The E-commerce Merchant’s Ultimate Guide to Preparing for Peak
It may look like summer outdoors but savvy e-commerce retailers recognize that beyond August’s warm days and sunny blue skies lies the hectic holiday shopping season ahead.
According to Insider Intelligence and Outbrain, holiday retail sales in the U.S. have seen dramatic growth in recent years, increasing from $1.051T in 2020 to $1.213T in 2021 and $1.271T in 2022.
Yet despite the impact of higher consumer prices and the residual effects of record-breaking inflation, the 2023 holiday shopping season appears poised for even further growth. The companies’ joint report projects that U.S. holiday shopping will increase by another 4.5% to $1.328T in 2023—and that e-commerce sales, in particular, will grow by 11.9% (compared to just 2.8% year-over-year growth for brick-and-mortar stores).
The bottom line? The 2023 holiday shopping season is likely to be as big—if not bigger—than previous years. The time to start preparing for this peak is now.
What to Do in the Calm Before the Storm
While we may be in the calm before the holiday shopping season storm, it’s also important to note that this storm hits earlier and earlier every year. While Black Friday used to herald the start of seasonal sales, it’s become more and more common for the holiday season’s retail frenzy to pick up as early as October.
According to Andrew Lipsman, Vice President and Principal Analyst at Insider Intelligence, “Early holiday shopping—kicked off with October promotions—is going to be the new normal going forward.”
Given this ongoing, accelerated timetable, here are several steps you’ll want to start taking now:
Review data from seasons past
Past seasons’ data may not be perfect predictors of how you’ll need to prepare for this year’s holiday rush. But it can provide critical insights. A few of the most important questions you’ll want to ask yourself and your business include:
- Per-item performance: What were your top-selling items in 2022? Were there any SKUs that performed unexpectedly well or any items that fell short of expectations?
- Promotion performance: How many promotions did you run in 2022, and how successfully did they land? Did the timing or type of promotions contribute to their results?
- Order volume over time: How did your orders pace over the 2022 holiday shopping season? Were they evenly spaced, or did they correlate with factors such as any promotions you ran or their proximity to the holidays?
- Inventory management: Were there any instances where you ran short of inventory and had to issue backorders in 2022? Anything you overstocked on? If stock shortages did occur, how long did it take you to resolve them?
- Carrier performance: Of the carriers and service levels you used, which was the most headache-free? Which took the shortest and longest times to deliver your packages, on average? Did your customers have a disproportionate number of complaints regarding one carrier over another?
- Total shipping costs: How did your shipping costs change over time or on a per-carrier basis? Which carrier was the least and most expensive to work with?
- Customer satisfaction: How happy were your customers with the way you fulfilled orders during the 2022 season? Did your average CSAT or review scores decline at any point?
- Customer inquiry resolution times: How many customer inquiries did you receive in the 2022 holiday season? Did they peak at any point, or were they fairly steady? How long, on average, did it take you to respond to inquiries, and were customers satisfied with your response times?
- Returns: Did the number of returns you processed (either during the holiday shopping season or directly after) fluctuate from your average baseline? How did customers choose to process their returns, and were they satisfied with the options available to them? How much did you incur in expenses related to returns (e.g. return shipping costs, costs to route items between fulfillment centers, etc.)?
The more granular you can be with this data, the easier it will be to use it to make substantive improvements to your 2023 holiday shopping season. For instance, if you’re able to break down your order volume over time not just by month or week, but by day or even hour, you may be able to more accurately predict potential peak times this year—and plan ahead appropriately for them.
Audit your existing inventory
As you assess last year’s performance, take the time to audit your existing inventory as you’ll need this data to plan your 2023 holiday season purchasing. This process may involve:
- Physically counting the items in your current inventory. You may need to temporarily shut down your warehouse operations across all locations to ensure this assessment is accurate. Depending on the type of items you sell, you may decide to physically count finished items, materials required to produce finished items, or a subset of your inventory (such as high-value, high-demand, or high-risk items).
- Identifying inventory in transit. Even with warehouse operations shut down, you may need to account separately for raw materials or finished goods that are in transit to your location(s).
- Reconciling the inventory records you create with your database. This is especially important when it comes to making sure backorders in your system don’t derail your future inventory ordering plans.
- Auditing your financial resources. Ordering inventory requires capital. Start by assessing the resources you have access to in order to determine what financing (if any) will be necessary to make your purchases.
Depending on how deep of an analysis you want to conduct, this process could also involve auditing your freight costs, overhead expenses, labor hours, and warehouse design. These findings may help you better prepare for the upcoming holiday season, but don’t let perfect be the enemy of good. Focus your audit on the items that are likely to have the biggest impact on your overall planning process.
Adapt your inventory ordering plan based on the current environment
The final piece of the planning puzzle lies in understanding your market’s current state, as well as how it may have changed since last year. A few of the data sources you may tap into for this assessment include:
- Forecasting tools
- Consumer purchasing trends
- Industry research
- Economic reporting
- Financial and consumer sentiment trends
- Supply chain data
These signals will help you to refine your inventory ordering plan. For example, if your industry research suggests that major new product releases may be on the horizon, this can clue you in to the fact that data from last year may not give you a comprehensive understanding of your future needs.
