For many, the holidays may bring to mind a cozy setting: twinkling lights, snowflakes, and hot cocoa by the fire. But for owners and operators of direct-to-consumer (D2C) brands, the holiday shopping surge is usually anything but serene.
October through January each year is known as “peak season,” or just “peak” in logistics, a period of high order and shipment volume. During this time, managing shipping and fulfillment can be a challenge for even the most established retailers and brands. While the holiday shopping season is the bread and butter of many brands’ annual revenues, an inefficient fulfillment strategy can lead to late orders, unhappy customers, increased support tickets and costs, and high stress and frustration.
But it’s not all bad news. While the impact of COVID-19 and labor and materials shortages will impact the 2021 holiday peak season in unique ways, with the proper planning and preparation, every D2C brand can ensure a successful holiday season.
In this post, we’ll explore what peak season is, how it impacts you, and best practices for how to modify your operations to offer an optimal customer experience.
Retailers and brands never thought they’d experience a holiday season quite like 2020, when COVID-19 delays and a sharp rise in online shopping collided to create the perfect storm—a “double peak” season. But in fact, The Washington Post reports that in late 2021, supply chain delays are actually more severe now than at any other point in the pandemic.
The rise of the Delta variant in mid-2021 has led to continued pandemic-related delays both domestically and abroad, as well as critical supply chain disruptions and shortages. From raw materials to transportation to labor, nearly every part of the supply chain has been affected. Imports are still unpredictable, expensive and backed up, with surging container costs, and warehouses are not immune to the impact of labor shortages either. Lockdowns, vaccination targets, and other virus mitigation tactics and thresholds vary by company, region and country, unlike early days in the pandemic, causing unpredictable and unexpected bottlenecks for goods at different stops on the journey from manufacturer to end customer.
As you plan for the holidays, also remember that the peak season lasts into January. Last holiday season, due to a post-holiday pandemic spike, unusually, January saw even more delays than December, and many packages from December were still processing with shipping carriers.
During peak, all logistics companies, from parcel and freight shipping carriers to warehouses, process above-average quantities of shipments due to the holiday shopping rush. As a result, high-volume parcel shipping carriers in particular like FedEx, UPS, and USPS modify their operations to balance that increased shipment load on their networks. They typically add tens of thousands of seasonal positions every winter and add significant overtime to support the surge.
On your end, as an ecommerce business, you will experience these changes in the form of 1) surcharges, 2) atypical (extended) delivery times and 3) occasional tracking delays or errors on your shipments.
FedEx, UPS and USPS typically publish holiday surcharges during summer to early fall, before refreshing their rate tables entirely every year in January. Peak surcharges vary from year to year, but in 2020 and 2021 they have been higher than usual due to the pandemic. Surcharges typically increase costs per shipment from a few cents to several dollars, and will vary by shipping method, package dimensions, zone, and other variables. For example, in 2021, companies shipping FedEx Economy Ground may see a $1.50-$3.00 surcharge per package. With USPS, packages weighing 0-10 lbs will see a universal $0.25-$0.75 surcharge per package.
However, although carriers add peak surcharges every year, whether your particular business will receive them depends on your recent shipping volume with that carrier. If you outsource shipping to a warehouse or third-party logistics provider (3PL) and utilize their rates, you’ll want to check with your partners directly to understand if you are impacted.
If you are impacted, it’s common to boost the amount you charge customers in cart for shipping to defray the cost.
Throughout the pandemic, Airhouse has noticed in our data consistently unmet delivery estimates from shipping carriers. Shipping carriers still advertise their usual delivery times for different shipping methods, but upon closer inspection in their notification centers, you’ll find that it has been the rule that orders from all carriers are being delivered anywhere from 1-3 days slower than usual.
Based on Airhouse data from September for all carriers, depending on the method, sometimes only half of shipments or less for specific methods met expected delivery times once they were handed off to shipping carriers. And, this is before we’ve entered the holiday peak season.
We’ll share tips around how to manage longer delivery times below, but brands that don’t notify customers of these delays will see more support tickets asking why deliveries are slow, as well as potential cancellations and requests for refunds or credits. So, transparency is better to help set expectations.
For any given shipment, tracking number accuracy hinges upon that package receiving consistent scans at different points during transit, from the warehouse at pickup, to sorting hubs, to regional sorting locations, to final destination. When shipment volume is high, or carriers pick up a larger than normal number of shipments, or carriers are otherwise crunched for time (i.e. spend more time at each pickup location during peak due to higher volume, but still need to pick up from all locations on one’s route), more scan errors and delays are noticeable.
