The e-retailer heads into the holiday shopping season behind a 30% increase in fulfillment spending and a widening net loss. North American sales increased ...
The atypical Christmas just past provides e-retailers lessons for Christmas future.
At first glance, the 2013 holiday season looks merry and bright for 3-year-old discount e-retailer NoMoreRack.com. Record December sales of $75 million helped the retailer tally $349 million in sales for 2013 compared to $100 million in 2012. Mobile sales grew from 15% of total sales in 2012 to 30% in 2013.
But all was not jolly.
Heavy online shopping just before Christmas combined with bad weather delayed many of its deliveries. That combination produced big headaches for NoMoreRack.com—headaches it was still dealing with in mid-January, says Melina Ash, the retailer's chief merchandising officer.
Ash says 8,000 of the retailer's orders placed during the Christmas season did not arrive by Dec. 25. "Those customers purchasing products as Christmas gifts have been very disappointed," she says. The retailer refunded a quarter of those orders and it allowed the shoppers to keep the late-arriving items for the inconvenience, Ash says.
It wasn't just one carrier that could not handle the rush, Ash says. NoMoreRack uses UPS Inc. and FedEx Corp., and both carriers had trouble getting packages to shoppers' doorsteps on time, she says. To deal with exasperated shoppers inquiring about the status of their packages, NoMoreRack had to double its customer service staff and many employees had to put in overtime, Ash says. UPS did not respond to requests for comment. FedEx says it "did not experience the widespread service issues reported in the news media," and responded "quickly to isolated incidents."
Other research suggests that not all the blame lies with the carriers. A study by retail consulting firm Kurt Salmon analyzed more than 175 orders placed on the last day that retailers guaranteed delivery by Christmas. It found that 15% of orders did not reach their destination in time and that retailers were responsible for 56% of those delays, which accounted for 8% of overall shipments. Retailers' shortcomings were largely due to internal processing errors or their failure to upgrade the shipping options, the firm says.
Regardless of where the fault lies, the delivery snafus made for a frenzied finale to the shopping season, which was already hectic with many shoppers going online to buy last-minute gifts. In the final weekend before Christmas, from Dec. 20 to 22, e-retail orders surged 37% over the same weekend a year earlier, according to IBM Corp., which bases its estimates on 800 of its online retail clients' sales.
That's despite retailers getting an early start on promotions—and seeing the results from those efforts with big online sales around Thanksgiving. Merchants responded to a holiday calendar that was unusual in two respects: The first day of Hanukkah, which typically falls in December, fell on Thanksgiving, and Thanksgiving was on the latest date it could be, Nov. 28, which meant there were only 26 days between Thanksgiving and Christmas. A year earlier there were 32 days between the two holidays.
This year, Hanukkah will fall on Dec. 16. But the holiday season will be only two days longer than in 2013. That means online retailers can benefit from paying attention to the new e-retail developments that emerged from last shopping season. And there were several that were noteworthy. Here are a few of the surprising results:
- Weekend warriors: Consumers attempted to make up for the shorter season by shopping online heavily on the weekends. For instance, shoppers using computers to buy online on Thanksgiving weekend spent $1.594 billion, 34.2% more than a year earlier, according to comScore Inc., which did not count sales via tablets and smartphones in its estimates. And the weekend of Dec. 14 and Dec. 15, web sales soared 41.0% over the corresponding weekend a year earlier, to reach $1.647 billion, comScore says.
- New Google ads gain traction: Late in 2012, Google replaced the free product listings that appeared in natural search results with paid Product Listing Ads, commonly called PLAs, which show images and prices in the center of a Google search results page. Many e-retailers used the ad format heavily over the holidays. Roughly 30% of ad spending on Google in Q4 2013 by e-retailer clients of online marketing company Mercent Corp. was spent on PLAs. Meanwhile, clients of digital marketing technology company Kenshoo Ltd. increased their spending on PLAs 100% during the 2013 holiday season compared to holiday 2012. Clicks on the ads rose 63% year over year during the holidays and revenue from the ads increased 82%, Kenshoo says.
- Is it really a deal? Despite retailers heavily promoting deep discounts around Thanksgiving and Cyber Monday, those weren't the lowest prices of the season, according to several vendors that track online pricing. In fact, four of seven major mass merchants tracked by vendor 360pi raised their prices for an assortment of products on Black Friday. That included Wal-Mart Stores Inc. which, along with Target Corp. and electronics retailer J&R Music and Computer World continued raising prices the following week. A Wal-Mart spokesman disputed the vendor's report, saying " ... the data we have confirms our prices on Black Friday were lower compared to the prior day and compared to that week." Other research from price tracking firm Ugam Solutions found prices on small appliances at several retailers' sites, including those of Belk Inc. and Macy's Inc., began dropping prices much earlier than the day after Thanksgiving, around Nov. 20.
- Marketplaces matter: Shoppers flocked to marketplaces like Amazon.com and eBay.com to complete their holiday shopping. Retailers that sell on the Amazon.com marketplace generated 50% more orders on the Monday after Thanksgiving in 2013 than they did a year earlier, Amazon.com Inc. says. Mercent Corp., meanwhile, says eBay's growth was slower, yet steady, with its marketplace sales growing around 22% in Q4 2013 compared to a year earlier, down slightly from about 30% for the first three quarters of the year. ChannelAdvisor Corp. says same-store sales for its retailer clients increased 27.9% on Amazon in December and 12.3% in November; comparable increases for eBay were 11.0% in December and 10.9% in November.
- Shoppers still love free shipping: 63% of online orders placed from computers in November and December 2013 shipped free, up from 60% a year earlier, comScore says.