Plan ahead to properly stock and store your inventory across locations
By managing your inventory appropriately across locations, you’ll decrease ship times while also improving end-to-end fulfillment experiences and customer satisfaction.
Keep the following tips in mind as you prepare:
- Improve in-house fulfillment efficiency. If you fulfill in-house, take the time now to identify and resolve warehouse bottlenecks. Implementing process automation, such as automated shipping rules, can help, as can stocking up on packaging and supplies ahead of time before materials become scarce (and more expensive) later in the season.
- Consider adding fulfillment centers. Having multiple distribution points can cut shipping costs and transit times, but you’ll want to identify and establish partnerships with these third-party logistics providers (3PLs) now before the holiday rush.
- Equip your fulfillment partners for success. The peak holiday season is busy for everyone. Empower your partners by establishing strong communications and developing processes for monitoring their stock levels and performance to ensure customer experience doesn’t decline.
Whether you fulfill in-house or through a network of partners, developing an integrated end-to-end fulfillment tech stack, solid infrastructure plan, and operational efficiencies will minimize the risk of holiday season disruption.
Diversify your carrier mix
Given dramatic changes like Yellow Trucking’s recent bankruptcy filing, it’s clear that the carrier landscape is far from static. As the shipping ecosystem becomes increasingly fragmented, it’s smart to regularly identify new opportunities to diversify your carrier mix in order to optimize costs, speed up delivery times, and improve customer satisfaction.
Consider the following aspects of diversification:
- Regional, national, and global carriers. If you’ll be shipping internationally, working with a global carrier is a no-brainer. But, working with an international shipping carrier can come with steep prices. In order to deliver holiday orders at a price that makes sense for your buyer, you’ll need to compare different international service levels and take advantage of discounts offered by multi-carrier shipping software like Shippo. You can also look into using shipping consolidators that group multiple packages heading to the same country in order to cut down on costs as well. But you may still want to diversify your carrier mix domestically with regional parcel carriers—who can often deliver faster and more affordably to select destinations. As an example, regional carriers such as GLS-US can offer custom pricing and fast shipping to those specifically on the West Coast while a regional carrier like LSO specializes in shipments throughout Texas. National carriers are also an excellent option for those who have a distributed customer base. These carriers are also often better equipped to handle heavy shipments traveling large distances.
- Carriers service levels. The carrier service levels available to you depend on carrier routing, your geographic location, the distances your packages travel, the size and scope of your operations, the total volume of your shipments, and the types of items you ship, amongst other factors. If you don’t regularly evaluate your carrier and service level options, you may not be utilizing the fastest, most cost-effective solutions available to you. Different carriers have different service levels which may work better for your target customers.
- Peak season fees and shipping cut-off dates. Every carrier assesses its own schedule of peak season fees and enforces its own shipping deadlines for delivering holiday orders on-time. Since these elements have the ability to impact your profitability and the success of your fulfillment process, it’s smart to understand how you’ll be affected to determine how to diversify your carrier mix. In the past three years, all major national carriers have assessed peak season surcharges around October and have them last throughout the remainder of the year. The amount of this surcharge can vary widely between carriers, so its best to have access to more. When it comes to holiday deadlines, those are also announced in October and will also vary by carrier as some have guaranteed two-day or next-day options while others don’t have guaranteed transit times.
In the case of holiday gifting, your packaging may represent a recipient’s first exposure to your brand. But even if you’re shipping to long-time customers, it’s a good idea to give your packaging approach some extra attention before the holiday shopping season kicks off.
For example, consider:
- Utilizing themed packaging or custom shipping boxes during the holiday season to create festive unboxing experiences.
- Updating branded elements on your packaging to be holiday-specific.
- Personalizing orders with a handwritten ‘Thank You’ note.
- Including branded stickers with your orders.
That said, look at your packaging from a broader point of view than just branding. Ensure any packaging materials you choose will protect your products in transit and keep your dunnage costs in check across all of your shipments.
While this is best practice throughout the year, it’s especially the case during the holidays. To put it into perspective, holiday returns can account for about $32 billion in a single season with 20-30% of those returns being attributed to damaged products. That’s roughly $9.6 billion worth of products in the U.S. arriving at customers’ doors damaged.
In order to properly protect your items you’ll want to look into asses what your items are made of and choose in-fill according to the specification of that product. For example, air pillows are inexpensive but won’t work for items that have jagged edges. For those items packing peanuts or kraft paper may work better.
For the box itself, you’ll also want to consider if using flat-rate boxes make sense for your products and overall peak season shipping strategy. While you are not allowed to decorate these boxes, they are often given by carriers for free and do not account for weight when shipping your products. However, if you need to use your own custom-size boxes, be sure to use quality corrugated boxes in order to protect your items.
You’ll also want to consider whether shipping your items in a box makes sense at all. For example, shipping with poly mailers can work for items such as clothing since they aren’t as susceptible to damage when dropped. Poly mailers can also drastically reduce shipping costs since their dimensional size is often less than that of a box. Poly mailers can also be designed so you are able to further promote your brand while also saving on shipping.
