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Kurt Salmon: Retailers to speed up holiday online processing/shipping by two days


New York -- Amid a public fight for Thanksgiving weekend foot traffic, retailers are also battling behind the scenes to prepare for peak-season e-commerce orders. According to a new Kurt Salmon survey, retailers will reduce their processing and shipping time frames for multi-item orders by almost two days this holiday season.

On average, it took retailers eight days to get orders into the hands of shoppers last year, with 3.4 days to process and 4.6 days to ship. This year, retailers are looking to cut down processing time by one day, and shipping time by nearly one day, to bring the total order fulfillment time down to 6.1 days.

The move to reduce shipping time is in in line with what is expected to be a fiercely competitive holiday season. Forrester predicts that holiday e-commerce sales will increase 13% to $89 billion this year. With free shipping increasingly expected, the differentiator this holiday season may come down to shipping speed.

When asked how competitive shipping and fulfillment practices could harm holiday sales, free and faster shipping are top concerns. A plurality of retailers (36%) say they are worried about competitors offering free shipping and 18% are worried they’ll lose sales to competitors offering next-day and same-day delivery.

The free shipping war is on among several big-box stores, with Target recently announcing free shipping for the rest of the season with no minimum purchase, and already 76% of retailers are offering some form of free shipping off peak, compared to 35% last year.

“It’s high stakes during the holidays, and retailers are playing a game of ‘anything you can do, I can do better’ when it comes to fulfillment,” said Steve Osburn, retail strategist at Kurt Salmon. “While it’s great for consumers looking for deals and convenience, it’s proving challenging for retailers who are already contending with constrained margins from a heavy promotional environment. We’ve seen retailers making progress to improve and enhance fulfillment practices to avoid the issues we saw in 2013, but every retailer can’t be Amazon.”

Retailers took action in 2014 in response to holiday season fulfillment issues, an increase in online orders and changing consumer expectations for shipping. When asked about priority investments to improve peak-season delivery, retailers say that their top focus was on shipping (25%) and technology/information (24%).

On the technology side, retailers are investing in online inventory and shipping management systems, distribution software, and improved forecasting systems.

In other survey findings:

Retailers will be aggressive with efforts to capture last-minute e-commerce sales this season, with 26%, up from 17% in 2013, saying their cut-off to guarantee Christmas delivery will be one to three days before Christmas.

• Nearly 50% of retailers will guarantee delivery by Christmas for orders placed by December 20, compared to 37% in 2013.

• Overall, retailers plan to push back the last order date for guaranteed Christmas arrival on average from 6.9 days (around December 18) to 5.5 days (between December 19 and 20). Retailers are also aiming to reduce the number of late orders to just 8% this year.

Consumers appear to be slightly wary: A separate Kurt Salmon survey of 1,893 consumers found that 40% of shoppers are generally confident that their orders will arrive by the promised date, but another 32% say that their confidence level depends on the retailer.

“After a few years of spending spikes early and late in the season, retailers are making ambitious promises in order to capture last-minute online sales,” Osburn said. “But if you compare average delivery times with last-minute promises, there is a gap that retailers will need to account for.”
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