Consumer confidence remains strong and forecasts for the upcoming holiday period remain positive. However, B2C and B2B online fulfillment will face added challenges in the coming weeks recruiting added labor, implementing new online fulfillment processes, and securing added resources. This may well be a period where investments in advanced technology can pay dividends.  Amazon Deliver Service

In a mere five weeks, the November 11th Singles Day holiday shopping event again kicks-ff in China, while in a matters of 6 weeks, the 2018 holiday fulfillment period kicks-off in earnest. Both are expected to secure record online shopping volumes.

As always, the open question is whether online, and indeed physical brick and mortar supply  and demand fulfillment networks are ready to support this year’s record volumes as well as compete with the likes of Amazon and other large retailers.

Expected Volumes

Last year, Alibaba’s sponsored Singles Day shopping event amounted to in excess of $25 billion in online and physical stores revenues, by far the largest global single day event. The open question is whether this year’s event can surpass that number.

According to Adobe Analytics, 2017 Black Friday related online sales amounted to $5 billion while the linked Cyber Monday shopping event amounted to $6.6 billion in online sales.

For the U.S., the National Retail Federation (NRF) expects 2018 holiday retail sales for the November thru December 2018 time period– excluding automobiles, gasoline and restaurants- to increase in range of 4.3 and 4.8 percent, amounting to a total of $717 billion to $721 billion. For comparison, 2017 holiday sales in the same period totaled upwards of $688 billion, amounting to an increase of 5.3 percent over 2016 levels.

Online retail sales forecasts vary but remain in rather healthy double-digit growth. Deloitte is forecasting 2018 online sales growth (November thru the end of January 2019) of 17-22 percent amounting to $128 to $134 billion. That compares with last year’s 16.6 percent increase amounting to $110 billion.  Market analytics firm eMarketer is forecasting online sales growth (November thru December) of 16.2 percent, amounting to $123.4 billion.

A recent blog posting from market analytics firm ComScore reminds retailers and product marketing teams that over the past few years, a clear trend has been online consumers shopping earlier in the season and primarily during the period spanning Black Friday and Cyber Monday. According to data collected, this period accounted for 17.7 percent of total desktop E-Commerce holiday spending in 2017. Thus, retailers are already in the process of queuing-up this year’s holiday promotional plans.

 

Added Opportunities and Challenges

Labor

According to the NRF, Retailers are expected to recruit between 585,000 to 650,000 temporary seasonal workers this year, up from last year’s numbers of 582,500 workers.  This comes right after U.S. government reports of

Seasonal labor forecast needs come on the heels of new U.S. government data indicating the lowest unemployment rate since the late nineteen sixties and that logistics and warehousing hiring surged last month. According to the U.S. Labor Department, warehouse and storage related hiring grew by 8400 positions in September alone. Parcel delivery giants FedEx and UPS have indicated intent to add 100,000 and 55,000 workers respectively to handle upcoming surge volumes, while the latter expects to have regular Saturday and Sunday delivery services operational under a revised labor contract. The question remains where will these added workers be found?

As Supply Chain Matters and other media has noted, Amazon elected to raise its minimum wage to $15 per hour, adding to industry wide pressures to incent needed temporary workers to support the upcoming online surge. According to a recent report by The Wall Street Journal, employers are now willing to recruit workers before completion of either criminal background or drug use testing.

To offset added labor requirements, retailers are expected to have deployed increased automation including robots and drones to handle added volumes. This year should provide added evidence in the use of more automated and autonomous material handling equipment to keep material moving around the clock.

In the grocery and food sector, retailers Amazon-Whole Foods, Kroeger and Walmart are expected to have increased use of robots to assist in pick, pack, and ship operations of online food orders for either store pickup or same day or hourly based home delivery. Walmart will be utilizing in-store robots to continually monitor on-shelf inventories.

Retailer Target anticipates shipping the majority of online orders utilizing local brisk and mortar stores, leveraging an investment in a new inventory management system.

Inventory Management

Our U.S. readers may have already noticed that Christmas and holiday focused merchandise is already on store shelves. The reason is because many retailers brought in inventory earlier to avoid the imposition of tariffs on Chinese imports. With retail stores and warehouses stacked with inventory, retailers have must insure that their bets on the most in-demand merchandise will play out this holiday season. With the cost of warehouse and logistics rising to all-time levels, retailers do not relish having high levels of left-over inventory. All of that implies that holiday promotions will appear much earlier and most inventory will be targeted for sale by the end of November.

Capacity Constraints

In addition to the labor constraints noted earlier, transportation remains in high demand with constrained supply. Resources were strained when Hurricane Florence struck North and South Carolina in September and in the continued re-building after the storm. As we pen this blog, Hurricane Michael has struggled to a Category 4 storm heading for a direct hit on the Florida panhandle region, and then moving across the U.S. Southeast. This event will further strain trucking capacity.

With more furniture, appliances and household goods being sold online, needs for white glove delivery services will be strained in the coming weeks. In bulk movement of freight, there were already reports that carriers were turning down record levels of movements, and this condition will likely further deteriorate with retailers’ attempts to re-position, replenish or shift channel inventories in the coming weeks.

Thus, sloppy planning will have added consequences for cost and customer service penalties.

 

Reader Takeaways

While consumer confidence remains strong and forecasts for the upcoming holiday period remain positive, B2C and B2B online fulfillment will face new challenges in recruiting added labor and securing added resource requirements for the remainder of the year. New investments in advanced technology will likely provide opportunities to overcome such constraints while accurate and continuous daily and weekly planning will become essential in the coming weeks.

Business outcomes will be fulfilled, and management bonuses will be garnered by those teams that are able to grasp and manage all of these constraints as well as leverage such opportunities. Business competitiveness will come from means and methods to differentiate from Amazon in each of these areas.

 

Bob Ferrari

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