November 13, 2014
Will retailers regret later deadlines for Christmas deliveries?
Last year’s debacle in which packages failed to reach their destinations in time for Christmas was a wake up call for many retailers and shipping companies. This year, all the parties involved claim to be better prepared for a season in which shipping services will be in greater demand as more consumers place online orders than ever before. But are they?
According to research by Kurt Salmon, many retailers have pushed deadlines for orders closer to Christmas despite all the problems encountered last year. Twenty-six percent of those surveyed will guarantee on-time delivery for orders placed one to three days before Christmas. That’s up from 17 percent last year. Nearly 50 percent will guarantee delivery of orders placed by Dec. 20, up from 37 percent in 2013.
Last year, it took retailers an average of eight days to get holiday orders into the hands of consumers, according to the consulting firm. That included 3.4 days for processing and 4.6 days for shipping. This year, retailers are looking to reduce the total time to fulfill orders to 6.1 days.
Retailers feel that free and faster shipping are required to remain competitive. Eighteen percent of retailers who spoke with Kurt Salmon expressed concern they would lose sales to competitors offering next- or same-day delivery.
"It’s high stakes during the holidays, and retailers are playing a game of ‘anything you can do, I can do better’ when it comes to fulfillment," said Steve Osburn, retail strategist at Kurt Salmon, in a statement. "While it’s great for consumers looking for deals and convenience, it’s proving challenging for retailers who are already contending with constrained margins from a heavy promotional environment."
Even with guarantees, many retailers understand that not all orders will arrive on time. According to Kurt Salmon, merchants are looking to reduce late arrivals from 15 percent last year to eight percent for this holiday.
"Retailers are making ambitious promises in order to capture last-minute online sales," Mr. Osburn said. "But if you compare average delivery times with last-minute promises, there is a gap that retailers will need to account for."
The Kurt Salmon survey included more than 100 retailers with e-commerce sites and revenues over $750 million (73 percent with $1 billion and up; 27 percent with between $750 million and $1 billion).
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Discussion Questions
Why do you think retailers are willing to push deadlines for orders closer to Christmas even though they expect eight percent of customers will be disappointed? Will a repeat of 2013’s delivery problems affect how consumers shop online for Christmas in the future?
Poll
No retailer wants to be in an uncompetitive position on Christmas delivery, just as most retailers want to start Black Friday when “the other guy” does. The issue is whether retailers have partnered more effectively with the major carriers—especially UPS, who was less prepared than FedEx last year. (And the Postal Service seems to be playing a more active role this year.) It’s also debatable whether the rise of BOPIS and ship-from-store will help retailers execute better, since brick-and-mortar locations will be plenty busy anyway.
The biggest question is whether consumers—having been burned in 2013—will even take the risk of waiting until the last possible minute, if they are rightfully skeptical about the stores’ ability to execute.
I desperately want to be wrong, but I’m very worried about holiday logistics. Every retailer I talk to is forecasting more home delivery growth than the logistic companies have increased capacity. When you consider that the giants at the top of the ecosystem (Walmart and Amazon) have their own above-market growth expectations and have tied up much of the increased shipping capacity, it feels like there is sure to be a shortfall.
One solution to the shipping bottleneck would be to spread the volume over more days, but all the aggressive cut-off time promotions will have the opposite effect.
It’s the same reason that retailers keep trying to open earlier and earlier on Thanksgiving Day: Desperation and the fear of losing out to the competition. It’s sad that disappointing 8 percent of customers might be considered OK. In my book, the objective should be to avoid disappointing ANY customer.
I’m no Farmer’s Almanac, but given that I’m writing this from Denver where it is 4 below and there is 2 inches of snow on the ground, I’m thinking this winter is going to be just as bad as last year’s. So retailers—and consumers—need to be prepared. I mean, if consumers get burned too many times, at some point they’ll learn not to trust the promises that retailers make. And that doesn’t seem like that should be okay either.
Greed and the belief that these big companies can miraculously get the impossible done, and they can control the weather are a couple of thoughts. Retailing online is just as fierce as brick-and-mortar stores, and the reliance on weather being perfect, and all the delivery folks showing up on time for work, and the trucks not breaking down are ways for failure to occur.
