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Many ecommerce brands capture a majority of their revenue during holiday sales.
It is critical to plan ahead and be proactive about forecasting and communication with your teams. For the winter holidays, summer is the best time to start setting up fulfillment projects.
The ultimate goal during the holidays is customer satisfaction. Your top priorities should be perfect order fulfillment, on-time shipping, and customer communication. If you can get these three aspects of ecommerce locked down, you’ll have happy customers and maximum profits.
Don’t fall into any of the common holiday issues that some ecommerce brands overlook.
While most of this holiday planning guide is geared toward the Q4 holidays (Black Friday, Cyber Week, and Christmas) all other holidays still apply. Some brands see a bigger spike during Valentine’s Day, Mother’s Day, or the Dads and Grads season. Much of the advice in this guide still applies, outside of the winter holidays.
“Scaling up for peak season is not easy. It requires a great deal of careful communication and planning—DCL is a great partner to plan with. DCL doesn’t operate like a large corporate 3PL with an inflexible standardized system, they offer customization and a level of boutique help that provides us with the perfect amount of support—it’s a Goldilocks value proposition for us.”
How to Prepare for Order Volume Spikes
Are your products seasonal? The answer to that for a large majority of ecommerce brands is, yes!
Whether you make golf equipment that sells more in the summer months, or connected photo frames that make the perfect Christmas or Mother’s Day gift, most ecommerce businesses have a specific season where order volume is higher.
It’s important to capitalize on the demand trends of your products. When your products are in demand, you will see higher customer acquisition and a natural spike in revenue.
Before your peak season hits, you need to prepare your operations, fulfillment, product packaging, and sync all teams to coordinate any sales, promotions, and forecasts. If you aren’t well prepared for high-volume order throughput, you’re likely to get caught with backorders, stockouts, and ultimately unhappy customers.
Don’t let supply chain delays affect your peak season sales. First, make sure you order stock with enough lead time before sales hit. Second, develop a close relationship with your suppliers. You’ll be better able to re-stock inventory if any issues arise.
Benefits and Drawbacks of Seasonal Demand
A major advantage of selling seasonal products is the lead time you have to adequately prepare for your peak season. During most major holidays consumers are in a buying mood and tend to spend more. Capitalize on this by offering deals, sales, or other promotions.
Be sure you don’t fall into any common seasonal demand issues. It’s very difficult operationally to scale up quickly and proactive planning is the best way to have a smooth peak season.
Perks of Seasonal Volume
- Longer lead time to buy and stock the correct amount of inventory
- Lower transportation costs to get products from supplier to warehouse
- Adequate time to plan fulfillment projects and value-added services
- Sync all departments—especially sales and marketing with operations
- Optimize operations to meet the demands of high-volume days
- A natural increase in revenue with the added order volume
Difficulties of Seasonal Volume
- Stockouts can occur if the inventory forecast is too low
- Expedited ordering and shipping during demand season adds high costs
- Customer satisfaction may drop if stock isn’t available when it is in demand
- Overstock may occur if demand doesn’t match the forecast
- Captial can get tied up in slow or unmoving inventory
- Buyer remorse can occur if marketing or product pages are misleading
- Managing returns is not easy, especially with a high volume at once
Tips for Perfectly Accurate Holiday Forecasting
Striking the right balance between product supply and customer demand can be difficult.
Forecasting is the process of anticipating the number of products you’ll need to fulfil customer demand and make the maximum profit (sell as many as customers want), but without having too much inventory left unsold (also known as deadstock).
Many brands do annual forecasting for their supplier and supply chain partners. It is imperative to create a specific forecasting model for peak season. Start with a baseline projection based on last year’s sales. Continue to update it (and your partners!) regularly as you approach your sales campaigns.
Inventory forecasts are never exactly accurate, but the closer you get the more revenue you’ll net. A forecast that goes too far above your actual order volume will mean you pay more than needed for shipping, number of boxes and packing materials, and temporary labor. A forecast too low means lost potential sales.
Common Inventory Issues, Solved
Visibility – Make sure all platforms and integrations are in sync to get real-time inventory updates. You need to know what is in stock, where orders are coming from, the size and quantity of the order, and which products are moving.
Slow Fulfillment – Staffing and training before a sales spike is crucial to maintaining same-day fulfillment. If you are seeing slow fulfillment prior to peak season, it may be time to reassess kitting or picking methods.
Accuracy— Regularly conducting physical inventory counts, especially in preparation for peak season, will help ensure what is in stock matches what is recorded in your database.
Stockouts — During peak season it’s very important to maintain a proper cushion of safety stock, or emergency stock. This will act as a buffer in case of closures, weather, delays, or other unforeseen circumstances.
