E-Commerce: Long-term Revenue Impact of Holiday Peak Performance

Poor performance during holiday peak for e-commerce companies can impact revenue far beyond the holiday season, with the primary driver of customer experience being timely order fulfillment.  Historically, November 28th to December 24th marked the peak season for shipping for small parcel carriers across the globe. A study on 2021 peak season emphasized the change in peak season - it now begins earlier and last longer, with 35% of consumers starting their holiday shopping earlier and 45% reporting they finished their shopping before December.  

It is estimated that approximately 3 billion packages are shipped across the carriers’ networks during this time period and the most crucial statistic during the peak season is on-time performance. In this article, we will dive deeper into what Private Equity firms and their e-commerce portfolio companies are doing to plan for this year’s peak season.  

We will cover common challenges and issues that e-commerce companies will encounter in the 2022 peak holiday season and  how to layout a plan to reduce fulfillment challenges, thereby driving higher customer satisfaction and securing revenue both for today and the future.  We will share thoughts on optimizing peak season small parcel shipping within Private Equity portfolio companies from industry experts to help ease the stress around peak season shipping.

Challenges and Issues:
E-commerce companies looking to out-perform their competitors must now manage a volatile supply chain, challenges with maintaining sufficient inventory, and the rising cost of shipments.  As we approach the peak holiday season, the shipping experience will be more important to companies’ bottom lines and brand reputations than ever before.  Research by Oracle found that 74% of senior executives believe that good customer experience directly impacts customer retention. 

According to Esteban Kolsky, 72% of customers will share a positive experience with 6 or more people. On the other hand, if a customer is not happy, 13% of them will share their experience with 15 or more people.  The challenge here lies in the fact that, in most cases, customers don’t tell you they’re unhappy. In fact, only 1 in 26 unhappy customers actually complains.
 
With increased competition and the knowledge that the majority of unhappy customers do not provide feedback, the need to win the customer experience battle is elevated during holiday peak for the e-commerce sector.
In order to exceed customer expectations during the 2022 holiday season, e-commerce companies must address many challenges, with an emphasis on the customer experience once the package leaves their facility.  
 
Here are some common challenges and issues facing the e-commerce sector this holiday season:

• Inflated shipping costs being passed on to the customer due to higher demand on the carriers’ networks and increases in fuel costs
• Insufficient or delayed planning internally and with carriers and 3PL providers resulting in inability to meet customer demands  
• Capping of capacity by carrier resulting in backlog of orders, warehouse floor space challenges and logistical challenges managing backlog & new volume  
• Lack of back-up plan - e.g., how do you route packages away from a bottleneck in the event of a major regional challenge?   Southern California and NY metro are regions prone to bottlenecks  
• Insufficient carrier diversity planning and contracting prior to peak; are all your eggs in one basket?  
• Antiquated systems and poor integration for tracking shipments  
• Lack of  support & escalation path for resolving customer issues related to shipments  
• Inadequate process and system for handling higher volume of returns  
• Poor data and inadequate tools to forecast cost per shipment during holiday peak resulting in lower margins as the company absorbs a higher cost OR checkout abandonment when shipping costs are too high

 
If these types of challenges and issues are not proactively addressed, both the immediate and long term impact to revenue and brand can be catastrophic.   The greatest  impact of holiday peak shipping issues  is a loss of revenue  that extends beyond the holidays.  A poor customer experience during the stressful holiday season results in orders being cancelled, loss of repeat customer orders, and damage to reputation and brand stemming from social media posts by dissatisfied customers.    

A Guide to Planning for Peak Season Small Parcel Shipping:
Get Ahead
Meeting consumer expectations for delivery is key to building customer loyalty, as 79% of consumers are more likely to make a second purchase from a merchant after a positive delivery experience.
The first step, when it comes to peak season parcel shipping, is to get ahead.  According to Steve Denton, CEO of Ware2Go, “The good news, as we head into peak, is that we’re in better shape then we were this time last year.  The supply chain has loosened up a little bit.”  Denton recommends shoring up your labor strategy by getting a handle on your demand forecasting and inventory planning as well as liquidating inventory that is not turning ahead of peak.

We have asked our Private Equity customers what they are doing to prepare for peak season and assess weak points or potential issues within their current shipping environment:

For us, 2021 Peak prep included establishing and deepening our parcel relationships.  With our partners, we were able to service our customers more adequately with better parcel pricing from our existing carriers, as well as leverage new partners for analysis to establish new parcel agreements.  With our full suite of partners, we were able to both deepen and widen our parcel solutions for customers during the 2021 peak. (Jeremy Evans, Boutique Brands)

As companies move into the prepping stage for peak season shipping, it’s important to continually monitor processes and systems internally to ensure efficiencies from when an order is placed on the website all the way through delivery.  One way to evaluate your current situation is to assess if your current carrier is fully meeting your business needs – if not, onboarding a new carrier is  a great way to put processes and systems in place with a clean slate.  Taking stock and evaluating current performance leading up to peak season will help identify vulnerabilities and potential challenges with higher volumes.

