Christmas was supposed to be a high point for online retail – and for many it was, early figures reveal. Online retail sales were up 37 per cent month-on-month in November, according to the IMRG Capgemini e-retail sales index.
And year-to-date, online retail sales are up 15 per cent, and following a strong start to December with Cyber Monday, this figure is expected to reach 16 per cent at the end of the year. The problem of course is that no-one expected that massive spike in demand on Black Friday. IMRG reckons sales on Black Friday alone were 135 per cent up year-on-year.
And that, it turns out, was a problem for the companies doing the deliveries. Yodel made headlines in the national press after it warned on 11th December that there could be delays of up to 72 hours in deliveries. Volumes were 26 per cent higher than forecast by its customers, and consequently it had been forced to defer collections of parcels by up to 48 hours to allow it to clear the backlog at the sorting centres. With demand hitting a peak, the market situation wasn’t helped by a fire at Hermes’s hub at Warrington at the beginning of December, which disrupted operations for a couple of days.
While internet shopping might be relatively new, the Christmas delivery problem certainly isn’t. It’s at least 20 years since Colin Millbanks, the legendary boss of Parceline (now DPD), explained it this way:
The problem with Christmas, he said, is that there is lots of extra business out there for delivery companies, and the temptation is to try and grab a great chunk of it and make a killing. That means taking on temporary staff and hiring in extra vehicles to handle the additional traffic.
The trouble is that the temporary staff don’t know the routes or the customers, and don’t have the same grounding in the organisation’s service culture. Consequently, deliveries are often late or, worse, missed altogether. Managers are run ragged solving the problems but at least there is the prospect of a big payday once the dust settles.
But you struggle through to January and you find that your costs went through the roof, the service levels were poor so you get no long-term business from the new customers. Worst of all, the bad service has angered your best customers who are now leaving in droves. Not surprisingly, Millbanks’s solution involved careful planning and taking care not to overstretch resources.
Of course, companies did plan for Christmas this year. But the one thing you can be sure about with any forecast is that it will be wrong – and this year some forecasts were clearly very wrong. The reputational risks involved in getting deliveries wrong are very high. The person that comes up with a better way to forecast online sales growth could quickly become very rich indeed.
Malory Davies FCILT,