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E-Commerce Holiday Growth Will Burden Shipping Networks, Warns Salesforce Forecast

Shipping volumes traditionally increase around the holidays, as retail sales — and e-commerce in particular — also rise. Yet this year’s shift towards online shopping is expected to place such a burden on shipping infrastructure that Salesforce’s holiday forecast anticipates that there will be $40 billion of COVID-19 delivery surcharges between November 15 and January 15 globally, with shipping capacity exceeded by 5% globally.

Shipping surcharges can present financial challenges to both retailers and consumers, depending on where the burden falls. While large retailers can often obtain discounts for scale, they are likely to still face higher rates as a result of the volume of packages this year. For smaller businesses, these charges could cause undue financial strain to already lean business models.

Additional charges are commonly built into the product price presented to shoppers, in order to protect retail margins; by raising the overall item price, businesses can avoid the common consumer aversion to hidden fees. This approach is likely to be popular this year; a Bluecore survey found 60% of shoppers would be more likely to buy if offered free shipping, versus a discount code  (27%).

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The overburdening of the logistics services is also predicted to create delays, even with the additional funding these firms will receive from overage charges. The 5% overage in capacity could mean delays for up to 700 million packages, according to the forecast. Due to the time-sensitive nature of the holidays, this is likely to cause more problems than the previous delays that occurred during the pandemic.

To alleviate these concerns, Salesforce says retailers are turning to additional delivery services like curbside pickup; buy online, pickup in store; and the utilization of last-mile carriers through the gig economy. The company also recommended that retailers advise shoppers to purchase early and avoid the busiest shipping weeks, in order to guarantee delivery in time.

Product package boxes and shopping bag in cart with laptop computer which web store shop on screen for online shopping and delivery concept
Shipping experts anticipate that this holiday season will see even greater strain placed on fulfillment networks.
CREDIT: Mymemo - Adobe Stock

This embrace of an earlier holiday shopping period is reflected in the recent decision of Amazon to launch its Prime Day on October 14-15. (The occasion typically takes place in July but saw multiple delays due to COVID-19.) The forecast predicts that this move — serving as perhaps an unofficial kick-off to the holiday shopping season — combined with general consumer enthusiasm to obtain their gifts quickly, will move up to $6 billion of November’s U.S. Cyber Week volume to the month of October.

Despite challenges stemming from this year’s excessive surcharges and potential delays, the Salesforce forecast included some positive predictions for the holiday season, in relation to e-commerce. Digital sales growth is expected to reach 30% globally year-over-year, compared to 8% in 2019; U.S. growth is predicted to reach 34%, compared to last year’s 12%. By contrast, overall holiday sales are expected to remain flat, due to the poorer performance of brick-and-mortar.

“Digital commerce won’t fully compensate for the projected brick-and-mortar slowdown, but it will be critical to help retailers close the gap this holiday season,” said Rob Garf, VP of industry insights for retail and consumer goods at Salesforce. “Businesses that succeed during the holidays will use everything at their disposal to make shopping easy and safe, including convenient digital ordering, creative and efficient fulfillment, and responsive customer service.”

Salesforce suggested that retailers assess and invest in their returns systems; the increase in online purchases usually correlates with an increase in returns. These packages can add difficulty to the already struggling carrier networks, as well as create additional work for staff at the warehouse or distribution center.

While a smooth returns process is important, Salesforce recommends minimizing the need for returns in the first place, through the use of specific tools to enhance pre-purchase confidence. Sales associates can provide insight through live chat or digital concierge; product descriptions, reviews, videos and fit guides can all help make the consumer make the right purchase the first time around.

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