The 3 Numbers Retailers Should Build Their Peak Plans Around

Peak season planning is always a combination of in-depth modeling, informed assumptions and, most importantly, gutfeel guesswork. This year, the ground under those guesses has shifted more than usual. Our quarterly Commerce Signal analysis, drawn from live activity across more than 4,900 U.S. supply chain operators moving 485 million orders a year, points to three metrics that should inform every operator’s peak season plan between now and October.

12.8%: The Shipping Cost Reality

Parcel cost inflation rose every week of the second quarter, ending up 12.8 percent year-over-year (YoY). Consumer price inflation, as reported by the Bureau of Labor Statistics, rose 3.9 percent over the same period. This means retailers are absorbing shipping inflation at more than three times the rate their customers are absorbing price increases. That difference impacts profit margins for operators.

It gets more concrete from here. The major national carriers published their holiday surcharge schedules in late July, with core per-package fees up 12 percent to 23 percent over last year's maximums, and the remaining carriers typically follow with their surcharge schedules within weeks.

The next step: Don't wait for the full picture. Model your exposure now against the published schedule, at the package level, by service, and by week. Also, audit your packaging before peak rather than during it. The fees that escalated the most are the special-handling and oversize charges, so a holiday bundle or a slightly larger box can push a shipment into a higher fee tier. Reviewing box sizes in September is cheaper than absorbing the cost of misclassified parcels all season.

Revenue Decelerated While Volume Increased

Revenue growth across the Deposco network decelerated through the quarter, from a 15.4 percent growth at the peak, then decelerated to 13.4 percent growth by the end of the quarter. Unit volume did the opposite, accelerating from 4.0 percent to 8.8 percent YoY. That divergence matters because executives and financial planners will plan in dollars while warehouses operate in units. A peak plan sized off the revenue line only could materially impact the floor and undersize the carrier commitments that units actually consume.

The next step: Build your capacity, labor, and carrier volume plans based on unit demand, and benchmark your demand assumptions against the quarter's close rather than its peak. Sizing to the June peak assumes a growth rate the market has already stepped back from.

Six Days: The Inventory You No Longer Carry

The typical operator enters this peak with roughly six fewer days of inventory than a year ago, the leanest position in 18 months, after a long and deliberate industry-wide drawdown. Lean inventory is a rational answer to expensive capital, since every day of inventory carries a financing cost. However, lean inventories plus accelerating unit demand changes the real cost of guessing wrong. Overbuying means carrying charges and January markdowns. Underbuying means unfulfilled demand, loss of customer loyalty, and expedited freight at the year’s highest rates. The drawdown has quietly shifted the risk toward that second, more expensive mistake.

The next step has a deadline: Set replenishment trigger points before supplier lead times exceed the runway to peak, because after that reactive reordering is the only option left. And remember lean does not have to be uniform. Ensure you have full visibility into where your goods are across your network, and focus coverage on the products that will actually carry your season.

One last signal worth holding onto: consumer sentiment fell 16 percent in two months this spring, yet retail sales kept climbing. Shoppers are expressing economic pessimism but continuing to spend. That's a complex environment to plan in, which is exactly why the plan should rest on observed demand rather than sentiment headlines.

Peak arrives on schedule, whether retailers are ready or not. The ones that model their carrier exposure, plan on units, and set their inventory triggers in September will dictate their own fourth-quarter terms. The ones that wait will have those terms set for them.

Eric Lemus leads strategy and analytics at Deposco, publisher of the quarterly Commerce Signal report on US ecommerce fulfillment.