For many, the holidays may bring to mind a cozy setting: twinkling lights, snowflakes, and hot cocoa by the fire. But for owners and operators of direct-to-consumer (D2C) brands, the holiday shopping surge is usually anything but serene.
October through January each year is known as “peak season,” or just “peak” in logistics, a period of high order and shipment volume. During this time, managing shipping and fulfillment can be a challenge for even the most established retailers and brands. While the holiday shopping season is the bread and butter of many brands' annual revenues, an inefficient fulfillment strategy can lead to late orders, unhappy customers, increased support tickets and costs, and high stress and frustration.
But it's not all bad news. While the impact of COVID-19 and labor and materials shortages will impact the 2021 holiday peak season in unique ways, with the proper planning and preparation, every D2C brand can ensure a successful holiday season.
In this post, we'll explore what peak season is, how it impacts you, and best practices for how to modify your operations to offer an optimal customer experience.
What's happening overall with logistics during peak in 2021?
Retailers and brands never thought they'd experience a holiday season quite like 2020, when COVID-19 delays and a sharp rise in online shopping collided to create the perfect storm–a ‚Äúdouble peak‚Äù season. But in fact, The Washington Post reports that in late 2021, supply chain delays are actually more severe now than at any other point in the pandemic.
The rise of the Delta variant in mid-2021 has led to continued pandemic-related delays both domestically and abroad, as well as critical supply chain disruptions and shortages. From raw materials to transportation to labor, nearly every part of the supply chain has been affected. Imports are still unpredictable, expensive and backed up, with surging container costs, and warehouses are not immune to the impact of labor shortages either. Lockdowns, vaccination targets, and other virus mitigation tactics and thresholds vary by company, region and country, unlike early days in the pandemic, causing unpredictable and unexpected bottlenecks for goods at different stops on the journey from manufacturer to end customer.
As you plan for the holidays, also remember that the peak season lasts into January. Last holiday season, due to a post-holiday pandemic spike, unusually, January saw even more delays than December, and many packages from December were still processing with shipping carriers.
What specific changes will I experience re: logistics during peak?
During peak, all logistics companies, from parcel and freight shipping carriers to warehouses, process above-average quantities of shipments due to the holiday shopping rush. As a result, high-volume parcel shipping carriers in particular like FedEx, UPS, and USPS modify their operations to balance that increased shipment load on their networks. They typically add tens of thousands of seasonal positions every winter and add significant overtime to support the surge.
On your end, as an ecommerce business, you will experience these changes in the form of 1) surcharges, 2) atypical (extended) delivery times and 3) occasional tracking delays or errors on your shipments.
Will I be charged holiday surcharges?
FedEx, UPS and USPS typically publish holiday surcharges during summer to early fall, before refreshing their rate tables entirely every year in January. Peak surcharges vary from year to year, but in 2020 and 2021 they have been higher than usual due to the pandemic. Surcharges typically increase costs per shipment from a few cents to several dollars, and will vary by shipping method, package dimensions, zone, and other variables. For example, in 2021, companies shipping FedEx Economy Ground may see a $1.50-$3.00 surcharge per package. With USPS, packages weighing 0-10 lbs will see a universal $0.25-$0.75 surcharge per package.
However, although carriers add peak surcharges every year, whether your particular business will receive them depends on your recent shipping volume with that carrier. If you outsource shipping to a warehouse or third-party logistics provider (3PL) and utilize their rates, you'll want to check with your partners directly to understand if you are impacted.
If you are impacted, it's common to boost the amount you charge customers in cart for shipping to defray the cost.
What should I expect with delivery times?
Throughout the pandemic, data showed consistently unmet delivery estimates from shipping carriers. Shipping carriers still advertise their usual delivery times for different shipping methods, but upon closer inspection in their notification centers, you'll find that it has been the rule that orders from all carriers are being delivered anywhere from 1-3 days slower than usual.‚
Based on data from September for all carriers, depending on the method, sometimes only half of shipments or less for specific methods met expected delivery times once they were handed off to shipping carriers. And, this is before we've entered the holiday peak season.
We'll share tips around how to manage longer delivery times below, but brands that don't notify customers of these delays will see more support tickets asking why deliveries are slow, as well as potential cancellations and requests for refunds or credits. So, transparency is better to help set expectations.‚Äç
What should I expect with tracking?
For any given shipment, tracking number accuracy hinges upon that package receiving consistent scans at different points during transit, from the warehouse at pickup, to sorting hubs, to regional sorting locations, to final destination. When shipment volume is high, or carriers pick up a larger than normal number of shipments, or carriers are otherwise crunched for time (i.e. spend more time at each pickup location during peak due to higher volume, but still need to pick up from all locations on one's route), more scan errors and delays are noticeable.
At the end of the day, it's people who process packages, and when you're handling billions of parcels, some issues will inevitably arise.
Other exceptions in handling or delays will reliably scramble expected delivery dates shared in tracking links, and as a rule, carriers like FedEx share that it's “not unusual” for packages to go more than 24 hours without a scan and that a package is often traveling as it should. During COVID and the last holiday peak, tracking issues have been well-documented by local and national outlets across the US and all carriers experience themРin some cases, like this past January, with package delays even extending weeks without tracking updates.
At a time when customers are closely monitoring tracking links and delivery estimates for gifts they have purchased, most companies receive more support tickets that their shipment is late, missing or lost, when in reality, it's likely en route. While it's important to check on packages with faulty tracking to ensure that they 1) actually shipped, 2) were actually delivered, during peak, resolution can take days in the best cases, to weeks.‚Äç
What should I expect from my warehouse?
Naturally, as shipping carriers process increased order volume, warehouses also experience a surge as they pick, pack and ship complex and highly variable orders from hundreds to thousands of different companies. With D2C brands that commonly have more complex branded packaging requirements, it's easy to see how a surge in orders can produce more delays than using a standardized service like Amazon.
To adjust, warehouses will impose deadlines on inbound inventory shipments during peak season, while managing their own challenges hiring folks to pick and pack orders. Most warehouses shift to having all hands on deck packing holiday orders, and attention shifts away from other tasks in the warehouse, like receiving inbound inventory and projects. Warehouses typically issue customers either a mandatory or suggested final receiving date for the year, after which point inbound inventory will be turned away, received but unstocked, or otherwise delayed. Some facilities lock down entirely, refusing new business during late fall through January.
For ecommerce brands launching for the first time in November or December, if you're working with a new warehouse with unknown performance, or even an existing warehouse, we strongly recommend getting inventory in early, taking presales through the holidays, temporarily self-fulfilling orders or otherwise not guaranteeing specific delivery dates for all of the reasons mentioned above.
Warehouses often allocate specific teams to specific brands, or work off of order volume estimates to help plan staff each day and week. It's easy to see, with unpredictable forecasts for order surges and promotions during peak, how despite best efforts, estimates for non-order processing projects and tasks can change during this time.
The best warehouses will plan as meticulously as possible around peak, and the worst won't notify you of any delays or adjustments (and you will still be impacted, but in the dark about it all), but all have to contend with unpredictability. Learn more tips about warehouse preparation for holidays.