Back it up a couple of days and the problem will be solved, but the thinking of these companies is if they back off a day or two, someone else will steal away their business. This mentality will not change, as this is how the braintrusts of the online companies think, and no one is going to blink first.
Mr. Osburn said it pretty succinctly: “Retailers are making ambitious promises in order to capture last-minute online sales … “
Will there be failures? Absolutely, but the online retailer doesn’t want to lose to the offline retailer who might have the item or one like it in stock if the customer makes the trip.
Obviously these retailers believe it’s OK to disappoint a few while satisfying the majority of these last-minute customers. And for the customer with no other alternative, just the possibility of success will probably be OK too.
If retailers don’t push ordering deadlines they must feel they will lose sales/revenue. That being said, they are making a trade off of what in their mind is the lesser of two evils, knowing that those customers that get disappointed won’t be likely to shop with them when timing is an issue going forward. And they are placing a bet that FedEx, UPS, USPS, etc., have built in the capacity to support the increased shipping volumes.
If fulfillment performance improves, consumers benefit. If it stays the same and is similar to 2013, you’d like to think consumers will change their behavior and shop earlier, but expecting a change of this magnitude might be unrealistic even though people know they run the risk of packages being delivered late. And if things don’t improve somewhat, FedEx, UPS, USPS, etc., will have some ‘splaining to do.
Why do I think retailers are willing to push the deadlines? Let’s try this scenario.
On December 22 my grandson suddenly says he really wants Toy X for Christmas. So I go to my favorite online retailer. I find Toy X and am ready to order, only to be advised that they can not guarantee delivery for Christmas. So what do I do?
I go to my next favorite retailer. I find Toy X. I get ready to order and the site says, “Delivery guaranteed by December 24.” I say “GREAT” and click BUY.
Now, let’s say they don’t make December 24 and it arrives on December 27. Do I send it back? No way! I keep it and give it to my grandson.
Who wins here?
That is why they are extending the deadline.
One word: Competition.
Competitive pressure is the lubricant for innovations—not necessarily the big bold, but those that can make incremental improvements in the right areas to impact the rest of the business. Order deliveries is such an area. It touches two major areas: Order taking/processing and logistic execution to the customers’ desired location. Without pushing the envelope, we wouldn’t be talking about holiday order deadlines or for that matter the evolution to next-day or same-day deliveries.
Shoppers want to postpone ordering as long as possible to get the best possible price deal while taking a risk on inventory availability (but they can choose from an unlimited number of retailers) while each retailer is trying to maximize their sales by increasing conversion rates during the holidays and will use price, promotions and flexible delivery options to do so.
If only eight percent of consumers are disappointed by delivery problems this season, that is a huge improvement from last year’s 15 percent. And for those anticipated eight percent, they will not shy away from ordering online again, but will definitely scratch those retailers off their list.
Retailers are pushing deadlines for orders closer to Christmas because they are afraid not to. Fear has more than two eyes, and they are focused on the competition’s actions. There are numerous reasons why a repeat of 2013’s delivery problems will affect how consumers shop online in the future. Included among them are the flooding tears in devastated children’s eyes.
Over the past 12-plus months we have discovered and discussed last Christmas’ delivery problems. Many sound improvements have been placed in the various contributing problem locations and if properly observed and maintained I expect to see big improvements. The retail industry is facing many new challenges in the 21st century with much frustration. Shopping and receiving issues are something we are very good at making improvements on.
There is one thing we can guarantee—retailers will be sorry they made a guarantee if a major snowstorm or two hits large parts of the country in the lead up to Christmas.
Because they believe they can make the deliveries on time for the vast majority of customers and if they fail people will understand and forgive them. Not being willing to take that risk means the customers will buy the item from someone who will.
Should it not make it in time, the customer can then say “I tried, it’s not my fault it didn’t get here in time.” However, if we have the same debacle this year as last year then the customer will face a harder time in justifying their late purchases and things may change in 2015. Actually that is probably unlikely as retailers will face the same pressures and many customers will have forgotten and/or forgiven.