At the end of the day, it’s people who process packages, and when you’re handling billions of parcels, some issues will inevitably arise.
Other exceptions in handling or delays will reliably scramble expected delivery dates shared in tracking links, and as a rule, carriers like FedEx share that it’s “not unusual” for packages to go more than 24 hours without a scan and that a package is often traveling as it should. During COVID and the last holiday peak, tracking issues have been well-documented by local and national outlets across the US and all carriers experience them— in some cases, like this past January, with package delays even extending weeks without tracking updates.
At a time when customers are closely monitoring tracking links and delivery estimates for gifts they have purchased, most companies receive more support tickets that their shipment is late, missing or lost, when in reality, it’s likely en route. While it’s important to check on packages with faulty tracking to ensure that they 1) actually shipped, 2) were actually delivered, during peak, resolution can take days in the best cases, to weeks.
At Airhouse, given our networked fulfillment model, we test and partner with different warehouse facilities and are uniquely able to witness how independent warehouses adjust their operations during peak season, both during and before COVID.
Naturally, as shipping carriers process increased order volume, warehouses also experience a surge as they pick, pack and ship complex and highly variable orders from hundreds to thousands of different companies. With D2C brands that commonly have more complex branded packaging requirements, it’s easy to see how a surge in orders can produce more delays than using a standardized service like Amazon.
To adjust, warehouses will impose deadlines on inbound inventory shipments during peak season, while managing their own challenges hiring folks to pick and pack orders. Most warehouses shift to having all hands on deck packing holiday orders, and attention shifts away from other tasks in the warehouse, like receiving inbound inventory and projects. Warehouses typically issue customers either a mandatory or suggested final receiving date for the year, after which point inbound inventory will be turned away, received but unstocked, or otherwise delayed. Some facilities lock down entirely, refusing new business during late fall through January.
For ecommerce brands launching for the first time in November or December, if you’re working with a new warehouse with unknown performance, or even an existing warehouse, we strongly recommend getting inventory in early, taking presales through the holidays, temporarily self-fulfilling orders or otherwise not guaranteeing specific delivery dates for all of the reasons mentioned above.
Warehouses often allocate specific teams to specific brands, or work off of order volume estimates to help plan staff each day and week. It’s easy to see, with unpredictable forecasts for order surges and promotions during peak, how despite best efforts, estimates for non-order processing projects and tasks can change during this time.
The best warehouses will plan as meticulously as possible around peak, and the worst won’t notify you of any delays or adjustments (and you will still be impacted, but in the dark about it all), but all have to contend with unpredictability.
This holiday season the best preparation you can make is to arm yourself with knowledge and understand these larger industry-wide factors to help define what is “normal” for your fulfillment.
The hard thing with logistics, especially during the holidays, is that there is no such thing as perfect, 100% on-time delivery or fulfillment, only more or less visibility, preparation, and efficiency. That is not to say that all problems with your warehouse or partners are excusable. But rather, it’s important to know when an issue is very real and vendor-specific (like lack of communication, or poor operations or management at a warehouse), and when it’s a universal peak or pandemic-related problem that all brands and logistics services have to contend with.
Many D2C businesses value transparency around their supply chain, sharing where they source materials and the labor practices of the manufacturers that they choose to work with. Your customers value it, too. So this Q4, we encourage you to be open and transparent with your customers around fulfillment and shipping, too. The best guiding light during this time is clear communication—between you and your partners, and you and your customers.
With that, here are a few tips that the most successful (and lowest stress) businesses adhere to around the holidays:
Remove economy shipping options or add alternatives. Many economy shipping methods are consolidated or aggregated. To offer a cheaper rate, with these methods, multiple carriers will handle a single package. You receive a lower rate, but the tradeoff is slower delivery speeds and often less reliable tracking that misses scans.
Common aggregated economy methods include UPS SurePost, UPS Mail Innovations and DHL eCommerce methods, where packages are handed off at some point in the delivery process from UPS and DHL to USPS for that final stretch of local delivery.
While all shipping methods periodically experience tracking issues, it’s less frequent when using direct methods like FedEx Ground, FedEx Home Delivery, UPS Ground and now FedEx Economy Ground (previously SmartPost) given there is no handoff between carriers.
When setting up your cart options, we recommend most companies at minimum offer more than one shipping method as a best practice—a standard (often free) method, and expedited method, like Overnight or 2 Day, or even just Ground as a paid option. During peak season, tracking issues are more abundant given increased shipment volume and more frustrating, and some companies choose to remove or upgrade economy methods altogether where their pricing model allows.
