February 3, 2014, 11:38 AM

E-retail takeaways from the holiday season

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Much of the topsy-turvy shopping season stemmed from the calendar, retailers say. Holiday forecasting was a big challenge for Fathead LLC, a web-only retailer and manufacturer of life-size wall decals of athletes and graphics. "Next year's holiday period will be more like this year's, though not quite as compressed, and we think that will provide a more reliable model for planning," says Michael Layne, director of Internet marketing.

That planning will no doubt take into account the problems with last-minute orders. "The big lesson this year is: Don't send out e-mails in the days before Christmas promising people their packages will arrive before Dec. 25," says Sucharita Mulpuru, Forrester Research Inc. vice president and principal analyst.

Seeking to squeeze all the orders possible out of the compressed season, many e-retailers did just that. Streetwear retailer Karmaloop.com, for example offered shoppers discounts like 40% off and free overnight shipping three days before Christmas for orders of $150 or more, and 30% off and free overnight shipping for smaller orders.

Amazon.com, meanwhile, enabled procrastinating members of its Amazon Prime two-day shipping program to shop Amazon for select items as late as Dec. 23, though they had to pay an extra $2.99 minimum fee per item to have the items delivered by Dec. 25.

Not all those last-minute orders arrived on time. A survey by customer service measurement firm StellaService Inc. of 25 of the largest North American e-retailers found eight of those e-retailers failed to get at least some orders placed by the order cutoff date under the tree on time.

Among the retailers that suffered from the delivery backlog was SimplyLobsters.com. The retailer only offers next-day delivery because it sells fresh and frozen lobsters and steaks that need to get to shoppers doorsteps before spoiling. Of the 700 packages consumers ordered for arrival on Christmas Eve, 20% didn't get there as scheduled, and in half of those cases the delicacies were ruined, says owner Donald Lee.

"What happened was everyone waited until the last minute, some big retailers offered big late promotions and that basically overloaded [the shippers]," Lee says.

Despite the late arrivals, the retailer's carrier, UPS, only agreed to cover a portion of the cost for re-shipping because it did not guarantee safe arrival of perishable goods, Lee says. UPS has said publicly that the volume of air packages in its system exceeded its capacity in the days leading up to Dec. 25 and some shipments were delayed. It said it delivered "nearly all the volume" of the late orders the day after Christmas. However, for lobsters, the day after Christmas often wasn't soon enough. Lee says he plans to beef up the insulation in his packaging, and has been approached by other carriers about possibly switching his service.

"Shippers ... didn't read the pulse at all," Marshal Cohen, chief industry analyst for the NPD Group Inc. wrote in a blog post. "The signs were there that there would be a late holiday surge and they failed to adjust." Special sales and enticing shipping discounts, including free shipping offers as late as two days before Christmas this year all drove sales online, he says. While shippers got what they initially wanted—more shipments from online retailers, and more express deliveries with two-day and next-day service—the flood of late shoppers and the increase in online sales tested their capacity, he says.

There certainly were plenty of free shipping offers. An Internet Retailer survey found that of the Top 1000 North American web retailers, 625 promoted some kind of free shipping offer on their home pages during the week ending Dec. 20, and 294 offered free shipping on all orders, regardless of the amount purchased.

The sales surge, however, was not restricted to late in the season. The season got off to a bang with stunning Thanksgiving weekend web sales. ComScore says computer-based online sales reached $3.558 billion over the four-day Thanksgiving holiday weekend, compared to $2.862 billion over the same days in 2012, for an increase of 24.3%. That was particularly impressive because store sales fell: total retail sales for Thanksgiving weekend 2013 declined 2.7% to $57.4 billion from $59 billion in 2012, the National Retail Federation reported.

The biggest online shopping day of the season was on Cyber Monday, when web sales from devices of all types hit $2.085 billion, comScore says (comScore does not have a comparable figure from 2012 because it began tracking m-commerce sales in 2013). At Fathead.com, Cyber Monday sales increased 67% year over year, while sales for Nov. 15 through the end of December increased 29%.

Mark Carson, president and co-founder of toy e-retailer Fat Brain Toys LLC, says the Monday after Thanksgiving has become such a significant day for his business that he now develops specific operational plans to handle the day and its aftermath.

"With the spike we saw coming with Cyber Monday, we staffed more heavily and worked later on the Saturday and Sunday preceding Cyber Monday to make sure that our shipping queues were virtually empty," Carson says. Between an increase in staff and hours worked, the retailer nearly doubled its distribution center man-hours on Cyber Monday 2013 compared to 2012, he says.

Some e-retailers primed the pump with promotions beginning well before Thanksgiving. CanvasPop, which produces and sells via its e-commerce site photos printed onto canvas, launched its holiday promotions earlier than usual, offering "10 days of deals" before Black Friday. The retailer says that promotion contributed to a record quarter.

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