Peak 2018: an array of new shipping challenges and how to beat them

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Christmas is coming and the need for coherent delivery options for retailers is front and centre. In the age of personalisation – and faced with ever-more demanding consumers – delivering a good shipping experience on a tight budget is crucial.

Shoppers today are not only coming at retailers from mobile, the internet, in-store, but are also mixing and matching these channels to their own advantage – not least with Click and Collect seeing them shop online, but collect in store. This pick and mix approach to multichannel is a challenge across all elements of retail craft, but is particularly vexing when it comes to shipping.

The challenges run right across the supply chain, from suppliers, to warehousing to store delivery and onwards out into the world of parcel collection points, third-party handlers and, of course, the consumer’s front door. And at peak times, these issues are magnified. So what are retailers up against for Peak 2018?

Super-fast, super-serious

The biggest challenge multichannel retailers are going to face over Peak 2018 is the increasing demand for fast delivery to a growing range of locations. While next-hour delivery is still some way off, shoppers this peak season are going to be demanding not only rapid delivery but guaranteed rapid delivery.

Peak this year is likely to be spread over a number of weeks between the ‘traditional’ Black Friday following Thanksgiving and Christmas Eve. Shoppers are going to want to be able to buy what they want in this timeframe with a variety of delivery options – but many are going to start to veer back towards buying closer to the ‘big day’ and will be prepared to pay for rapid delivery.

This is going to push retailers’ logistics to the limit. Peak will last for a month and short order time volumes will rise. This can be a supply and distribution nightmare in the making. To date even Amazon Prime isn’t a guarantee of next day delivery: for many of this year’s peak shoppers, they are going to pay the extra and they are going to expect delivery when they want it – to a place they specify.

This puts untold strain on logistics networks and inventory management and is going to increase costs. This peak is going to be unlike any other when it comes to speed.

The rural-urban divide

Another area where logistics has shifted over the past 12 months that will have a bearing on Peak 2018 is the rural-urban divide. Increasingly, people are moving to cities and so retail logistics is often seen as an urban issue. Startups that offer same day delivery or other innovative delivery models are usually focused on this young, urban population and so retailers face an ever-more demanding urban audience. These guys are likely to want more options for delivery and will be the ones driving speed issues noted above.

However, for pure-play retailers this presents a problem – or if you prefer, for existing brick and mortar retailers, it offers an opportunity. The increasing demand for more flexible eCommerce delivery in urban areas means that the need for urban or urban-connected warehousing is rapidly rising. This pushes up costs for pure-plays.

Established retailers, however, finally have an advantage: they have store space that can be used to help fulfil this urban demand.

But rural shoppers are also changing how they shop, which is having other impacts on logistics that will start to impact on peak in 2018. Traditionally, shoppers based out in the country tended to travel to a town or city and ‘stock up’: in other words, rural shoppers were regular bulk buyers.

Ecommerce has changed all that. Now rural shoppers shop more like their urban counterparts, buying things as they think of them of as they want them. This leads to smaller basket value order and more of them – every eCommerce retailer’s worst nightmare.

The cost of delivering many, small orders over larger rural distances is going to stretch the logistics operations of any retailer or logistics company to the full this year. While the promise of drones and other tech could solve this problem, they are still some way off. For Peak 2018, both rural and urban shopping habits are going to be increasingly challenging.

Is anyone ready for in-home delivery?

One of the biggest costs for retailers and logistics companies is delivering to people who are out and unable to take their goods. Not only does this often mean a return visit by the courier, which costs, it also creates a poor impression among the ever-more picky shoppers.

One solution mooted in 2018 has been in-home delivery. This involves the delivery agent having access to the user’s home – usually through some sort of web-enabled lock à la Amazon Key – allowing them one time entry to drop of packages.

The jury is still out on this one. It could well be something that logistics companies and retailers are keen on as it guarantees delivery first time, streamlining operations. However, consumers are less keen. Do you really want someone letting themselves into your house? And what if it gets hacked?

As Peak 2018 approaches it is unlikely that in-home delivery is going to be high on the agenda, but this year may well see significant numbers of early adopters use it for the rest of us to work out if it might be a goer.

Click and Collect complexity

Despite it seemingly being the worst of all worlds, Click and Collect is on the up. Why consumers want to mix the convenience of buying online with the distinctly inconvenient drive to the shops to collect it remains unclear, but retailers certainly have a vested interest in keeping it going – and Peak 2018 will see it reach new heights.

For retailers, Click and Collect allows for orders to be taken online and assembled overnight and it then brings shoppers into the stores. And those store-visiting customers usually then go on to buy more once in store.

In-store Click and Collect has been extraordinarily successful, with many multi-channel retailers reporting upwards of 30% of all online orders being collected in-store. This nearly doubles amongst market leaders like John Lewis and M&S which have reported upwards of 50%. However, retailers will struggle to see the same level of growth in 2018 if they don’t invest in the channel.

The reason for this is that consumers are becoming more discerning in the experience they expect from Click and Collect. Research from JDA has found that 73% of shoppers would switch retailers if they had a poor experience with an online Click and Collect order.

