With Americans spending more time at home, online shopping has accelerated at an unprecedented pace, with sales quickly surpassing holiday volume back in April. At CommerceHub, we continue to see a notable uptick in online order volume across the board for our top retailers, and it’s showing no signs of slowing down.
According to CommerceHub’s COVID-19 Shopping & Delivery Trends survey, 69% of consumers said they’d be more willing to subscribe to a delivery service for essential items following the COVID-19 pandemic
The upcoming peak holiday season will not only have to compete with decreased carrier capacity due to the pandemic but also the anticipated influx of mail-in election ballots – all of which could result in a “super peak” holiday nightmare for retailers that aren’t properly prepared. Now is the time for them to implement strategies to ensure they can keep up with demand and protect their customer experience.
Shipping Costs Drive Alternative Methods
Just last month, FedEx announced it’s tacking on a peak residential delivery surcharge for packages shipped starting in November, a move that will have an overwhelming impact on large retailers. As carriers like FedEx and UPS grapple with a massive surge in ecommerce, pushing their networks to capacity, retailers have begun testing out different strategies to bypass traditional delivery methods.
Take Best Buy, for example. Last month, the big box retailer announced it will turn a quarter of its stores nationwide into makeshift fulfillment hubs to better handle the higher volume of peak holiday season online orders. The idea is to bring inventory closer to customers in order to combat rising shipping costs and ultimately prevent delivery delays.
On top of that, Best Buy has also set up third-party locations for curbside pickup, a method that has become a consumer favorite this year. For example, in our COVID-19 shopping and delivery trends survey, 59% of consumers said they will likely opt for curbside pickup once the pandemic subsides to avoid shopping in stores.
Curbside pickup has given traditional retailers and brands a means to attack Amazon’s Achilles heel: Not having a large physical footprint. While Amazon has purchased more than 100,000 vans to ensure meeting its Prime (now) one-day delivery promise, retailers like Best Buy, Walmart and Target are leveraging stores to hold inventory and let customers pick up orders when it’s most convenient for them.
Curbside and Other Last Mile Tactics
While curbside delivery has been around for a few years, retailers and brands are exploring alternate last-mile delivery methods to sidestep the major carriers. Target, Nordstrom and Banana Republic have all formed partnerships with on-demand services such as Postmates and Uber to better compete with Amazon. Banana Republic, for example, uses Postmates as an extension of its buy online, pickup in store (BOPIS) offering. Customers within a certain radius of any of its stores can have their order delivered the same day by Postmates.
Another example is Walmart’s recent investments in grocery delivery and curbside pickup, which has put them in a strong position against Amazon in the third quarter.
Drop Shipping Mitigates Inventory Issues, Out of Stocks
Despite establishing curbside pickup and exploring the gig economy for delivery options, many retailers will still have to deal with potential inventory shortages or peak holiday season out of stocks. To minimize the risks and cost associated with purchasing and moving stock unnecessarily, particularly during periods of uncertainty and heightened demand, companies are turning to drop shipping programs to more effectively manage inventory needs and demands.
Drop shipping allows retailers to be both reactive and proactive in response to demand and anomalies that might impact their business. For example, if a particular supplier’s fulfillment center is overwhelmed, diversifying ecommerce inventory via drop shipping gives retailers the flexibility to pivot to a different FC that has the capacity.
Diversifying inventory distribution, bypassing supply chain bottlenecks and making logistics more efficient has never been more critical for retailers and brands. When well executed, these strategies can help them more effectively navigate an expected massive peak holiday season by ensuring ease of purchase (e.g., inventory availability and accurate order fulfillment) and timely delivery. This will help in this year’s crunch time and into 2021 and beyond.
Erik Morton is SVP of product and strategy at CommerceHub