory management is essential — but the logistics piece of the puzzle is harder.
Failure to deliver goods ordered online in a timely manner leads to frustrated consumers and the potential for reputational damage, but it’s just not practical or possible for every retailer to have its own logistics business.
If your delivery service is delayed, you can walk the fine line of blaming a third-party provider, but that won’t prevent your customers from getting frustrated.
Going silent on the customer is even worse.
We’re already seeing instances where deliveries that should be taking two or three days are stretching out to three or four weeks.
Communicating with customers in this situation is about managing frustration and protecting future business by keeping them engaged and informed.
As a retailer, a far better strategy is to have multiple delivery channels.
Consider spreading your risk among your suppliers, and potentially using different local and long-distance providers for delivery.
Those who have the capacity to maintain multiple distribution channels should continue to do so — a bricks and mortar store, a click and collect option, and normal delivery.
I even know of a boutique women’s fashion retailer who will deliver by bike in the local area, which works brilliantly.
Over the past two years we have seen retail leap forward years in its ability to find, market and sell to customers.
Being creative and adaptable about how to deliver to those customers is now the next big challenge.
Mark Harrison is a Partner with Pitcher Partners Melbourne, with extensive experience in advisory and assurance services to businesses of all sizes, from publicly listed companies through to private family-owned enterprises, including in retail, transport and logistics.