Putting Click and Collect in a remote corner of the store and having to wait while store teams rifle through poorly formatted and organised storage rooms to find parcels, just doesn’t wash with today’s attuned Click and Collect shopper. This requires investment in the technology and customer experience to make sure retailers don’t lose out to other retailers offering a slicker in-store experience, or third party networks offering a more convenient experience.

Additionally, more and more retailers are having to reflect the cost of in-store Click and Collect in their pricing to customers as the benefit of footfall does not always outweigh the fulfilment cost for in-store Click and Collect. Tesco, John Lewis and New Look have all taken steps in this regard.

But while the model is well established and popular, it is evolving, adding challenges to multichannel retailers aplenty.

Third party location Click and Collect has grown three-fold in volume over the last two years, and is likely to again in 2018, with the market up by 130% year on year. This increase exceeds recent predictions by the IMRG Delivery Index.

The basis for this is the increasing number of third-party Click and Collect providers and locations, combined with increasing adoption of third-party Click and Collect at online checkouts of retailers, and consumer demand as a result of fewer people being “home” during the day.

Workplace and city policies such as those put forward by the London Assembly to ban personal deliveries to workplaces to reduce congestion will also drive greater volume to third-party Click and Collect points. We believe the impact of this has not been fully considered in previous predictions, however a mandated behaviour change of this nature could be a significant tipping point for third-party Click and Collect volume in 2018.

Managing the supply side

Multichannel retail has made supply a much more complex area than once it was. Selling through multiple channels means carrying greater inventory levels – to satisfy increased demand – as well as looking at how to optimise delivery potentially worldwide to eCommerce customers as opposed to a set of stores.

Managing where orders are coming from and how best to fulfil them is a massive job in itself. Co-ordinating supplies to store with orders to eCommerce customers can be a nightmare. For smaller retailers, stock is often held centrally at a store and eCommerce fulfilled from there. For larger retailers dealing in millions of units, it makes more sense to ship eCommerce orders from warehousing or even direct from the supplier.

But the picture is even more complex.

Many retailers also now use marketplaces as part of their multichannel strategy. Amazon is the obvious choice, but there are many others that cater for niche sellers. Together these all add another dimension to the management of both the supply side and retail distribution issues for retailers.

Part of the lure of marketplace trading for many retailers is that marketplaces usually offer some form of fulfilment. Amazon, of course, offers the full beans (if you want it), but many others will help with delivery.

While on the consumer side this can be a real boon for the retailer, again it has supply side and inventory management issues that are often overlooked. Keeping the marketplaces supplied is a constant issue – especially when it forms just part of a retailer’s online strategy.

Co-ordinating the supply of all these channels is crucial for all retailers working across channels and must be part of any logistics strategy.

The solution

So how can retailers manage these complex changes in eCommerce logistics for Peak 2018? The key lies in having total oversight – and that comes from employing a shipping and logistics management company.

The demands of the urban and rural markets, the rise in Click and Collect, the need for speed and, increasingly, some demand for new ways of delivering things such as robots and drones, means that no multichannel retailer can survive without having access to many varied carriers.

Couple this with having to manage the logistics of supply and retailers preparing for Peak 2018 face a huge challenge.

The answer lies in getting experts to manage this for you. Linking together all the suppliers and distributors to create a living network of carriers, inventory and order management. For pure-plays or multichannel retailers, there is still time for getting this set up for Peak 2018 – certainly to cover off elements of it – and you shall then find yourselves ready for these challenges (and more!) in Peak 2019.

About Parcelhub – The bespoke parcel shipping solution.

Parcelhub is a multi-carrier shipping and eCommerce customer services solution. Flexible and scalable, it integrates seamlessly with marketplaces, eCommerce platforms, OMS, WMS and ERP systems, providing hundreds of multichannel retailers, global brands and wholesalers with one access point to 20+ carrier partners and 300+ services.

Peak Season Parcelhub Van

Distributing more than 6 million parcels on its own carrier contracts every year, Parcelhub’s free multi-carrier shipping software grants hundreds of national and global businesses access to ‘pooled volume’​ discounted rates from its carefully selected range of carrier partners, including Yodel, Hermes, DPD, UK Mail, DHL, UPS, DX, Parcelforce, CollectPlus, SkyNet, ArrowXL, Interpost, Panther Logistics, Direct Link and Palletforce. Dedicated proactive parcel management comes as standard.

Parcelhub is part of the Whistl Group. Whistl is the leading delivery management company enabling customers to get their letters, leaflets or parcels to customers efficiently and cost effectively both in the UK and internationally. It is headquartered in Marlow with 8 depots and 2 fulfilment centres across the UK handling 3.8bn items a year. The company is privately held with over 1500 employees and a turnover in excess of £600m. It has grown significantly over the years and is now expanding its presence in the eCommerce sector offering fulfilment services to customers through a seamless experience from first click to final delivery.

This guest blog was written by Parcelhub.

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