Underpromise, overdeliver with delivery estimates. Throughout the pandemic, at Airhouse, we’ve recommended companies buffer their delivery estimates when communicating with their customers by 1-2 days. Because in these last few months of 2021, it’s not a question of if a package will be delayed but usually by how much. To reduce customer frustration and support emails, the best defense is for you to post shipping delay notifications all over your site: on your shipping policy page, on top-of-page banners, in product listings, at checkout, and in email confirmations.
Using Airhouse data from shipping carriers, we found that in September 2021, regardless of shipping carrier (UPS or FedEx or USPS), on-time delivery typically hovered around 70-80%. So, a significant chunk of parcels was delivered slower than advertised by shipping carriers. And, when delivered within the carrier’s advertised 1-5 day delivery range (as an example), average package transit times tended to be on the longer end, closer to 5 days on average for methods like FedEx and UPS Ground.
This becomes critical in December, when some ecommerce brands try to push delivery estimates for their customers out to the last minute, to encourage pre-holiday shopping, only to be frustrated when finding that carrier delivery estimates aren’t carrier delivery realities. We strongly recommend advertising “pre-holiday/ship by” dates on your shop. If you’re looking for recommended cutoffs, you can view Airhouse’s here.
Make a plan for holiday theft. Package theft is unfortunately common around the holidays, and those who monitor its stats are seeing more of it during COVID in general. After a customer orders from you this season, remind them to check for packages frequently to avoid porch or lobby theft, as tracking can show orders as prematurely delivered, or delayed when they are in fact at one’s door.
Internally, determine how your team will handle claims and reshipments and what your policy will be. The key piece here to note is: it’s not if you will need to handle a claim or lost shipment, but when, and how many. For your customers living in cities in particular, missed first deliveries (repeat delivery attempts and theft) are frequent, accounting for ~15% of all deliveries in 2018. More recently, with COVID increasing online purchases, one survey found that 29% of respondents regardless of destination had a package stolen in 2020, and most were first-time victims of package theft. The average value of stolen packages was $126, and 81% of stores refunded that lost package.
When you encounter package theft, these events are beyond the control of your fulfillment provider or warehouse. However, you may not know that they are often beyond the shipping carrier’s liability and control as well. Even when shipping methods contain baked-in insurance, carriers do not accept or process claims if shipments are marked as delivered by their package carriers. Meaning, if a package is stolen after it’s delivered to a porch, there is not much that you or your customer can do about it with the carrier to recover the value of that package. The liability is on your customer at that point, or depending on your policy, your company may choose to shoulder the cost. For this reason, we strongly encourage companies find supplementary services like Route that offer buyer protection against theft, especially if you have a high average order value (AOV), or are using an economy service that does not include insurance.
Package protection is one way to avoid stress and financial loss for your company but to also boost cart checkouts and offer customers peace of mind when buying from you, when fear of theft or your policy may be causing them to hesitate.
Promote early. In 2020, large retailers turned Black Friday into more of a “Black November,” running promotions over weeks to months as stores closed during lockdowns, or saw reduced foot traffic. But it wasn’t all a retail tactic to boost sales: customers wanted to shop early, too.
For fulfillment and shipping, this appetite for early holiday shopping is good news. If you’re deciding when to run promotions, it wouldn’t be a bad idea to start earlier rather than later, which would help you sidestep the bulk of delays that come in December.
Find the right fulfillment provider. Although we’re fast approaching the holidays, if you find in October that your fulfillment provider is: 1) not sharing information about holiday plans and deadlines, 2) not proactive with you about disclosing holiday surcharges, 3) inconsistent with communication or services, 4) using workarounds that create frequent order errors that break your operations, or 5) unable to share data around past holiday performance, order processing and expected delays, it is not too late to switch warehouses or test the waters with another.
It’s unwise to radically change anything after October, from mid-November to December. Instead, it’s a good time to make plans, compare options, and get your ducks in a row for post-holiday. But before, it is still possible to make a switch, and the simpler your product and SKU profile, the easier it may be.
The holiday season is often a critical time for ecommerce businesses, but with a firm handle on what to expect and how to prepare, you’ll be ready for it.
For more tips around where holiday fulfillment and COVID collide, we invite you to watch our webinar, How to Build Resilient D2C Operations, or contact us to learn more about how the right fulfillment solution can help you.