Capitalize on Available Resources
Though it may seem there are no additional resources for your particular company, there are subject matter experts, software, carriers, and third party providers to take advantage of as you develop the roadmap for a more successful small parcel program.
Some things to consider when looking for additional resources when it comes to small parcel shipping are:

• PE firms leverage relationships to assist portfolio companies  
• 3rd party industry experts  
• 3PL partners 
• Carrier partners like UPS, FedEx, DHL 
• Regional carriers  

There are a variety of resources available to you to make sure you are optimizing your small parcel shipments and creating a solid foundation from a systems and process standpoint.
 
Have a Plan!
As we close in on peak season parcel shipping, having a plan can be the best way to ease concerns for your customers and internal workforce. One of the most critical ways to set expectations with your customers is to collaborate with your internal or external marketing team to advertise your delivery commitments and any potential promotions if customers were to buy from your business. This is one easy way to let customers know that you have a plan in place and guarantees that you can meet their needs when they order during this year’s peak season.

There is also planning around facilities or warehouses that needs to take place. A recent study reported that 57% of consumers surveyed made a purchase last year from a retailer they had never done business with before.  37% of those shoppers did so because their first-choice retailer was out of stock. 
Does your facility have enough space for a potential increase in product warehousing needs? Is your carrier aware of the increased need for drivers for pickups or drop-offs? If there is an issue with pickup and drop off times, would adding an additional carrier help with the issues and needs of the facility? These are some of the questions that may need to be answered to ease  some of the tension around the facility or warehouse and the carrier as we inch closer to the holiday peak season.

Unforeseen circumstances are also in the mix when planning for peak season. Are you in a climate that experiences heavy snow in the fall/winter months? What if a facility needs to close for power outages or maintenance issues? Asking “what if?” questions around all your parcel-related needs can help with finding solutions and having a backup plan if issues  arise.

Chief Supply Chain Officer at Ware2Go, Chris Domby, offers the following advice for risk mitigation :
"When warehouse vacancy rates are low, it's very important to distribute your inventory across multiple warehouses, giving you a smaller footprint in expensive coastal markets. If you're looking for an alternative to Southern California, moving just a little further North into Central or Northern California, you're likely to find more available space. If you want to avoid the West Coast all together, the port of Houston is an attractive alternative, and container volume is on the rise there. Texas has a large population, and its central location reduces long zone shipping across the country. On the East Coast, there is higher capacity and excellent ground shipping coverage in the Tennessee, Virginia, and Atlanta markets." (Chris Domby, Ware2Go)

Planning for both increased demand and unforeseen circumstances is critical.  Consider having multiple warehouses available to ship from or ship to for returns,  or evaluate ramping up productivity within a certain warehouse where demand is going to be amplified.  It is crucial for companies to explore these types of options before we enter the peak season shipping months.

Purchasing, Delivery Execution & Customer Service:
The last mile is quickly becoming the most important touchpoint in the customer experience and is often the area the merchant has the least amount of control.  Overall, the shipping experience is becoming a larger pain point for both the merchant and the online shopper.  

Data shows that the top reason a shopper will invest time to leave a negative review is if a package was damaged or never arrived.  Among the top five reasons for leaving a bad review is that the shipment was delayed or took longer than expected.  

Through timely planning, carrier partner selection and execution, the last mile can be an important differentiator for merchants. 

When talking about the holiday peak season shipping, one aspect that is often overlooked is the importance of the return experience. Having a seamless and easy return process, along with a quality customer service experience, is valuable.  From when a e-commerce customer adds a product to their cart, the experience from that point through delivery and a potential return is critical for customer retention and loyalty, and positive small parcel shipping experiences are a key part of the customer experience.   
The positive customer experience is critical for companies as they work to meet or exceed expectations.
Alongside customer satisfaction with purchasing and delivery, the customer service and returns processes need to be strong in order to maximize customer satisfaction. Plan for returns the same way you are planning for delivery of your products, as this will also ease concerns for when peak season comes around.

Treya Partners:
We have been a leading provider of Procurement Improvement Services across the public and private sectors since 2006. Clients served include 15 state governments, multiple institutions of higher education, and over 60 private equity funds. We also hold the first and largest small parcel Group Purchasing Organization (GPO) with UPS to deliver savings for Private Equity and their portfolio companies through a PE volume leveraged program. 
 
 
 

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