Ways to Ensure Smooth Operations During Peak
During peak season you want to put all of your attention on getting orders fulfilled perfectly and keeping customers happy. Here are some common issues you can resolve before your order volume increases.
Optimize Ecommerce Integrations
More visitors to your website is a dream! Until your website can’t handle the volume. Slow load times, faulty links, or improperly connected checkout flows can result in a poor user experience, abandoned carts, and lost sales. Make sure all of your ecommerce sites and integrations are fully connected and optimized for increased traffic.
Ramp Up Customer Service
With more orders and website hits comes more questions, issues, returns, and customer inquiries. To make sure all questions get answered in a timely manner, be sure your customer service channels are in great working order. Clearly define your return policy, delivery window expectations, and answer any other common questions that may arise.
Reinforce Security Systems
Do a comprehensive analysis of the systems your business needs to run safely during sales. Protect your brand, your employees, and your customers by tightening all cybersecurity and physical security measures. Maintain customer trust and prevent financial losses with secure payment transactions and secure personal data capture.
Set Up Special Projects
Most fulfillment providers offer value-added services, which can help increase average order value. Options may include gift wrapping, custom messages, bundles, free accessories, branded boxes or holiday packing materials. Be sure to set these up early, complete proper testing, and train all staff before the sales start hitting.
Holiday Shipping 101
Shipping is everything during the holiday season. Everyone wants their gifts to arrive on time. Even if delays are the fault of your shipping carrier, customers will blame your brand. Be proactive about choosing the right partners to ensure your customers are satisfied with on-time deliveries, no missed packages, and perfect presents.
Occasionally it happens that order volume surges higher than the carriers expect. In the past they have implemented last-minute volume caps and steep surcharges. Ecommerce shippers can take action prior to peak season to create a solid shipping strategy in case of unforeseen issues, delays, or carrier challenges.
A few ways you can make sure shipping is smooth and fast during a holiday sale:
- Simplify your packaging and packing materials to reduce overall transportation costs and keep fulfillment easy.
- Check your fulfillment partner and shipping carrier for dates of operation and closure. Plan your sales accordingly.
- Track carrier transit times for more accurate delivery estimates. Communicate any changes to customers.
A seller’s biggest defense against a negative customer shipping experience is to clearly communicate to customers. Manage your customers’ expectations by giving them clear shipping deadlines and costs before they buy.
Four Ways to Limit Holiday Package Delays
Shipping delays happen for many reasons—weather, labor shortage, order surges, and more. The best approach to on-time deliveries and happy customers is a proactive shipping strategy.
1. Create a Redundancy Plan
Ensure your products get delivered on time by creating a backup shipping plan. It’s hard to predict how reliable delivery times will be each year. Some carriers will struggle more than others to get your packages out quickly and on time. It is advisable to have a relationship with a backup carrier who can be on-call in case a specific region or carrier gets backlogged.
2. Communicate Your Forecast
All supply chain partners should receive clear and frequent forecast updates as you plan your holiday campaigns. This is especially critical with shipping carriers as some may cap their daily intake for certain services as parcel volume increases. If you outsource to a 3PL, proactively communicate order forecast our carrier.
3. Understand Cut Off Days
Before any major holiday, carriers often publish shipping deadlines—these are dates that packages need to be in carrier’s hands to reach a final destination by a certain date. The most common shipping cut off days are prior to Christmas. Each service will have specific shipping cut-off days, taking into account weekends and non-operational days.
4. Incentivize Early Buying
Give customers very little chances to receive gifts late. By offering sales early in the shopping season, customers will be incentivized to order and ship early. While there will always be last-minute shoppers, the more you can help customers buy early the greater chance you’ll have of meeting their delivery expectations.
“If you can’t get your products to the customer in an efficient way—not damaged, sent on time—then it honestly doesn’t matter. We recognize that there has to be a symbiotic relationship between our branding and our fulfillment. What’s most important is that everyone gets the whole picture for the customer.”
Guide to Holiday Surcharges
Shipping costs will go up during Q4. That’s a fact. Most years the major carriers add peak season surcharges (also known as demand surcharges) from October through January to offset the additional labor, infrastructure, and resources it requires to move a higher-than-average volume of parcels.
What are Demand Surcharges?
Most major carriers add demand surcharge during peak season. These are fees layered on top of their usual base rates. Some facts about surcharges, when, and how they are applied.
- Most are effective for a finite period of time.
- Some last only a week, and some for a few months.
- Rates vary from year to year—it is impossible to predict which carriers will add surcharges and at what rate.
- They are often flat fees layered on top of specific services.
What most shippers don’t anticipate is that surcharges are added to the charges you normally incur. For example, a peak season surcharge may be added for delivery or pickup to certain zip codes—if you already have delivery area surcharge on your invoice, during peak there will be a surcharge added.
