This post was contributed by Anna Ngo of Cin7, a provider of multichannel inventory management software. As a marketing content writer, Anna produces content to help Cin7 customers scale and sell successfully across retail, wholesale and marketplace channels.
Last year, nearly a quarter of eCommerce sales took place over the two months of November and December, starting with Black Friday. As people’s preference for shopping online continues to grow, this holiday season is expected to pull even bigger numbers, which can put a huge strain on even the most organized fulfillment system. So what can you do to prepare?
Predict volume using historical data and business plans
If this isn’t your first peak season, review last year’s data, factoring in current growth trends, your promotional calendar, and peak-season assumptions to establish a baseline. Go as granular as your data will allow, looking at the daily level (hourly, if possible) for any trends. If you don’t have any historical data to draw from, search for statistics online and discuss industry trends with partners and leaders in your product category. Establishing an informed prediction of volume will allow you to make better business decisions leading up to the holidays. For instance, you can have more targeted marketing efforts and ensure you have enough inventory for the influx of orders.
Consider a multi-facility approach
Put your findings to work to understand the impact of shipping from multiple locations on your business. Even a simple two-node fulfillment strategy where, for example, you have one warehouse in California and another in the Midwest, can significantly reduce your overall shipping costs by reducing the distance to your customer and the number of days orders are in transit. Thanks to Amazon’s free two-day shipping, “fast and free” has become the norm and is now what customers demand from their eCommerce experience.
To determine if a multi-facility approach is right for you, review your shipping data and zone coverage. Research the percentage of customers or regions you can reach within two days using an economical ground service. The more customers you can reach in two days, the likelier you can extend your peak season for a day or two and generate more revenue. Adding a node can give you a significant competitive advantage against larger eCommerce sites.
Looking for a third-party fulfillment provider to help diversify your warehouse locations? Complete this questionnaire so we can help you find the perfect match.
Review your inventory-placement strategy
Remember that seasonal spikes in orders affect some regions more than others. For example, beach towels will sell differently in Southern California in December than they will in Vermont. If you have certain SKUs that are likely to sell more during peak season, consider adjusting your inventory for these; think of SKUs typically bought as gifts rather than as individual purchases. Consider the cost of redistributing inventory between locations versus shipping orders with multiple packages for longer distances and times.
Prepare your business and your employees
If you’re going to self-fulfill, create a plan for managing and/or increasing the staff you will certainly need. If you haven’t already, establish strong relationships with temporary staffing agencies, share your projections with them, and align on your needs. If you plan on using a third-party fulfillment provider, consider how an increase in orders might impact your internal customer service team. In 2018, a low unemployment rate paired with a record number of retail job openings made it finding seasonal staff challenging, so plan early.
Also plan for managing new employee training, which will require a large, coordinated effort and a significant amount of time. Failure to properly train employees can cause costly errors and unnecessary issues or interruptions during peak season. For these reasons, many businesses choose to outsource their logistics. To ensure adequate lead time for implementing and testing systems for a seamless launch, conversations with potential logistics providers should begin no later than the end of October.
Integrate and automate your sales channels
Review your channel strategy and get systems in place to manage the real-time data needs of all of your sales channels. Marketplace integrations allow for easy tracking of orders, greater visibility, and better overall planning. When analyzing your data, be sure to differentiate between your dotcom and marketplace needs.
Adding more sales channels gives you the benefit of more eyeballs, growing your addressable market. In fact, each new marketplace you use, your revenue increases by 31%. Holiday shoppers might be more likely to shop on specialty platforms like Etsy or other gift-focused marketplaces, for example. Consider these channels even if they haven’t performed well for you at other times of the year. If you are looking to add a marketplace, make sure you think about how the onboarding process will affect your other integrations with your inventory management system and other operational platforms you use.
If your inventory is limited, consider reducing volume into channels that are less profitable and moving toward more profitable channels. Take into account specific service-level agreements per channel and be sure you or a provider can meet SLA before committing to a marketplace.
Plan and optimize your logistics
Partner with a transportation provider with strong carrier support. Make sure your peak volume is accounted for by the carrier in their peak-demand planning. Estimated sales volumes can help with planning for inbound shipments. In addition, moving inventory into stock earlier (i.e., before peak season) can help avoid last-minute shipments, delays with manufacturers or at the ports.
You may also want to test bringing sales into October or even earlier, to alleviate the need to bring in shipments during inbound peak. Earlier sales are also usually less time-sensitive and can be produced using the most affordable shipping methods, giving you the ability to profitably offer free shipping. Experiment with minimum spending thresholds to increase your average order value.
Check out the holiday shipping cut-off dates here.
Be prepared for returns—lots of them
In brick-and-mortar retail, returns average 10%, with certain categories like fashion apparel and luxury items at around 12%. Ecommerce returns have been cited at two to three times that! Having an unaccommodating policy can lead to cart abandonment or fewer customers being willing to purchase in the first place. We found that 72% of shoppers say return policies directly influence their online purchase decisions, so make sure your return process is simple and easy.
Try to streamline returned merchandise as upstream as possible. If you’re omnichannel, leverage “return to store” and “ship from store” to local market, return it directly to your vendor, or return and sell in store. All of these help simplify the process while keeping it as upstream as possible. If all else fails, be prepared to process returns quickly at your facility and aim to resell them at full value over the peak season or at a discounted rate soon after peak season.