Identifying the right technologies and procedures now can help retailers avoid potential pitfalls during the hectic holiday season.
With both the holiday shopping season and the subsequent wave of returns in the rearview mirror, it's time to start planning for the 2014 holiday season. Savvy retailers know that holiday planning starts in February, when the lessons learned from the previous holiday season are still fresh in their minds.
Preparing a holiday 2014 strategy can require looking at nearly every area of the retailer's business. By starting now, retailers have plenty of time to implement and test technologies and tactics so that when November and December roll around, they're ready.
"It takes a lot of planning and testing to properly prepare for the holidays, because any changes retailers make to their web sites have cascading effects that impact their performance downstream," says Elizabeth Scott, director of technical services for Tenzing Managed IT Services, a provider of hosting solutions for e-retailers. "Identifying the areas where upgrades are needed now means retailers can use the selling seasons leading up to the holidays to audition and fine-tune those improvements."
One area that's particularly critical for retailers is to improve their supply chain technology. Accurate supply chain forecasting is increasingly important because retailers can source products from suppliers in multiple countries. Underestimating the time it takes for a supplier to fill and ship an order to the warehouse and have the contents of that shipment moved to the warehouse shelf for picking can result in a merchant lacking the inventory it needs to fill orders. And any delay in fulfillment during the holidays can lead to unhappy shoppers, since most holiday shoppers have hard deadlines for when they need to receive an order.
"Retailers need to review historical data for working backward to determine how long it takes each of their suppliers to fill orders and then talk to their suppliers months in advance about what kind of volumes they expect and their projected timetable for filling holiday orders," says Perry Belcastro, vice president of fulfillment services for Saddle Creek Logistics, a provider of fulfillment, warehousing, transportation and packaging services.
The sooner retailers have a handle on their suppliers' expected timetables, the sooner they can complete their inventory forecasts and place orders to avoid delays, he says.
A holistic view
Improving their visibility into inventory across sales channels can help retailers fill orders more efficiently, say experts. For example, if a shopper orders a sweater after the cutoff date to receive items before Christmas, the retailer can scan its in-store inventory to locate the item and offer the shopper the option of picking it up in one of its stores.
Any omnichannel fulfillment strategy, however, needs to be well thought out. Some retailers that sell through stores and online may want to fulfill web orders from certain stores, lest the new responsibilities overtax locations not equipped to handle them efficiently and in a timely way, according to Saddle Creek's Belcastro.
"While some retailers want to fulfill orders from their stores, extending that capability to every store can be challenging," he says. "Managing that capability through one or two strategically located stores can provide better control. However, outsourcing fulfillment to a provider with an extensive network can provide optimal flexibility, while easing the logistics of managing it."
Whether they're shipping from a store or a dedicated e-commerce fulfillment center, retailers have to pay attention to order accuracy. Shipping an order without an item or with the wrong item can sour a consumer's opinion of a retailer.
Evaluating their order-verification processes can help spare retailers from making fulfillment mistakes next holiday season, especially when temporary personnel are used. Deploying experienced personnel rather than inexperienced seasonal employees in key quality-oriented areas like pick and pack prior to shipping can help a retailer maintain its high service quality standards.
Technology also plays a key role in order verification. Having systems that can support paperless operating environments will also drive accuracy, according to Belcastro.
"Order accuracy is always important, but even more so during the holidays, so retailers cannot compromise their standard processes," he says. "Retailers should also expand operating windows where possible and add resources accordingly to meet peak volume projections."
A good experience
Of course, e-retailers won't face fulfillment challenges if they don't entice shoppers to click and buy. And a site that is slow to load can lead consumers to click away to a competitor's site. While site performance issues may be linked to a sudden surge in visitors, shoppers are only concerned about their own experience. That means online retailers must prepare now to handle higher-than-expected traffic.
Gathering real-time data on page download times that occur as traffic spikes can help retailers determine the server capacity they need to keep their web sites running at peak performance. "This data can tell retailers how many additional servers they need to handle projected holiday capacity so those servers can be pre-staged and ready to go as needed," says Tenzing's Scott. "Retailers should also be thinking about an emergency plan for adding capacity in case the volume they planned for gets exceeded."
She recommends that retailers evaluate the performance of applications from third-party partners, such as payment processors, to be sure they too can handle expected spikes in order volume. "Understanding how volume affects performance at each customer touch point is critical to overall site performance," Scott says.
Tenzing works with retailers to evaluate their web storefronts to make sure they are optimized to handle expected loads. As part of this evaluation, Tenzing assigns risk scores to retailers that indicate if they need an emergency plan to handle slowdowns when site traffic exceeds anticipated volumes. Tenzing recommends e-retailers identify potential problems, assign a risk score and develop a plan and use this process for each business element that touches their web storefronts. The plan should include after-hours contacts so it can be quickly put in place if problems occur outside regular business hours, says Scott.
Coordinating marketing campaigns with the information technology department is another way retailers can manage site traffic more efficiently during the holidays. For example, staggering an e-mail marketing campaign so that messages are sent in multiple blocks throughout the day can make resulting spikes in traffic more manageable and extend the life of a platform's capacity, according to Scott.