How Fuel Charges Contribute
On top of the regular fuel rates, carriers often add fuel surcharges during peak seasons. These are some of the most aggressive surcharges that carriers add, because the cost of fuel isn’t a fixed rate it is based on the market cost.
“Fuel surcharges hit a lot of services—they affect the base fuel charge, residential surcharges, delivery area surcharges, and more—and they can really add up.”
Managing Holiday Shipping Costs
Shipping costs during peak season can add up quickly—the addition of demand surcharges plus any expedited transport to ensure you have enough inventory in stock if sales go well. It’s important to have a shipping cost strategy before peak season hits.
Who Pays for Shipping?
With higher overall transportation costs during the holidays, some ecommerce brands struggle to figure out how to offset that added expense.
Here are two common ways ecommerce sellers manage added shipping costs.
- Absorb the costs entirely. To do so you’ll need to adjust costs somewhere else so that you aren’t losing money. This tactic may mean you don’t lose customers to increased shipping costs.
- Pass all or some costs to customers. While some buyers may be deterred by higher shipping costs, not all will. Passing the cost to customers will mitigate your overall shipping budget.
Should I Offer Free Shipping?
Giving your customers free shipping during the holidays can boost sales, but it can backfire and lead to more returns or cut into your revenue.
Here are a few alternatives to offering free shipping during the holiday season.
- Set an order minimum for discounted or free shipping. You’ll ensure you’re still netting a higher average order value.
- Give VIPs the shipping discount. Pair your shipping perks with subscription or premium customers only.
- Offer a few clear options. Give a shipping discount to ground services only, let the customer decide how important free shipping is to them.
Specialty Projects and Value-Added Services (VAS)
The holiday season is a great time to leverage your fulfillment provider’s value-added services to increase your average order value. It’s historically the biggest buying season of the year and consumers are ready to buy gifts for themselves and loved ones.
You can encourage customers to add more to their cart by bundling products, promoting upsells, and adding specialty services like gift wrapping or custom messaging.
Before you add any specialty projects, put time into optimizing your fulfillment flow. Here are a few places to start.
- Invest in an advanced inventory management system that provides real-time visibility into your stock levels so you can track and manage inventory efficiently. Make it easy to track down order numbers to help satisfy customer questions.
- Automate systems where possible. This will help eliminate human errors and speed up the order flow process. This includes procedures such as order entry, payment processing, shipping label generation, and ecommerce site updates.
- Cross-train employees. All roles should be able to help with operations if needed. Your customers service team may need to help put products into boxes, and warehouse staff may need to answer customer calls.
- Create quality control standards. Mistakes will happen, especially when you least expect. Rigorous quality control measures can minimize issues and delays. Set your checkpoints early so you’re not mitigating during high-volume days.
“Between November 19 and December 20, DCL shipped close to 200,000 units, around 85,000 orders. And during that time frame, we stayed on day zero. And what that means is, if an order drops before noon today, The DCL team makes sure it ships today.”
Ways to Increase Average Order Volume
AOV stands for average order value. It is an important growth metric to track for all ecommerce brands.
Divide the total revenue from your store by the number of orders placed within the same time frame. For example: if you make $1000 total per day from 25 orders, your average order value is $40. That means your customers cart total is, on average, $40.
To try and increase your AOV during peak season you want to set reasonable goals. Figure out if you want to reach a growth percentage or a set dollar amount. Below are a few tried and tested ways to increase AOV.
- Seasonal Product Bundles. Bundles increase the perceived value of your products. When products are bundled together customers will spend more money than if they purchased the same number of single items. Other than increasing the average order value (and cart size!), offering bundles is also a great way to expose customers to a wider variety of items.
- Upsell Products on Social. The classic upsell is “Would you like to supersize your order?” This incentivizes the customer to purchase more expensive or higher-value items. They’ll get slightly more of the items they already ordered, for an additional fraction of the original cost. For the holiday season, entice customers to snag those upsells by promoting higher-value goods in your marketing campaigns.
“We sell a variety of bundles on our websites—we use them as upsells because they increase our average order value quite a bit. Plus they give us a lot more flexibility. Being able to bundle products has been really helpful for us.”
All About Value-Added Services
Before you start telling your customers all about your holiday bundles, upsell packages, and custom options, you need to work with your fulfillment provider to test and implement these operationally.
Not all fulfillment partners have the capabilities to execute these projects or execute them well. Be sure and ask—Have you done a project like this before? What was the accuracy rate? New fulfillment projects take time to build correctly.
Types of Holiday Value-Adds
Personalization – whether it’s a special-colored camera strap or a sticker on a cereal box, adding a personal touch can be simple to execute and an easy way to mark-up your product.
