Retailers to reduce shipping and processing time for holiday orders

Retailers are aiming to reduce shipping and processing for holiday orders this season but will still struggle to meet demand as online shopping is expected to increase once again.

E-commerce sales could increase as much as 13 percent this year and retailers are determined to remain competitive not just on price, but free shipping too. According to a new survey by Kurt Salmon, retailers will reduce their processing and shipping timeframes for multi-item orders by almost two days this holiday season. Kurt Salmon surveyed 100 retail brands and respondents resoundingly cited free and fast shipping as top practices that could boost holiday sales.

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 intend to cut down processing and shipping times by nearly one day for each process, bringing the total order fulfillment time down to roughly six days.

Thirty-six percent of retailers are worried about competitors offering free shipping and 18 percent are concerned they'll lose sales to competitors offering next-day and same-day delivery. Target has promised free shipping on all orders throughout the season and 76 percent of retailers are offering some form of off-peak free shipping, compared to 35 percent that did so 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 have increased their investment in fulfillment technologies. When asked about priority investments to improve peak-season delivery, retailers said that their top focus was on shipping (25 percent) and technology/information (24 percent). Retailers noted that they were investing in online inventory and shipping management systems, distribution software and improved forecasting systems.

The 2013 holiday season shipping snafus negatively impacted sales at some retailers and generated bad publicity for weeks after the season had ended. Shoppers are a bit more wary this season and retailers may still be promising a delivery window they can't meet.

Approximately 15 percent of orders arrived late in 2013, and retailers cite a variety of reasons: 26 percent blamed their company's failure to upgrade shipping when items left the distribution center late; 25 percent said they did not have the inventory in stock; 45 percent pointed a finger at shippers or the shipping method; 24 percent said delays were the carriers' fault; and 21 percent cited issues with a non-guaranteed shipping method such as SmartPost and SurePost.

But still, retailers are expected to be even more aggressive with delivery promised this season. Twenty-six percent said Christmas delivery cut-offs will be one to three days before Christmas, a 17 percent increase from in 2013. Nearly half will guarantee delivery by Christmas for orders placed by December 20, compared to 37 percent 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 percent this year.

But that's still 8 percent of orders arriving late, for Christmas.

"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."

For more:
-See this Kurt Salmon press release
-See this Forrester report
-See this Forbes story

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