Key Logistics Challenges E-Commerce Retailers Will Face This Peak Season
E-commerce sales rose steadily the first half of 2022, with sales increasing 2.7 percent between Q1 and Q2. But even with the coming holiday sales surge, that trend might not continue. In fact, some reports predict that the number of online orders this holiday season will be down 5 percent compared to 2021.
Why? And how should e-commerce retailers address this issue after the pandemic pivot to online ordering? Let’s take a look at the reasons for these changing retail winds, and how retailers and logistics providers can prepare for this shift together.
The 'New Normal'? It’s Finally Arriving
What retailers are seeing is likely a sign the market is returning to some pre-pandemic shopping habits — but not all. When the pandemic hit, many consumers opted not to go on vacations, attend in-person events, or even shop in-store. Instead, they stayed at home and ordered their necessities and wish list goods online, which drove up e-commerce retailers’ order volumes and inventory amounts significantly.
But even as consumers feel more comfortable heading out to stores, post-pandemic economic factors are likely to change shopping habits in general. Inflation is at 8.3 percent, gas prices are expected to rise, and job growth — although still moving at a clip in September — faces a cloudy future.
The impact of these trends is compounded by new go-to-market strategies driven by e-commerce retailers themselves. More virtual storefronts are contracting with physical big-box chains such as Walmart, Lowe’s, and The Home Depot. It's not uncommon for e-commerce retailers to forget to factor in or underestimate the effect cannibalization will have on their online sales. Consumers who may have bought a retailer’s products online before might grab it off the shelf on their store run.
All of these factors — a return to in-store shopping, availability of products in-store, and decreased buying across the board — mean that e-commerce retailers may be left with excess inventory gathering dust, racking up storage fees, and even expiring on their warehouse shelves this peak season.
Work With, Not Against Your Fulfillment Providers
To sell their excess inventory and free up their warehouse space, savvy e-commerce retailers will likely turn to sales and promotions this peak season. That’s a great strategy. However, it can only be executed if e-commerce retailers work with their fulfillment providers closely. Here’s why:
- Labor Challenges: Much like their in-store counterparts, warehouses are struggling to find enough employees. Fulfillment providers will need runway to further ramp up their recruiting efforts or to scale their automation technology as a substitute.
- Packaging Challenges: Unlike their in-store counterparts, warehouses can’t just throw your purchase in a nice plastic bag. Fulfillment providers will need to know which products you expect to move so they have enough of the right-size boxes and accompanying packing material to meet demand.
- Delivery Challenges: Although supply chain backups are lessening, the trucking industry still faces capacity issues. Fulfillment providers will need to ensure they can schedule adequate transportation, especially with trucks already in high demand for Q4.
E-commerce retailers need to start these conversations with their fulfillment providers as soon as possible. The quicker they can prepare, the greater chance of success.
Don’t Give in to the Decline
Although some of the pandemic-spurred e-commerce sales inflation is starting to wear off, 2022 can still be a successful peak season for online retailers with the right strategy. By working together, e-commerce retailers and fulfillment providers can pivot sales to empty warehouse shelves — and drive profit from their excess inventory.
Jason Minghini is group vice president at Kenco Group, a company that offers customized third-party logistics (3PL) management solutions and warehousing services to businesses across North America.
Fast-paced supply chain executive focused on optimizing the supply chain and creating value for shareholders, customers and employees. Solutions design, including robotics and automation, that maximized value across the supply chain. Strategic direction and planning on use of business intelligence and advanced analytics (ML/AI) to solve complex business problems.