The holidays are a time to celebrate. For shoppers, it means more retail therapy. For retailers, it’s the last two months of the year that make up for a slow start or a sluggish middle. In the midst of all the revelry, retailers have the added pressure to meet shoppers’ expectations in order to keep their registers ringing into the New Year.
Now shoppers’ expectations form such a long list of must-do’s that it can be hard to meet every single one of them. Shoppers expect deep discounts, they look for a huge variety in product assortments, they want their buying experience to be smooth and hassle free; the list goes on. One item that consistently makes its way to the top of most online shoppers’ wish lists is fast, free e-commerce deliveries.
Holiday Shopping Patterns
According to data from Cardlytics, holiday shoppers can typically be categorized into 4 segments: Early Birds, Black Friday Deal Hunters, Last-Minute Shoppers and Slow & Steady Shoppers.
Source: Holiday Retail Report 2015, Cardlytics
Of these, the largest proportion of shoppers, 36%, fall into the Last-Minute Shoppers category. What’s worse, this segment of last minute shoppers is growing. Holiday season 2015 saw the last minute shoppers segment grow by 27% YoY, making late order cutoff dates a necessity.
Not offering late order cutoff dates during the holiday season can adversely impact revenues. However, this loss in revenues can be mitigated by extending holiday cut-off dates till as close to Christmas as possible.
Despite a relatively late holiday order cut-off date of December 21st, one of CommerceHub’s large retail clients, saw a dramatic drop of 58% in average daily GMVs after the cut-off date.
Source: Holiday Order Data for a Large Retail Client, December 2015
Late Order Cut-Offs for E-commerce Deliveries Can Be Expensive
Even though last minute shoppers pick up items at the eleventh hour, they still expect deliveries before the holidays.
So online retailers are on the hook not only to offer late cut-off dates for online orders, but also to go the extra mile and ensure that these last minute orders get delivered in time for the holidays.
Quick deliveries can be achieved by upgrading all of them to the fastest shipping method, which is usually by air. However, this is a prohibitively expensive option for most retailers given that the average order value (AOV) for 2015 e-commerce holiday orders stood at just $147.24.
While it’s great to be competitive to gain market share, it’s usually not a good idea to incur huge costs in the form of exorbitant air freight just to deliver packages during the holiday season.
A smart solution to this problem is to assign shipping methods to each order based on a combination of five decisive factors:
- Promised delivery date (at least one day before Christmas, in this case)
- Customer location
- Warehouse location
- Supplier processing time
- Transit time from the warehouse to the customer
The upside to this process is, you no longer end up upgrading all last minute holiday orders to the fastest (and most expensive) shipping method. Smart shipping algorithms that take into account each of these five factors upgrade only those orders that cannot make the promised delivery dates by ground delivery methods, thus saving big in shipping costs.
A Holiday Shipping Win
During the 2015 holiday season, the same retail client referred to above wanted to maximize revenues by offering late order cut-off dates and aggressive delivery timelines. The catch? They also wanted to control costs and avoid running up a huge shipping bill.
Orders taken during an 11-day window leading up to their holiday order cut-off date were to be delivered on or before a deadline of December 24, 2015.
Using OrderStream’s SmartShipping feature, we algorithmically assigned the optimal ship method for each order. Only those orders that would not meet delivery promises by any other means were expedited.
As a result, the retailer managed to successfully deliver their orders in time for the holidays. Just 42% of orders were expedited, compared to a 100% in previous years. The icing on the cake? Huge savings! Our calculations show estimated savings of $2.8 million over the 11-day holiday order window.*
Emarketer’s research shows that online sales growth this holiday season is set to be the biggest yet, since 2011. Additionally, the period from Black Friday through Christmas typically brings in 50 -100% more revenue than other shopping days in the year.
Make the most of this spike in online shopping by laying the groundwork for your order fulfillment and delivery processes now. Need help with managing your deliveries? Give us a shout, and we’ll set you up for a prolific holiday season!
* Calculation assumes a 50% discount to listed carrier shipping rates.