For years, American shoppers flocked to stores on Black Friday — the day after Thanksgiving when deals were as abundant as drivers clogging roadways to get to their favorite stores.
Then came Cyber Monday, the Monday after Black Friday when online deals dominated the shopping universe. On July 15, 2015, Amazon changed the equation again with its first-ever Prime Day. Walmart (NYSE: WMT) and Target (NYSE: TGT) soon followed with special online sales days.
This year, the three retail giants added another online sales promotion with each promoting special deals last week. And with more retailers promoting sales this year, both online and in-store, to ease a glut of inventory and boost sales ahead of the holidays.
Is it the end of the traditional holiday shopping kickoff season as we know it? Black Friday may never be the same.
Consumers driving change
“This year is different. There is actually a consumer push,” explained Johnson Ma, senior vice president of operations with Shippo. “Last year it was supply chain [disruptions] … that drove a lot of different behavior. We saw it last year with peak season demand spreading all the way back to even September. This year the name of the game is inflation and planning how [consumer] budgets get spent on these purchases. I think that is super interesting.
“If a consumer has spent $20 out of their $100 budget, the retailer wants that $20 spent with them,” he added. “Merchants don’t like these spikes, but traditionally that’s what’s happened.”
Data collected by Bank of America found that Amazon’s (NASDAQ: AMZN) 48-hour Prime Early Access sale last week did not match the success of its summer event but still brought in an estimated $5.7 billion. Numerator, a market research firm, said the average order was $46.68 compared to $60.29 during the summer’s Prime Day event.
Inventory reduction push
Analysts surveyed by CNBC said the event accomplished one goal — reducing an inventory glut in Amazon warehouses. Ma said Amazon is not the only one that faces this problem.
“They need to get rid of that inventory before Dec. 25 because come Dec. 26, whatever markdowns they have will get [even worse],” he said.
Ma noted that retailers have been trying to push forward holiday shopping for years — see Christmas decorations in stores in early fall — but have seen only a “modicum of success.” The massive supply chain disruptions of the past few years, though, helped alter consumer behavior.
Shippo is seeing a slow uptick in volumes within its network, but not the same spike that was common five to 10 years ago.
“This year looks a lot similar to last year,” he said. “Two years ago in 2020, there was a lot of news around delays and capacity issues. And last year we saw almost none of that. I think it is a combination of capacity being spread out more evenly over the last few months. In terms of actual logistics, and how the carriers themselves are impacted, I don’t see many newsworthy items here.”
Ma said he sees supply chains that have mostly “normalized” at this point and carriers well positioned to handle volumes this year.
Peak season hiring down
Both carriers and retailers are still looking to hire seasonal employees, but are doing so at rates below previous years. The U.S. Postal Service expects to hire about 30% fewer seasonal employees this year compared to 2021 and Walmart is looking to bring on board 73% fewer.
“Peak season was a topic widely discussed by freight companies at our recent Laguna conference, with consensus among TLs and LTLs that there will be a peak season more closely mirroring 2018-19 than 2020-21,” wrote Morgan Stanley in a recent report. “Following these announcements from retailers and parcels, it is clear that no major retailer/e-commerce player expects an increase.”
There has been a small shift starting to appear in the last-mile delivery market as brands look to reduce shipping expenses. A survey, Holiday Shopping Trends Report: Winning Customers Despite Uncertainty, conducted by Auctane and Retail Economics for ShipStation and released last week, found that 91% of merchants said they expect business costs to be higher this holiday season, with 34.7% increasing the expense of delivery and another 26.2% extending delivery time frames in response. Another 10.1% are eliminating free returns, a particularly troublesome cutback for consumers purchasing apparel, which is returned at a much higher rate than other items.
Customer communication
Ma said that if merchants are increasing their delivery costs or slowing delivery times, it is important that they communicate with their customers. That includes brands that are offering sustainable delivery options.
“[There’s] a lot more discussion around sustainability,” he said. “Once consumers are more educated and given that choice, there are a couple of surveys out there that when given the choice they choose sustainability in their shipping.”
Ma reiterated that Shippo is seeing some elevated shipping volumes and that could smooth out traditional Black Friday and Cyber Monday peaks. These elevated volumes, he predicted, will likely last into January as retailers deal with “returns season.” But it is something the industry should be able to handle this year.
“I think it is a combination of capacity being spread out more evenly over the last few months and they’ve all ramped up to a certain extent,” he said.
Click for more articles by Brian Straight.
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