We close out a very busy week with some updates relative to previous supply chain management and industry developments highlighted in prior Supply Chain Matters postings.
In our most recent Supply Chain Matters commentary stream, we questioned whether recent fuel surcharge rate hikes would have an impact on consumer online buying trends for the coming holiday period. The Black Friday to Christmas holiday period has never been more important for online retailers as well as to parcel carriers and retail supply chain teams. There remains retail inventory overhang from last year’s U.S. West Coast port debacle and we expect retailers to be aggressive in earlier merchandise promotions. We furthered wondered aloud how consumers will respond to higher shipping charges, or whether online retailers will elect to absorb increased shipping costs or seek alternative delivery models.
This week, major online and brick and mortar retailers have begun to disclose their Free Shipping policies. Target announced that it will offer free shipping for orders placed online from Nov. 1 to Dec. 25. The retailer currently requires a minimum online order of $25 to qualify for free shipping. According to reports, Free-shipping boosted Target’s digital sales 36 percent during the fourth quarter last year.
Wal-Mart, on the other hand, indicates it will keep its minimum online order size for free shipping at $50 this holiday season. Electronics retailer Best Buy has elected to waive its $35 minimum through early January. Amazon, of course, offers free delivery to members of its Prime shipping service, and this year, may well add premium or same-day shipping services for members.
Meanwhile, the same retailers are positioning their policies for Thanksgiving holiday hours among brick and mortar owned stores. Sears announced it will open its doors from 6 p.m. through 2am on that holiday, and then reopen at 5 a.m. on Black Friday. The Sears’ announcement came one day after Macy’s disclosed that it will offer shoppers within its stores Black Friday deals beginning at 6 p.m. on Thanksgiving. On the other hand, a handful of retailers including Lowe’s, TJX and Staples have indicated that they will be closed for the holiday.
Many studies continue to reinforce that convenience and Free Shipping motivate consumer buying decisions. However, retailers run the risk of not meeting or underperforming profitability goals if they do not have up-to-date information on shipping and fulfillment costs. This year, with parcel carriers adding the dimension of additional charges and capacity premiums, the challenge becomes ever more important.