It’s no secret that online shopping rates have soared during the pandemic.
Even as stores reopened in June, online sales were still up 76.2% year-on-year, according to research by Adobe Analytics.
While the coronavirus accelerated eCommerce adoption, it also increased pressure on the industry’s fulfillment infrastructure — and, in many cases, a previously untested supply chain began to show signs of cracking.
From stores drowning in online orders to delivery companies struggling to survive and workers risking their lives in warehouses, we’ve learned a lot about the state of eCommerce fulfillment and brands’ abilities to perform under pressure.
Most Brands Have Struggled to Keep Pace With Demand
Online orders have skyrocketed, but almost every brand has struggled to keep pace. Even Amazon hasn’t delivered on its promises of two-day shipping and an endless inventory of products, writes CNBC Technology Reporter Annie Palmer. Among other things, the “everything store” has had to combat price gouging and panic buying, prioritize essential goods and maintain social distancing in warehouses and distribution centers, all of which have had a negative impact on product availability and delivery times.
Under pressure to fulfill its own orders, Amazon has also cut support to third-party sellers, says Jason Goldberg, Chief Commerce Strategy Officer at advertising agency Publicis. Resellers are being encouraged to sign up for slower shipping options, while the site is pushing digital content like Kindle eBooks over physical products.
Ikea has also struggled to deal with surging demand as store closures have forced consumers online. In Canada, customer support was down for multiple days, writes digital journalist Brooklyn Neustaeter at CTVNews. Consumers have also had to contend with long wait times, shipping delays and canceled orders.
Many retailers have been forced to close down eCommerce operations altogether in order to protect warehouse staff. Econsultancy’s Nikki Gilliland reports that U.K. retailer Next suspended online orders immediately at the start of lockdown and refunded any orders that hadn’t already been delivered.
Even after reopening, the brand had to put a limit on the number of orders it took per day. Demand was so high, however, it suspended online orders by 8:30 a.m. on the day it reopened.
Delivery Companies Are At Risk Despite Increased Orders
“Amazon isn’t the only company struggling to meet the increased eCommerce demand during the pandemic,” writes Truckinginfo Editor-in-Chief Deborah Lockridge. “UPS and FedEx both suspended service guarantees, citing the impact of COVID-19.”
According to research by BCG’s Rodrigo Escudero, Felipe Alves, Martin Ehmler, Kartik Goel and Vitaly Filonov, most delivery companies have struggled to make ends meet during the pandemic. Despite the increase in eCommerce orders, the market capitalizations for Deutsche Post DHL (DPDHL), FedEx and UPS have declined by 15% to 30% between January and mid-May.
DPDHL suffered a first-quarter earnings slump of $260 million due to a double-digit fall in mail delivery, according to Escudero, et al. The cash-strapped United States Postal Service is facing an even worse fate, and expects to run out of money by the end of September without government intervention.
If the USPS were to close, it would present a huge problem for small eCommerce brands, says Mario Paganini, the Head of Marketing at Shippo. That’s because the USPS delivers more mail than all of the private carriers combined and is the go-to carrier for most small firms. While giants like Amazon may be able to survive without it, small businesses and consumers will be hurt most, Paganini explains.
Not everyone involved with eCommerce logistics has struggled during the pandemic, however. Casey Armstrong, CMO at ShipBob, says foresight and planning helped the third-party logistics provider keep all eight fulfillment centers open. ShipBob started preparing for the virus as early as February, purchasing PPE well before the United States government took action. Further protective measures such as limiting merchant site visits and requiring temperature checks were introduced soon after.
The Ugly Side of eCommerce Fulfillment Has Been Exposed
For all the positive aspects of eCommerce that shone through the pandemic, it has also shed light on the murkier aspects of getting products from warehouses to people’s homes.
The industry’s continued heavy reliance on low paid warehouse workers, in particular, is being revealed. In many cases, these workers are being forced to choose between their health and a job, write Chris Kirkham, Reade Levinson and Nandita Bose at Reuters. Several brands have been able to exploit a loophole in stay-at-home orders for warehouse workers designed to ensure the flow of necessities. Wayfair, Kohl’s and Macy’s even gave workers letters from executives to show to police in case they were stopped on their way to work.
Many workers are scared of falling ill because conditions in warehouses have not changed enough to prevent flare-ups of the virus, reports Josh Dzieza, Investigations Editor at The Verge. Several of the two dozen warehouse operatives and delivery drivers the publication spoke to described a lack of protective measures. Workplaces were crowded, screenings were lacking and cleaning supplies were limited.
Then there’s the environmental impact of increased eCommerce activity to consider. More online orders means more plastic waste, write Sirish Gouda and Debabrata Ghosh at Supply Chain Brain. “To make things worse, stating the same reasons for possible infections [through direct contact], some municipalities have even stopped sorting and recycling plastic waste.”
More deliveries also mean higher carbon emissions. According to a study published in Environmental Science & Technology, eCommerce has a higher carbon footprint than traditional retail shopping if orders are shipped from warehouses.
The problem is big enough for the U.K. government to consider a compulsory delivery levy on online orders to help reduce emissions and congestion, reports The Times’ Transport Correspondent Graeme Paton. He cites a report from the Department for Transport that highlights the damage of “unnecessary over-ordering” caused by free and next-day shipping.
DTC Brands Can Learn Several Lessons
Analysis of the last few months offers several takeaways for brands looking to improve their delivery logistics now and in the future.
One is to take advantage of the increased demand for eCommerce orders and turn your delivery service into a product like Amazon’s Prime membership. Fortune’s Danielle Abril reports that Walmart had already been planning to launch a rival service, Walmart+ this year, and accelerated the development of its two-hour delivery service during the pandemic.
For brands that rely on overseas manufacturers, Jake Rheude, VP of Marketing for Red Stag Fulfillment, recommends looking to local suppliers to increase the availability of products. “Onshoring manufacturing can be more expensive in a general sense, but, if you can find a company nearby that is ready and willing to make your products, you might save considerable time and have a more reliable stream of goods.”
The more products you ship, the more important it becomes to save on delivery fees. Logistyx President Ken Fleming writes that “decreasing the net landed cost of goods” will be essential in a post-pandemic world. “This means retailers will have to examine their parcel shipping operations and optimize strategies for better cost control.”
Fleming suggests a multi-carrier strategy that sees brands contract several carriers and then compare rates to find the best option. Such a strategy doesn’t just reduce costs, it also ensures brands always have a carrier to turn to, even if their favored provider is unable to take their product because of restrictions or lack of availability.
Whatever strategies you implement to handle increased demand and delivery issues, there’s no excuse for not keeping consumers abreast of the situation.
One way to do so, writes eCommerce consultant Pamela Hazelton, is to create COVID-10 FAQ pages that cover product availability and delivery guidelines. Information can be added with banners on homepages and on the order pages themselves.
You may not be able to control government restrictions, consumer demand or the availability of logistics partners, but you can take steps to protect that crucial customer relationship.
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