Merchants Have An Optimistic Outlook On Peak Season

Recent data from Ware2Go shows that 73% of merchants expect higher holiday sales in 2023 despite economic headwinds. To learn how retailers can capture consumer demand and deliver on evolving expectations this holiday season, I spoke with Steve Denton, CEO of Ware2Go, a UPS warehousing and fulfillment solution simplifying the supply chain to enable companies of all sizes to compete across all commerce.

Gary Drenik: From your perspective, what are you seeing differently this upcoming peak season from both merchants and consumers that we haven’t seen in years past?

Steve Denton: We’ve had three years now of “unprecedented” Peak seasons. 2020 was the year that everyone bought everything because they were stuck at home and money was cheap. 2021 was the year everyone was happy they even got gifts at all because everything was out of stock or arrived late due to supply chain issues. Then 2022 was the year that retailers overcorrected and overbought, which led to record levels of inventory in the country and a severe warehousing shortage.

This year feels like a return to 2019 Peak. The supply chain is certainly in better shape. We’re facing some economic uncertainty, merchants have dealt with that before, and it looks like one of the usual levers being pulled is making shoppers feel like they’re getting a great deal. According to a recent Prosper Insights & Analytics survey, 82% of consumers saying that they expect prices to be higher this year, they’re going to be on the lookout for deals. However, this year I think you are going to see more micro sales and more frequently.

Drenik: Why do you think merchants are feeling more optimistic this year despite changing consumer expectations, how do you anticipate these expectations will impact a merchant’s approach this peak season?

Denton: Many merchants have either right sized their inventory or feel confident that they can sell through the products they’ve been sitting on since last year. The past few years, their primary focus was on navigating supply chain issues, but this year, with the supply chain back under control, they can really hone in on their sales strategy and customer service. That customer service component is key to making sure they get a second bite of the apple, which is paramount when you look at current customer acquisition costs.

However, it’s getting even more complex to deliver the experience today’s shoppers expect. For one thing, we’ve seen a major shift in consumer expectations around fulfillment and delivery. For many years, the conversation was around 2-day delivery – how to deliver that Prime-like experience across all sales channels, but today, delivery speed is just table stakes.

There was this shift during the Covid-19 ecommerce boom. Consumers started to realize that they didn’t need everything delivered in 2 days. They still expect to see a 2-day option at checkout, but they also expect the option to schedule a delivery date, pickup in store, consolidate shipments, get it same-day, or wait a little longer for an economy option. Merchants have clearly noticed this shift as well because 95% of them added a new delivery option this year in order to stay ahead.

Drenik: In order to have the most successful peak season, what tools do merchants need to have access to and how will technology come into play?

Denton: First off, the key to riding the wave of consumer demand this year without sacrificing margin will be robust demand forecasting capabilities. We’re seeing that the days of quarterly forecasts are gone, and 79% of merchants are reporting that they plan to revisit their forecasts more frequently this Peak – for 56% of them that will be as often as monthly or bi-weekly throughout the quarter. This strategy will enable them to measure their top-line sales progress against their goals and determine if they need to push more aggressive promotions or if they can back off and realize a little more margin per sale.

Secondly, they need to have their end-to-end commerce ecosystem connected. They need all of their sales channels connected to their supply chain with the ability to move inventory easily between channels. They also need their supply chain data connected to their marketing strategy so they can run geo-targeted campaigns based on inventory availability. For example, we had a client that was holding excess inventory in Las Vegas, so their marketing agency ran a campaign advertising next-day shipping to everyone within a 1-day ground delivery footprint of Las Vegas, and they cleared out that inventory quickly. They never would have been able to do that if their supply chain and marketing functions had been working in silos.

Finally, all retailers need to have technology in place to enable real-time delivery tracking. Consumers today demand delivery certainty. They need to trust that when you say something will be delivered on Tuesday, it will actually arrive on Tuesday. One of the best ways to establish that trust is through visibility because 67% of consumers check delivery tracking daily. From the moment that order drops, they’re going to be plugged in and waiting for updates.

Drenik: What do you anticipate this upcoming Black Friday/Cyber Monday to look like?

Denton: As I mentioned, shoppers are looking for deals this year, and 62% of them report that they’re going to wait until BFCM to do most of their holiday shopping according to a recent Prosper Insights & Analytics survey. As one of the biggest promotional events of the season, I imagine we’re going to see a lot of activity, but at Ware2Go, we’ve seen some interesting shifts in sales patterns across the BFCM weekend over the last few years. We’ve actually seen sales on the Monday and Tuesday after Black Friday far outpace sales on the weekend. Maybe consumers are browsing on the weekend and then actually making their purchases on Monday and Tuesday – whatever the reason, it’s clear that Black Friday is more like the starting gun for holiday deal-hunting rather than the end-all, be-all event in itself.

Drenik: Anything else you’d like to add?

Denton: As consumers shop for deals this year, they’re going to be channel-hopping more than ever, so retailers have to prioritize a multichannel sales approach if they want to stay top of mind for their customers. One channel expansion opportunity that merchants shouldn’t ignore is third-party marketplaces. The ecommerce marketplace landscape is rapidly expanding as retailers see them as an opportunity to expand their product catalogs to offer an endless aisle without investing in product development or carrying additional inventory. And consumers have been quick to adopt. In fact, 89% of consumers say they comparison shop across 2 or more marketplaces before they make a purchase, so marketplaces are now a search engine and discovery channel for brands of all sizes at all times of the year, but especially during the holidays.

Drenik: Thanks for the insights as always, Steve. It will certainly be interesting to see how retailers ride the wave of consumer demand this year to balance top-line sales with profitability.