The Supply Chain Matters blog provides another reader update on the ongoing holiday fulfillment quarter and the implications to industry supply chain and logistics teams.Where To Buy Allopurinol Progout no Prescription Order Hydrocortisone Pandel Without a Prescription
In our initial update in early October we pointed out that Amazon was likely to be the catalyst for a far earlier kickoff. Amazon’s annual Prime Day shopping holiday which usually occurs in July was rescheduled to occur as a two-date event on October 13 and 14. Indeed,
Amazon indeed broke many additional online records during the multi-day Prime Day event. In conjunction with the online retailer’s report of third quarter financial performance at the end of October, CEO Jeff Bezos indicated to The Wall Street Journal: “We’re seeing more customers than ever shopping early for their holiday gifts, which is one of the signs that this is going to be an unprecedented holiday season.” That statement alone was the harbinger of the headlines of these final two months of the holiday period. Now, with further indicators, the picture is growing clearer, and with COVID-19 infection rates now accelerating once again globally, this may well be the perfect storm of online.
Deloitte InSightQ Report
Key findings from the Retail Insights for Holiday 2020: October Pulse report published earlier this month included key findings that online sales increased 50 percent year-over year during the October 11 thru 17 period.
A Deloitte InSightIQ team analyzed consumer spending data to better understand consumer behaviors in making their holiday purchases this year. Other reported findings indicated that:
- Traditional and online-only mass merchants will likely be the winners with this holiday season as spending levels among such retailers was up 10 to 30 percent in October.
- Major promotional events, including Prime Day, resulted in a 6 percent year-over-year spending increase, across in-store and online. Reported was that not only did spending increase, but so did the number of people visiting retailers’ digital sites. During the third week in October, visits increased 63 percent year over year, and the number of unique visitors increased 47 percent. Not all retail subsectors benefitted since according to analyzed data, mass retail drove consumer spending increases during this October period.
- From the onset of the pandemic, retailers offering essential services (Grocery delivery, Club, Home delivery, etc.) outperformed those that carried more status related categories such as electronics, jewelry, drug and convenience, etc.)
Reinforcing Evidence – Other Retailers
Other major retailers took full advantage of the Prime Day event to offer consumers other attractive choices. This week’s headlines of financial and performance indicate evidence of the success of that strategy.
In the quarter ending October 31, broad line retailer Target Corp. reported a quarterly revenues of $22.6 billion reflecting comparable sales increase of 20.7 percent from stores and online channels. The retailer reported that more shoppers came to stores and spent more during each visit. Online digital sales reportedly grew twofold, while online demand for same-day pickup and delivery services increased more than three-fold. Once more Target CEO Brian Cornell indicated that the retailer is gaining market share across all five of its main product categories. To the notion that the pandemic and increased transportation and logistics costs are an added burden to increased online retailing, Target reported operating income of $1.9 billion, up 93.1 percent. Net earnings were reportedly up 41.9 percent and operating margin increased to 8.5 percent from 5.4 percent in the comparable 2019 quarter. Keep in mind that Target has initiated an online retailing strategy that places physical store as the primary customer fulfillment entity, supported by regional customer fulfillment centers.
Walmart reported its third quarter performance, generally exceeding analyst expectations but at the same time, hinting of holiday and pandemic related challenges. Total revenues increased 5.2 percent Overall while same store physical and online digital channel sales reportedly increased 6.4 percent in the U.S.. However, the growth number was below the retailer’s prior two quarters. Physical store shopper traffic reportedly decreased 14. 2 percent while the value of the average shopping trip increased 24 percent. Somewhat similar to Target, operating income increased 22.5 percent while managing increased COVID and other logistics costs. Consolidated gross profit reportedly increased 50 basis points.
The visitor trending is being interpreted as fewer trips to Walmart stores, more stocking-up when visiting, and likely turning to online. Executives pointed to an online sales growth of 79 percent during the quarter with demand for same day pickup or home services on the increase. The retailer’s CFO indicated that when the pandemic initially hit in the Spring, out-of-stocks were a challenge. While in-stock levels have improved executives noted continued challenges in stocking important items such as toilet paper and cleaning supplies.
To provide a more seamless merge of brick and mortar store and E-commerce fulfillment in November and December, Walmart announced last week that it will place “pop-up” E-commerce centers inside its network of 42 regional distribution facilities to accommodate demand for fast-moving items across both channels. The centers will reportedly be positioned in warehouse areas used to ship pallets of goods to stores, allowing a more synchronized flow of goods from Walmart’s trucking fleet direct to stores for online fulfillment. The effort is interpreted to be avoidance of added transit times and transportation costs from carriers such as UPS and FedEx.
The Next Challenge- What To Anticipate
The above data on the one hand confirms that indeed, this holiday fulfillment quarter is one of accelerating online order volumes and consequent unprecedented volumes of added parcels across logistics and transportation networks. . Indeed retailer efforts in October to spur online shoppers to order early were foretelling and timely.
The next milestone in this holiday fulfillment quarter is next week’s Thanksgiving holiday followed by the Black Friday and Cyber Monday shopping events.
From our lens, the implication is that the weakest link for overall performance will be that of logistics and transportation volume surges that overwhelm networks. There is already evidence of such vulnerability in spite of added seasonal capacity and hiring. The network vulnerability may indeed be local “last mile” when food, grocery and essential goods collide with other online purchases.
A previous unknown factor in the logistics and transportation sector that we addressed in our prior update was COVID-19 vaccine distribution impact. With both Pfizer and Moderna vaccine candidates showing rather optimistic trial results, emergency approval seems likely with the potential for initial priority vaccine distributions to occur in the mid to late December period. That indeed is the big unknown in what logistics industry professionals term as “the mother of all peaks” in terms of priority transportation capacity drain
A further unknown is the tenuous economic condition of consumers, especially with COVID-19 infection rates exploding across the U.S. and many regions of Europe. In the U.S., a fractious and contentious end to the Presidential election and the lack of a supplemental economic stimulus can provide for added economic impacts for consumers in terms of any remaining holiday purchases other than deemed essential needs. There is a reason as to why many retailers including Apple, decline to provide forward-looking guidance relative to this quarter. There are many uncertainties, as this year has foretold.
The next milestone in this holiday fulfillment quarter is next week’s Thanksgiving holiday followed by the Black Friday event.
For industry supply chain management professionals this indeed will be a holiday fulfillment quarter unmatched by others in its dimensions and implications. Aligning and synchronizing inter-facility and overall network logistics and customer fulfillment flows are obviously critical.
Once again, Supply Chains and their resources, will Matter.
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