Peak Season Challenges for Retailers
Understanding the Landscape that was “Peak Season 2023”
The 2023 peak season proved to be a tough test for all UK retailers, it was marred by cost-of-living concerns that shook consumer confidence and global supply chain disruptions that caused delays and increased expenses for all. While these challenges are largely beyond any retailer's control, ongoing inefficiencies in last-mile delivery will have compounded the issues for some retailers, negatively impacting both customer satisfaction and profitability.
Recent findings from the Descartes’ Home Delivery Consumer Sentiment Study 2024 reveal that a staggering 67% of consumers faced delivery issues within the surveyed three-month period. Alarmingly, 63% of these consumers reacted by taking action against the retailer or delivery service, raising the question: how are retailers preparing for the 2024 peak season?
Optimise your operations
Addressing Supply Chain and Economic Volatility
Uncertainty in the supply chain and economy is a given, influencing not just customer experiences and profit margins, but also broader strategic goals, including sustainability efforts. Retailers must focus on what they can control, striving to minimise uncertainties in their fulfilment process, particularly during peak periods. As Andrew Tavener, Head of Marketing at Descartes, notes, it's essential to eliminate unpredictability in consumer fulfilment.
The Stakes of Delivery Performance
The UK ranks as the third largest eCommerce market, it is therefore imperative for retailers to excel in efficient fulfilment and consumer experience. With a projected market growth of 7.3% in 2024, eCommerce continues to shape retail revenues. However, last-mile delivery remains a weak link; 22% of consumers reported late deliveries and 21% experienced deliveries at different times from those originally stated.
The challenge of maintaining consistent, timely delivery increases during peak demand periods. While adding in additional resources can manage spikes, it will also erode margins during quieter times. Alternatively, retailers may choose to maintain average staffing levels while only sourcing additional delivery capacity for peak times. Yet, with 74% of companies facing workforce shortages, scaling up on demand is easier said than done.
Reliance on third-party temporary resources carries risks, especially as customer perceptions heavily hinge on delivery quality. With 63% of consumers affected by delivery issues taking actions that harm a retailer's reputation—such as losing trust in the delivery service or choosing not to order again—the stakes are high. In a landscape where two-thirds of customers frequently encounter delivery problems, the cost of fulfilment uncertainty can be significant.
Flattening or spreading Demand for Better Fulfilment
Retailers must avoid over-promising on delivery capabilities, particularly during peak times. Consider the repercussions when a discounted Black Friday item arrives late or damaged, or when Christmas orders are delivered in January, leading to immediate returns.
Fortunately, consumer preferences have been evolving; fewer shoppers are now not willing to pay for faster delivery, favouring instead more cost-effective alternatives. Many customers prefer precise delivery windows over rapid delivery options, seeking assurances that packages will arrive when they are home. There is also growing interest in environmentally friendly delivery options, especially among younger consumers.
Retailers can harness these delivery preferences to stabilise demand and enhance fulfilment certainty. Price-sensitive shoppers don’t need costly next-day delivery options, so retailers can avoid offering them. Environmentally conscious customers may respond favourably to consolidating their deliveries, thus minimising delivery mileage and costs.
Enhancing Predictability in Fulfilment
Retailers have the power to shape consumer choices by presenting realistic delivery options at the Point of Sale, including dates based on real-time insights into existing commitments and available delivery resources. By continuously monitoring capacity planning and assessing inbound orders, retailers can offer a range of delivery options that align with actual capacity, instilling greater certainty in the last-mile delivery process.
A comprehensive overview of total demand and available resources enables retailers to optimise capacity and share resources across geographic regions. For instance, John Lewis successfully boosted delivery capacity by 35% without increasing the number of vehicles or drivers, while also reducing fulfilment costs by £1.8 million.
Improved distribution efficiency also supports environmental and sustainability objectives by reducing travel distances. Furthermore, retailers can encourage customers to choose ‘green’ delivery options, which not only enhance efficiency but also reinforces Environmental, Social, and Governance (ESG) commitments.
Instilling Customer Confidence
As online shopping continues to expand, customer expectations are higher than ever. They seek assurance throughout the eCommerce journey, particularly in fulfilment. By smoothing out demand and eliminating unrealistic promises, data-driven capacity management minimises delivery issues and enhances the overall customer experience.
To build on this improved experience, effective communication at every stage is crucial. Proactive regular updates regarding delivery times can alleviate customer anxiety. Additionally, transparency about potential delays due to accidents or traffic ensures customers remain informed, fostering a stronger relationship.
For high-value items purchased during peak seasons, maintaining a reliable chain of custody—such as proof of delivery through picture and signature capture—has become essential for boosting customer confidence.
Conclusion
Retail operations are often at the mercy of external factors such as geopolitical events, weather disruptions, and workforce shortages. Economic pressures, including inflation and interest rates, further complicate matters. However, substantial improvements can be made to reduce fulfilment uncertainties and enhance customer trust.
By integrating real-time capacity planning into their eCommerce strategies, retailers can eliminate unprofitable delivery slots, protecting margins. Offering realistic, affordable delivery choices based on comprehensive capacity data boosts performance and mitigates issues that could harm customer perceptions and loyalty. By aligning delivery options with customer preferences and providing ongoing updates, retailers can create a more positive customer experience.
In an unpredictable environment, it is crucial for retailers to introduce essential predictability into their eCommerce operations.
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