The later a customer can order, the more likely the store will get the sale. And what retailer wants to miss out on that last opportunity to make a sale? For competitive reasons, stores will match what others are doing regarding shipping deadlines.
Unless it is weather related, we shouldn’t see a repeat of last year’s service failure. The retailers are ready. The carriers and shippers are ready.
What is that 8% going to cost them and how will their margins fare in the process?
When oh when is retail going to stop playing games and start playing smart? I know it’s all about competition but if everyone is losing don’t you think transparency to the customer is the smarter play?
And, BTW, does anyone have the % of how many consumers wait until the absolute last minute to buy anyway? My mother used to get some very interesting things in her stocking (the only part of Christmas that dear ole dad had to do) because my dad just got whatever was left at the drugstore. So as a tradition in my family we always get stuff like aspirin, band aids, etc, in our stockings. Got lemons? Make lemon-aid!
And that’s my 2 cents!
Retailers are pushing the deadline from fear of lost sales. The real question is, is this rational thinking? How many sales occured by product category in the last three days? Pushing back a deadline for no real sales increase is only playing with fire.
Consumers have gotten lazy. When most of the non-store sales were from catalogues, consumers know they had to order early. The internet is believed to have inventory levels providing assurance that consumers will receive the merchandise. Further reinforcement comes from retailers saying they will guarantee delivery by a third party.
First, I expect any consumer burnt last year will order earlier this year. Second, I expect any consumer burnt this year will order earlier in future years. Over all, based on the publicity last year, I am not so sure consumers trust online retailers to deliver this year.
George took my lines! Weather is a factor over which NO ONE has any control. And I think the retailers are cutting it way too close. Better to have the order and it be late than not have the order at all I guess.
I had an important (overnight delivery!) package sit at FedEx over a whole weekend because the delivery arrived a few hours late on a snowy Friday, after that day’s deliveries had begun, they put it into a box with other packages (not to be opened and delivered until Monday), and no amount of pleading and complaining said they couldn’t get into the big box until Monday. Even when it kinda sorta hasta be there, they forgot their own mantra.
Retailers know the customer is always right, and in this new omnichannel age where anything can be delivered anywhere and anyhow the customer wants it, retailers have to push their boundaries to compete.
I agree with the professor’s comments below, in that if a retailer doesn’t meet the “delivery by Xmas” deadline as promised, there will unlikely be a return if the gift is well received. However, I would argue that if deliveries arrive late, the retailer has LOST that customer entirely. Is it worth losing customers to make a one-time sale? I don’t think so. However, it’s entirely possible that some retailers who offer these closer deadlines have invested in technology tools that enable their supply chains to move responsively enough that they can decrease the gap between order and fulfillment. Those retailers will win out.
Each year more and more purchases go to the online channel and at Christmas, even more so. My experience has been mixed. I’ve had the early delivery, the heroic UPS Christmas Eve delivery…and the late ones.
I think we’re talking about something that success and failure aren’t scored equally. A miss is much more negative than a hit is positive. So..unless something has happened structurally to deliver the promise more reliably, the later deadline will backfire. But the issue is the backfire happens after the sale, so the impact may be buried in post-Christmas sales.
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No retailer wants to be in an uncompetitive position on Christmas delivery, just as most retailers want to start Black Friday when “the other guy” does. The issue is whether retailers have partnered more effectively with the major carriers—especially UPS, who was less prepared than FedEx last year. (And the Postal Service seems to be playing a more active role this year.) It’s also debatable whether the rise of BOPIS and ship-from-store will help retailers execute better, since brick-and-mortar locations will be plenty busy anyway.
The biggest question is whether consumers—having been burned in 2013—will even take the risk of waiting until the last possible minute, if they are rightfully skeptical about the stores’ ability to execute.
I desperately want to be wrong, but I’m very worried about holiday logistics. Every retailer I talk to is forecasting more home delivery growth than the logistic companies have increased capacity. When you consider that the giants at the top of the ecosystem (Walmart and Amazon) have their own above-market growth expectations and have tied up much of the increased shipping capacity, it feels like there is sure to be a shortfall.
