Optimizing Your E-Commerce Fulfillment Strategy for the Holidays

This blog post is part of our 2017 Holiday Planning series. Be sure to check back often or, better yet, subscribe to the blog to stay updated with this year’s latest holiday trends, tips, best practices, reports and more!

You’ve analyzed demand, determined inventory, optimized product listings and planned promotions. But a critical factor still remains, and it’s one that could make or break a successful holiday sales season: order fulfillment.

When it comes to shipping costs and speed, consumer expectations have shifted drastically over the past several years, with the latest available research indicating delivery demands have reached an all-time high.

Here’s a quick recap of how the ever-evolving e-commerce consumer journey is impacting fulfillment expectations — and what sellers can do to remain competitive this holiday season.

E-Commerce Shipping: Free Still Tops Fast

But “Fast” Isn’t What it Used to Be

When faced with a choice, consumers still value free over fast. According to Internet Retailer, only 1% of consumers are more concerned about the speed of a delivery. The other 99% value free over fast or say that both are equally important, and 68% refuse to pay for shipping at all: They’ll either buy more items to qualify for the minimum threshold or leave the site and shop elsewhere.

This trend continues to accelerate as more marketplaces join the shipping arms race. Walmart began offering free two-day shipping for orders of $35 or more earlier this year, and then eBay announced it would be offering Guaranteed Delivery.

Those moves (and others like them) are leading more consumers to expect that they won’t have to pay to have their online orders delivered quickly.

Which isn’t all that remarkable — until you take a look at what consumers now consider to be “quick.”

According to Deloitte’s 31st annual holiday survey, 83% of shoppers considered fast shipping to mean delivery within two days or less. In just one year, the percentage of shoppers who consider three-to-four-day shipping to be “fast” took a steep drop, decreasing from 63% to 42%. When it comes to household items like toilet paper, 23% of surveyed buyers have said they expect those items at their doorstep within a day or two at most, and 6% won’t wait more than 24 hours.

The amount consumers are willing to pay for expedited shipping has decreased significantly, too. Fueled largely by Amazon’s “Prime effect” — a growing number of e-commerce consumers are now accustomed to free two-day shipping — Deloitte found that the amount people are willing to pay other retailers for 48-hour deliveries decreased 37.5% from one holiday season to the next. For next-day shipping, the decline was 20%.

What this means for seasonal sales:

Rising shipping expectations are creating some big obstacles for manufacturing brands and retailers to overcome. While free shipping can often be absorbed as an expense, expediting delivery typically involves sophisticated warehousing, comprehensive back-office execution and strong partnerships with third parties such as UPS and FedEx.

What you can do to address it:

When considering options for expanding your fulfillment network, don’t overlook drop shipping. When executed correctly, a strong drop ship relationship can be an excellent fulfillment model for retailers that want to expand product selection without incurring extra inventory and warehousing costs or get steeped in the detailed logistics of fast deliveries.

This is also a great time to take advantage of new marketplace options such as eBay’s Guaranteed Delivery program, which allows qualified sellers to show up in search results that have been filtered by delivery speeds. And be sure to use available order consolidation tools wherever possible to combine multiple orders into a single delivery and save on fulfillment costs.

E-Commerce Returns: Expectations are High

Yet Many Sellers Remain Unprepared

Delivery speed is important, but it’s not the only mission-critical element to consider. Another holiday shopping trend looms large, with the potential to blindside the unprepared seller come January: returns.

Some 10% of all holiday merchandise ends up being returned each year. And while those gift returns have long cost retailers billions of dollars, the problem appears to be exacerbated in the age of e-commerce.

Consumers are buying more products online than ever before, and they expect accommodative return policies on those purchases. The return rate for online purchases is about three times higher than items bought in stores. Yet recent research indicates that many retailers and brands remain unprepared.

In the Internet Retailer study mentioned above, the report’s authors tested the fulfillment strategies of 30 retailers and third-party sellers. While most delivered orders quickly, few handled returns effectively. Some required phone calls for approvals or charged higher fees for return shipping, others waited months to issue refunds and most made the process of returning online orders a “real hassle.”

Among consumers, such experiences are often the difference between lasting loyalty and damaging reviews.

What this means for seasonal sales:

Like it or not, gift merchandise is more likely to be returned than other purchases. And there are few seasons where this will play out more prominently than during end-of-year holiday sales.

What you can do to address it:

Instead of dreading the inevitable holiday returns (or, worse yet, doing nothing to address them), it’s time to approach these as an opportunity to connect with consumers and build loyalty.

In fact, we believe so strongly in having a holiday returns strategy that we’ve decided to devote an entire blog post in this series to the topic. Subscribe to the ChannelAdvisor blog, and we’ll be sure you receive an update when it’s published.

What else should sellers be prepared for when it comes to deliveries and returns this season? What questions do you have for the ChannelAdvisor team? Let us know in the comments.

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