Can Retailers Handle the Holiday E-Commerce Surge?

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Can Retailers Handle the Holiday E-Commerce Surge?

By Thad Rueter - 10/01/2020
Can Retailers Handle the Holiday E-Commerce Surge?
Amazon and other retailers face the challenge of keeping holiday deliveries timely as more shoppers buy online.

The holiday shopping season during this extraordinary year promises to start earlier than normal, and involve a heavy does of e-commerce. But all those digital orders could contribute to delivery delays for consumers, according to new data from Salesforce.

The company, which provides customer relationship management software and other services to retailers, said this holiday shopping season will bring 30% global year-over-year growth in e-commerce. Digital sales will reach $221 billion in the U.S. during the holiday season and $940 billion globally, Salesforce said.

But a blessing can open the door to a curse. As Salesforce puts it, up to 700 million packages will face potential shipping delays this holiday shopping season because orders are on track to exceed shipping capacity by 5%.

Not all e-commerce involves deliveries, of course. Salesforce also estimates that retailers offering buy-online, pickup-in-store services will grow digital revenue by an average of 90% over last holiday season.

Overall, holiday sales are expected to be flat despite this digital growth, with an expected $5.1 trillion in global holiday sales and $730 billion in U.S. holiday sales.

“Digital commerce won’t fully compensate for the projected brick-and-mortar slowdown, but it will be critical to help retailers close the gap this holiday season,” said Rob Garf, vice president of Industry Insights for retail and consumer goods, Salesforce. “Businesses that succeed during the holidays will use everything at their disposal to make shopping easy and safe, including convenient digital ordering, creative and efficient fulfillment, and responsive customer service.”

Fulfillment Challenges

Retailers have to focus hard on what consumers think is important during this year of the pandemic, according to the company. As health mandates forced store and warehouse closures, many businesses early in the coronavirus outbreak encountered fulfillment challenges and struggled to maintain both product availability and the delivery windows that customers were accustomed to. As a result, shoppers’ priorities are availability, shipping and delivery time, Salesforce said.

Those trends will result in an estimated $40 billion worth of COVID-19 delivery surcharges between Nov. 15 and Jan. 15 globally, the company estimated. To deal with that, retailers are not only expanding their in-store pickup services, but will likely lean harder on crowdsourcing last-mile carriers through the gig economy to alleviate the strain placed on traditional carriers. As well, reminding shoppers to buy early and highlighting shipping cut-off dates will help shoppers avoid last-minute purchases and reduce fulfillment strains during the busiest weeks.

Earlier Holiday Season

As Salesforce put it, the combination of Amazon’s Prime Day event in mid-October and consumers eager to ensure their packages arrive on time will lead to an earlier start in the holiday shopping season. 

This earlier demand could shift up to $6 billion of November’s Cyber Week volume in the U.S. and $26 billion globally to the month of October, Salesforce said. However, Cyber Week digital traffic is still expected increase 28% year-over-year — a trend accelerated by nearly ubiquitous access from mobile phones and the fact that fewer people will be rushing to stores on Black Friday.

Concerns over health and safety, anticipated product scarcity and shipping delays are also expected to contribute to the start of an earlier holiday shopping season, Salesforce said.

Returns and Hot Products

More online and mobile purchases could help spark an increase in returned merchandise. In total, $280 billion in online purchases are expected to be returned globally — 30% of all purchases made, Salesforce said.

To reduce return rates, retailers should use store associates to help guide online buyers to the right purchases via communication tools like live chat and digital concierge services, the company said. Commerce websites should also be revamped to provide comprehensive product descriptions, product reviews, videos, clear and accurate fit guides, inventory availability and expanded shipping options to minimize returns.

So what products will prove most popular for the pandemic holiday shopping season?

According to Salesforce, last year’s leading categories included footwear, general and luxury apparel, beauty and electronics and gaming. While beauty and electronics and gaming will once again be top holiday spending categories in 2020, home furnishings and decor, home fitness and toys are among the new leading categories this year. Evidence of that trend has already been seen in the latest earnings reports of certain retailers.