One solution to the shipping bottleneck would be to spread the volume over more days, but all the aggressive cut-off time promotions will have the opposite effect.
It’s the same reason that retailers keep trying to open earlier and earlier on Thanksgiving Day: Desperation and the fear of losing out to the competition. It’s sad that disappointing 8 percent of customers might be considered OK. In my book, the objective should be to avoid disappointing ANY customer.
I’m no Farmer’s Almanac, but given that I’m writing this from Denver where it is 4 below and there is 2 inches of snow on the ground, I’m thinking this winter is going to be just as bad as last year’s. So retailers—and consumers—need to be prepared. I mean, if consumers get burned too many times, at some point they’ll learn not to trust the promises that retailers make. And that doesn’t seem like that should be okay either.
Greed and the belief that these big companies can miraculously get the impossible done, and they can control the weather are a couple of thoughts. Retailing online is just as fierce as brick-and-mortar stores, and the reliance on weather being perfect, and all the delivery folks showing up on time for work, and the trucks not breaking down are ways for failure to occur.
Back it up a couple of days and the problem will be solved, but the thinking of these companies is if they back off a day or two, someone else will steal away their business. This mentality will not change, as this is how the braintrusts of the online companies think, and no one is going to blink first.
Mr. Osburn said it pretty succinctly: “Retailers are making ambitious promises in order to capture last-minute online sales … “
Will there be failures? Absolutely, but the online retailer doesn’t want to lose to the offline retailer who might have the item or one like it in stock if the customer makes the trip.
Obviously these retailers believe it’s OK to disappoint a few while satisfying the majority of these last-minute customers. And for the customer with no other alternative, just the possibility of success will probably be OK too.
If retailers don’t push ordering deadlines they must feel they will lose sales/revenue. That being said, they are making a trade off of what in their mind is the lesser of two evils, knowing that those customers that get disappointed won’t be likely to shop with them when timing is an issue going forward. And they are placing a bet that FedEx, UPS, USPS, etc., have built in the capacity to support the increased shipping volumes.
If fulfillment performance improves, consumers benefit. If it stays the same and is similar to 2013, you’d like to think consumers will change their behavior and shop earlier, but expecting a change of this magnitude might be unrealistic even though people know they run the risk of packages being delivered late. And if things don’t improve somewhat, FedEx, UPS, USPS, etc., will have some ‘splaining to do.
Why do I think retailers are willing to push the deadlines? Let’s try this scenario.
On December 22 my grandson suddenly says he really wants Toy X for Christmas. So I go to my favorite online retailer. I find Toy X and am ready to order, only to be advised that they can not guarantee delivery for Christmas. So what do I do?
I go to my next favorite retailer. I find Toy X. I get ready to order and the site says, “Delivery guaranteed by December 24.” I say “GREAT” and click BUY.
Now, let’s say they don’t make December 24 and it arrives on December 27. Do I send it back? No way! I keep it and give it to my grandson.
Who wins here?
That is why they are extending the deadline.
One word: Competition.
Competitive pressure is the lubricant for innovations—not necessarily the big bold, but those that can make incremental improvements in the right areas to impact the rest of the business. Order deliveries is such an area. It touches two major areas: Order taking/processing and logistic execution to the customers’ desired location. Without pushing the envelope, we wouldn’t be talking about holiday order deadlines or for that matter the evolution to next-day or same-day deliveries.
Shoppers want to postpone ordering as long as possible to get the best possible price deal while taking a risk on inventory availability (but they can choose from an unlimited number of retailers) while each retailer is trying to maximize their sales by increasing conversion rates during the holidays and will use price, promotions and flexible delivery options to do so.
If only eight percent of consumers are disappointed by delivery problems this season, that is a huge improvement from last year’s 15 percent. And for those anticipated eight percent, they will not shy away from ordering online again, but will definitely scratch those retailers off their list.
Retailers are pushing deadlines for orders closer to Christmas because they are afraid not to. Fear has more than two eyes, and they are focused on the competition’s actions. There are numerous reasons why a repeat of 2013’s delivery problems will affect how consumers shop online in the future. Included among them are the flooding tears in devastated children’s eyes.