Insurance & Tracking
Offering customers the option to add shipping insurance to their holiday purchases gives them peace of mind—especially given increasing rates of porch piracy and package theft during this time of year. In fact, according to a recent study, 43% of Americans who shop online during the holidays have reported package theft before. That number jumps to a whopping 59% in urban areas, only further increasing the need for your business and your customers to have that reassurance that the shipment is fully protected.
And considering that shipping insurance can cost as little as $1.25% of the item’s value, building these costs into your pricing can be an inexpensive way to create a competitive advantage over other merchants in your space. With Shippo, you also now have the ability to automate the process so that all your shipments can include shipping insurance. This makes it faster for your fulfillment team to process orders and gives you complete coverage throughout the holidays.
But, before you make a decision regarding whether or how you’ll offer shipping insurance, price out the specific costs of insuring your items and determine which services make the most sense for you. If you sell high-end, one-of-a-kind goods, for example, offering signature confirmation adds an extra level of protection consumers may appreciate.
Order Tracking Pages
Further, beyond integrating these offerings into your holiday shipping program, explore ways to leverage your package tracking pages for marketing and branding purposes. These pages are not only a great tool for customers to use to ensure they’re present at the time of the packages arrival (which can reduce stolen packages) but also serve as a way for you to maximize your current customer base. Customers check these pages an average of 3.5 times per order. Shippo pro plan users can fully customize these order tracking pages to re-engage customers, recommend products, or promote new offers. You can also link them to your social media pages and encourage shoppers to follow you there.
Excess returns have the potential to disrupt your holiday shopping season by complicating inventory management and pulling resources away from the fulfillment of new orders. Not to mention, returns can be costly. According to our 2023 Benchmarks Report, returns are estimated to cost retailers nearly 66% of the item’s original value.
Keep the following tips in mind as you review your return policy:
- Extend your return window. Although a 30-day return window is common in e-commerce, gift-givers may need more time to give and potentially return their gifts. A longer window, up to 45–60+ days, relieves the pressure on buyers to delay ordering until the holidays fall within the return window. For example, many shoppers buy Christmas gifts during Black Friday and Cyber Monday. By extending the returns window past 30 days, this allows them to gift the product to someone and give that person a chance to return the item if they don’t like it. This gives the initial purchaser more confidence to buy when they are ready.
- Clearly define seasonal-specific restrictions and gift exchange rules. If your holiday return policy deviates from your standard process, describe these changes in locations that are highly visible to your customers (such as on your individual product description pages, your FAQs, and your post-purchase communications). Remember 84% of customers look at a return policy before buying and 54% won’t make an initial purchase if the return policy is unclear or unfavorable.
- Notify customers of holiday shipping deadlines. In a similar vein, clearly communicate when orders must be placed to be delivered before the holidays. Many e-commerce retailers add custom site headers with this information, though product and policy pages should contain it as well. This may help prevent returns of items that arrive after the holidays.
- Consider including return labels with your shipments. Even if you don’t continue the practice year-round, including prefilled, scan-based return labels with every purchase reduces friction in the returns process. With Shippo, you can easily do this and best of all, you won’t be charged for a return label until someone uses it. You can also automate the process so that you always print return labels with your shipping labels. This saves you time and gives your customers reassurance in one can be one of the most hectic times of the year.
- Treat your return policy as a competitive advantage. Offering easier returns may not come to mind immediately. In fact, in the past year, 6-10 retailers have made their return policy more difficult on the customer as a way to lower their return rate. But, this strategy could be detrimental. In our 2023 Benchmarks Report, 80% of Americans said they would leave a retailer they regularly shop with if they made returns more difficult. This doesn’t mean you have to offer free shipping—it just has to be as pain-free as possible for customers to navigate. By having a customer-friendly holiday return policy while your competitors are making theirs more difficult, your business will be able to stand out among the competition.
The bottom line? Prioritize flexibility when establishing your holiday shopping returns program. The more options you can give buyers in terms of the items that can be returned, the length of time they have to initiate returns, and the number of channels they have for executing returns, the more confident they’ll feel entrusting your business with their holiday purchases.
Automate the Shipping Process
Finally, before the 2023 holiday shipping season is upon us, you’ll want to automate as much of your shipping workflow as possible, as automations can help you get packages out the door up to 50% faster than manual processes.
Generally speaking, shipping automation applies predetermined “if-then” rules to your shipping label purchases, based on factors including package size, weight, destination, and product SKU(s). A few of the specific automations you can integrate into your operations using Shippo include:
- Automatically selecting carriers and service levels for certain shipments
- Automating the purchase of insurance on some or all of your orders
- Automatically printing return labels alongside your shipping label purchases
Automation outside of your shipping workflows can help you to manage partial fulfillments, as well as dynamically integrate product recommendations into your order tracking pages, based on customers’ purchase histories.
To see these automations in action, sign up for a free Shippo account. Once inside, you’ll also enjoy discounted rates from the nation’s top carriers, the ability to connect 40+ carrier accounts, and features that make scaling your shipping operations seamless—all of which can set you up for success in the 2023 peak holiday shopping season.