Retailers also have to be ready for challenges such as distributed denial of service attacks (DDoS) caused by hackers looking to knock the site offline by overwhelming it with traffic. While DDoS attacks can severely crimp a retailer's sales any time of year, the negative impact of a successful DDoS attack on sales is more acutely felt during the holidays when retailers typically reap most of their profits.
A DDoS attack usually manifests itself initially as a slowing of site performance that retailers cannot pinpoint. By the time it becomes full-blown, the retailer's site is slowed to a point where it has to be shut down for hours, and sometimes days, to address the problem.
Rerouting traffic destined for a retailer's site to a DDoS mitigation service can block malicious traffic and thwart the effects of a DDoS attack. Scott recommends retailers pre-stage a DDoS mitigation service before their busy seasons. That allows them to thoroughly test the site as part of their disaster recovery planning, while leaving the service turned off until it is needed.
"Don't wait until a flood strikes to start planning for how to handle a flood," says Scott. "The sooner retailers prepare for DDoS attacks the better they will be prepared to handle them."
Know your carriers
Retailers should also have contingency plans in case their delivery carriers run into problems. Even though a retailer doesn't have control over a package once it leaves the warehouse, the delivery carrier's performance can reflect on the retailer, because consumers made the purchase from them, not the delivery carrier. This past holiday season both FedEx Corp. and UPS Inc. delivered some orders after Christmas, even though the orders were placed before a retailer's cut-off date. While in some cases the retailers that filled those orders had no control over the circumstances that led to the problems, they still felt the backlash from angry consumers.
Retailers should learn from that experience and partner with other vendors to supplement their existing operational activities to ensure a positive customer experience if one vendor experiences operational snafus, according to Elizabeth Hunter, vice president of e-commerce for Newgistics Inc.
Retailers should also evaluate their carriers' performance at the beginning, middle and end of the holiday shopping season. If the audits show increased delivery times as the holiday season progressed, Hunter recommends retailers diversify their shipping partners.
Simple steps can also make a difference, says Hunter. "Proactively communicating with consumers when shipping is delayed is the best thing retailers can do," she says. "Whether it is notifying them a delayed order will be shipped by an alternative carrier or that a refund or other compensation for delayed delivery is in the offing, retailers should proactively let customers know what solutions are available and that they are working to solve the problem."
Newgistics Transit Triggers provide a mechanism for sending e-mails to the customer to support this requirement. "There are a lot of consumers that wait until the week before Christmas to complete their shopping," Hunter says. "Communicating additional delivery options that will get their package there on time can help overcome unexpected delays."
While the late deliveries around the holidays often appear related to unexpectedly high online orders in the final days of the season, there are other problems that can lead to delivery delays. For example, severe weather can ground planes and delay trucks. When severe weather is forecast, asking carriers about their contingency plans and how long the weather is expected to push back deliveries will help retailers better communicate customer notifications regarding expected delays. This can help retailers proactively address customer dissatisfaction when orders are delayed.
"Sending e-mails to customers explaining why a weather-related delivery delay has occurred and providing them with a link to track their package can help minimize heavy inbound customer service calls, as well as provide consumers with an opportunity to see specifically how their order may be impacted," says Belcastro.
Indeed, letting shoppers know as they place orders that severe weather may impact delivery to certain parts of the country can prompt them to choose express delivery options to beat the storm. "Retailers can't control the impact of weather on delivery, but they can take steps to better communicate anticipated delivery delays and provide flexible shipping options because of it," he says.
Retailers also have to be ready for shoppers' returns. A strong return program can enhance consumers' overall shopping experience and may even help increase reorders and customers' lifetime value. With a solution that offers advance visibility into what's being returned, merchants can also improve labor planning and inventory management, and reduce inbound call-center volume. Retailers can even leverage return fees to create a new revenue stream, says Newgistics' Hunter.
Visibility into in-store inventory also gives retailers the option of shipping an item that's out of stock in its warehouse from a store. "Having a holistic inventory management system that sees inventory in real time across all sales channels gives retailers more flexibility in fulfilling orders, and this is something that Newgistics supports as part of its end-to-end e-commerce solution," says Hunter. "It's important that this inventory information be used as part of on-site messaging as well a part of the fulfillment and logistics optimization process."
Merchants should also consider their mobile strategy in preparing for the holidays. Use of mobile devices is playing a bigger role in e-commerce as consumers are increasingly using them to research and purchase items—not just locate the nearest store. Retailers that create web sites using responsive design can gain a competitive advantage with mobile shoppers as responsive design resizes and reorganizes content to the dimensions of the mobile device's screen, making it easier to view and navigate the site. Newgistics offers mobile solutions to allow for ease of tracking and e-mail communications to customers on the go.
Preparation is key to a successful holiday season. And planning for the next holiday season begins with retailers realizing that they cannot be experts in every area of operations. Addressing that shortcoming starts with having technology partners to help identify where bottlenecks can occur, find solutions to fix those problems and prepare contingency plans for the unexpected. After all, every holiday season brings surprises.
"It takes a lot of logistics expertise to develop an end-to-end holiday plan," says Belcastro. "Having the right fulfillment partner who understands the retailer's needs can help retailers with the challenge of managing their supply chain through peak season. This will allow retailers to focus on their core business of selling products to consumers during their most important time of the year."
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