Over the past 12-plus months we have discovered and discussed last Christmas’ delivery problems. Many sound improvements have been placed in the various contributing problem locations and if properly observed and maintained I expect to see big improvements. The retail industry is facing many new challenges in the 21st century with much frustration. Shopping and receiving issues are something we are very good at making improvements on.
There is one thing we can guarantee—retailers will be sorry they made a guarantee if a major snowstorm or two hits large parts of the country in the lead up to Christmas.
Because they believe they can make the deliveries on time for the vast majority of customers and if they fail people will understand and forgive them. Not being willing to take that risk means the customers will buy the item from someone who will.
Should it not make it in time, the customer can then say “I tried, it’s not my fault it didn’t get here in time.” However, if we have the same debacle this year as last year then the customer will face a harder time in justifying their late purchases and things may change in 2015. Actually that is probably unlikely as retailers will face the same pressures and many customers will have forgotten and/or forgiven.
The later a customer can order, the more likely the store will get the sale. And what retailer wants to miss out on that last opportunity to make a sale? For competitive reasons, stores will match what others are doing regarding shipping deadlines.
Unless it is weather related, we shouldn’t see a repeat of last year’s service failure. The retailers are ready. The carriers and shippers are ready.
What is that 8% going to cost them and how will their margins fare in the process?
When oh when is retail going to stop playing games and start playing smart? I know it’s all about competition but if everyone is losing don’t you think transparency to the customer is the smarter play?
And, BTW, does anyone have the % of how many consumers wait until the absolute last minute to buy anyway? My mother used to get some very interesting things in her stocking (the only part of Christmas that dear ole dad had to do) because my dad just got whatever was left at the drugstore. So as a tradition in my family we always get stuff like aspirin, band aids, etc, in our stockings. Got lemons? Make lemon-aid!
And that’s my 2 cents!
Retailers are pushing the deadline from fear of lost sales. The real question is, is this rational thinking? How many sales occured by product category in the last three days? Pushing back a deadline for no real sales increase is only playing with fire.
Consumers have gotten lazy. When most of the non-store sales were from catalogues, consumers know they had to order early. The internet is believed to have inventory levels providing assurance that consumers will receive the merchandise. Further reinforcement comes from retailers saying they will guarantee delivery by a third party.
First, I expect any consumer burnt last year will order earlier this year. Second, I expect any consumer burnt this year will order earlier in future years. Over all, based on the publicity last year, I am not so sure consumers trust online retailers to deliver this year.
George took my lines! Weather is a factor over which NO ONE has any control. And I think the retailers are cutting it way too close. Better to have the order and it be late than not have the order at all I guess.
I had an important (overnight delivery!) package sit at FedEx over a whole weekend because the delivery arrived a few hours late on a snowy Friday, after that day’s deliveries had begun, they put it into a box with other packages (not to be opened and delivered until Monday), and no amount of pleading and complaining said they couldn’t get into the big box until Monday. Even when it kinda sorta hasta be there, they forgot their own mantra.
Retailers know the customer is always right, and in this new omnichannel age where anything can be delivered anywhere and anyhow the customer wants it, retailers have to push their boundaries to compete.
I agree with the professor’s comments below, in that if a retailer doesn’t meet the “delivery by Xmas” deadline as promised, there will unlikely be a return if the gift is well received. However, I would argue that if deliveries arrive late, the retailer has LOST that customer entirely. Is it worth losing customers to make a one-time sale? I don’t think so. However, it’s entirely possible that some retailers who offer these closer deadlines have invested in technology tools that enable their supply chains to move responsively enough that they can decrease the gap between order and fulfillment. Those retailers will win out.
Each year more and more purchases go to the online channel and at Christmas, even more so. My experience has been mixed. I’ve had the early delivery, the heroic UPS Christmas Eve delivery…and the late ones.
I think we’re talking about something that success and failure aren’t scored equally. A miss is much more negative than a hit is positive. So..unless something has happened structurally to deliver the promise more reliably, the later deadline will backfire. But the issue is the backfire happens after the sale, so the impact may be buried in post-Christmas sales.