We pen this Supply Chain Matters blog on the eve of Thursday’s Thanksgiving holiday in the United States and the subsequent Black Friday kickoff to this year’s peak holiday online fulfillment period.

B2C, retail and transportation industry focused supply chains and logistics teams have made all the preparations and now comes the time for execution and response to events that are sure to occur over the coming 32 shopping days prior to the Christmas holiday.

Online shopping analytics firm comScore is forecasting a robust 18-20 percent growth in this year’s online spending to estimated revenue levels of $95-$96 billion.  In October, the National Retail Federation (NRF) released its forecast of expected holiday retail sales (excluding autos, gasoline, and restaurants) for the months of November and December which called for a year-over-year retail sales increase of between 3.6 percent and 4.0 percent. Expectations are that Cyber Monday that occurs on November 27 will represent the single most active online shopping day. In 2016, according to comScore, 30 total days exceeded $1 billion on online spend, double that of 2015.  For 2017, the expectation is that there will be 38 days surpassing $1 billion in order volumes. Amazon Prime Branded Trailors

Positives sentiments point to a healthy economy, low unemployment, one extra shopping day prior to Christmas, and very strong online spend rates in the prior three quarters. As Supply Chain Matters opined in a prior blog, caution relates to higher gasoline prices, unprecedented amounts of catastrophic storms, flooding, wild fires, and major earthquakes that have strained consumer wallets and discretionary spending.

As is the usual, there will be heightened expectations that parcel delivery and last-mile fulfillment carriers FedEx, the United States Postal Service (USPS) and UPS will rise to the volume challenge and collectively delivers the goods per consumer expectations. For 2017, we must now include Amazon Prime to the list of major last-mile fulfillment carriers. This year, as it was in 2016, each has extracted incremental higher rates and surcharges related to the volume peaks, thus retailers will have little tolerance for missed delivery times.  As noted above, specialty third-party logistics firms could well have broader involvement while Amazon will again leverage its leased and owned network of air freighters, trucks and now expanded customer fulfillment centers. We speculate that the USPS may be the weak link in 2017 due to laggard investment.

Our counsel to sales and operations planning (S&OP) teams and supply chain planners across all industry sectors was to move beyond traditional holiday product forecasting techniques and instead sense what is likely to be extraordinary changes or shifts in traditional or holiday product demand patterns over the coming weeks. Interesting enough, online sales of apparel and accessories have reached the number one online category, surpassing that of consumer electronics. Online furniture, appliance and equipment sales are a growing category as-well, which implies that third-party logistics and white-glove delivery services firms may play a more visible role this holiday season.

All eyes will again be focused on how Amazon performs in online sales as well as last-mile fulfillment. This year will feature the presence of natural food retailer Whole Foods as a business extension for Amazon Fresh and added physical outlet for Amazon fulfillment.  The acquisition itself provided a discernable shockwave across the food and grocery retail industry and thus online food ordering and delivery will sure to have a headline for 2017 online fulfillment as consumers test the notions of order online, pickup in store, or same-day delivery via carrier.

An open question is whether Wal-Mart’s online investments in Jet.com, the leveraging of price optimization and the retailer’s vast physical store presence will add to online sales revenues. Many are expecting Walmart.com to do well during the upcoming period. Already, Wal-Mart’s strategies of combining the capabilities of online and physical store into a singular experience have boosted revenues. In pricing, some goods are priced lower in the physical store to both drive shopper traffic and foster more optimized inventory management.

Similarly, retailer Target has invested in online talent and technology resources to make a more positive seamless online and physical store experience. The retailer has further initiated price cuts involving thousands of items including food staples. Other retailers are expected to feature products that cannot be bought from Amazon, or with pricing and offers that are more attractive than Fulfilled by Amazon storefront providers.

Many consumer electronics retailers have been counting on sales of Apple’s new tenth anniversary iPhone X and iPhone 8 smartphones as a hot commodity, but Apple’s contract manufacturer continues to attempt to make-up for a one-month delay in production of the premium model. Many Apple consumers may be disappointed in not having their more expensive iPhone X for Christmas. Electronics contract manufacturers will also be scrambling to respond to expected surges in online demand for personal smart speaker assistants such as Amazon’s Echo and Google’s Home. Electronics retailer Best Buy has already launched Black Friday promotions early this month in order to get early consumer holiday buying attention.

This year, more retailers are expected to leverage same-day shipping to counter Amazon, which implies a coordinated and seamless strategy of fulfillment among online and in-store pick-up as well as leveraging local last-mile delivery services providers. According to comScore’s latest data, online transactions involving Free Shipping are now compelling in correlation to completing on the online sales thus retail sites will be compelled to offer such services and absorb any incremental transportation costs. As for overall volumes, many anticipate that online holiday shoppers will be completed their purchases much earlier.

For now, we extend to all readers a happy, safe, and joyful Thanksgiving holiday.

Transportation, online fulfillment, and industry S&OP teams, rest-up and once again be prepared for the roller coaster ride that unfolds over the coming weeks.

As usual, Supply Chain Matters will be publishing periodic updates and commentaries regarding the holiday surge.

Stay tuned.

Bob Ferrari

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