Gift wrapping – if your products lend themselves to being gifted during the holidays, offer to pre-wrap items for an extra cost. Customers will thank you for the time-saver.
Custom messages – everyone loves to send a note with their items; Amazon capitalized on this early, and it’s something consumers have come to expect.
Tips for Implementing Special Holiday Projects
Create a long lead time. Peak season is a busy time of year for everyone and you want to make sure customer satisfaction comes first. Iron out the details in the summer and make sure all of your teams are in sync.
Test and test again. Set up a small list of testers who will give you critical feedback on your holiday specialization. Send every new order type out of all facilities and with every shipping service before they go to customers.
Consider simplifying. While it’s nice to add bells and whistles to your holiday packages, customization can increase costs and cause friction. If you are making any fulfillment changes, consider simplifying instead of adding on.
Most ecommerce businesses need to deal with returns, and post-holiday sales returns management can be a very challenging aspect of the sales cycle.
The best way to manage holiday returns is to prioritize prompt resolution of all returned merchandise and regular analysis of your return operations.
The best advice for low-stress post-holiday returns is to plan your reverse logistics in advance. Don’t wait to set up returns until the last minute.
The biggest place ecommerce brands get tripped up after the holidays is not getting returned merchandise back into “good stock” quickly enough. For some brands this may mean refurbishment work, or simply repackaging. Work with your fulfillment provider on how they’ll make sure to keep your returned inventory streamlined so you don’t lose sales.
Here are a few of the key components you should set up proactively:
- Have a clear returns policy. Iron out the detail and messaging before holiday sales hit.
- Make your returns policy easy to find. Customers should know what to expect before they buy.
- Add return labels just in case. The easier it is to return items, the faster they’ll come back.
- Ask your fulfillment team what they accommodate—not all do refurbishment or disposal.
- Smooth out all returns operations from receiving and restocking, to customer service.
“We needed help repackaging our refurbished products We looked into doing it with a third-party, but it would have been much more complicated logistically. DCL came up with a really nice solution—being able to have that capability directly with DCL was really nice.”
Common Post-Holiday Returns Issues
High Volume of Returns
The sheer number of post-holiday returns can be overwhelming, it’s so important to optimize your operations to get returned merchandise back into stock quickly. Take a proactive approach by updating product listings to give consumers a very clear understanding of your product specs, details, uses, and limitations.
Extended Return Period
Many retailers offer extended return periods, which may limit the number of resalable items if products come back out of season, damaged, expired, or otherwise unwanted. Work with your team to get returned items back into good stock faster.
Refurbishment and Disposal
Not all returned items come back in resalable condition—this is a particular concern for high-value goods. Get strict on your return policy or use a donation campaign to get rid of unwanted products and net a positive brand image.
Reverse Logistics Costs
Returns management includes product retrieval, quality checks, restocking, and return shipping costs. Factor these expenses into your product prices, and don’t forget to think about the cost of reverse logistics when you create sales campaigns and holiday discounts.
Inventory Management Issues
Returns can disrupt inventory management systems, especially if returned items are not immediately made available for resale. Invest in the best technology tools to integrate all systems to properly restock returned items quickly and efficiently.
A small percentage of customers will exploit lenient return policies by returning used or counterfeit items or obtain refunds without returning the product. Implement fraud detection mechanisms and create clear operational guidelines for these scenarios.
Ways to Optimize Reverse Logistics
Managing returns is one of the most challenging aspects of ecommerce. The smoother your reverse logistics are, the more you’ll be able to supercharge your business and grow. With efficient returns you’ll have products that come back quicker, turned into resalable items faster, and overall you’ll have happier customers. A few things to consider when setting up holiday returns.
Double Down on Asset Utilization
Do more with less. Use your forward logistics assets to support your reverse logistics. By finding ways for your logistics assets, whether you rent them or own them, to do double duty will reduce your asset spend. This makes your company’s operations more efficient on a per-asset basis.
Do It for Your Customers
Happy customers are loyal customers. Any changes to your returns management operation should keep customers in mind. With ecommerce growing year-over-year, ordering goods online and having them delivered is becoming ubiquitous. Hassle-free returns that are convenient and painless are now expected. A simple and efficient return policy could be the difference between a one-time customer and a returning one.
Improve Inventory Investment
It’s no secret, inventory costs money. The more inventory you have in the system and the more warehouses you have stock in, the more capital will be tied up. If you can increase the speed of returns, and goods replacement, you will reduce your operational inventory requirements naturally increasing your ROI.
One major area with ample opportunity for improving environmentally sustainable standards is reverse logistics. It’s becoming common practice for industry-leading companies to ensure they are reducing waste and creating environmentally friendly operations. Comb through your reverse logistics for increased efficiencies and ways to reduce your carbon footprint.