Wednesday 22nd Nov 2017 - Logistics Manager

A proliferation of peaks

With Black Friday and Cyber Monday looming on the horizon is the proliferation of online bumper bargain days playing havoc with the usual approach to “peak planning”?

 

The summer holidays may be over and autumn upon us, but the Christmas decorations have – thankfully – yet to go up in our high streets. Seasonal festivities still seem a long way off, after the Hallowe’en binge, but for anyone in the retail or distribution business, planning for the year’s peak seasons will have been underway for months. And with those “peaks” coming around more often, “planning for peak” has become a year round activity.

Perhaps not surprisingly the most recent “peak” was down to Amazon. Many e-tailers rode on the back of its “Prime Day” promotion – called by some “The Black Friday of the Summer” – on 11 July in the UK (11 June in the US) to introduce one-day events of their own. While Amazon limits its offers to those willing to pay £79 a year for Prime membership, its competitors launched promotions and flash sales on the same day with many highlighting their delivery offer – as PC World said on its website: “No subscription fee, just great deals. Get free delivery or collect in store in minutes”. No doubt all these also rans gained some sales – and plenty of home deliveries – but reports after the event still suggested that 50 per cent more Prime members bought on Amazon that day than in 2016.

Penelope Ody is a retail market specialist.

Black Friday on 24 November this year – we can blame that one on Walmart – Cyber Monday and Christmas are already firmly on the calendar, but what about Chinese “Singles Day” on 11 November? Some analysts are already suggesting that this too could become a European fixture once we pass the centenary of the First World War Armistice in 2018.

For real world retailers such events take time: apart from physically moving promotional stock, there are the window displays to install, point-of-sale material to print, staff to brief and very much more. Online, it’s a matter tweaking the website and, hey presto, flash sales and “one-day only” offers can instantly appear whenever needed. And if they prove too popular, no need for stock-outs and disappointed shoppers, another tweak and items can disappear from sale or prices be moved up or down at will. According to e-commerce consultancy Salmon, 37 per cent of online spending now goes through Amazon. It’s a figure likely to rise as almost three-quarters of consumers surveyed said they plan to do more shopping over the internet in the future. Small wonder that Jeff Bezos of Amazon is closing in on Bill Gates for the title of “world’s richest man” – and small wonder that for a significant proportion of consumers bargain hunting has become de rigueur.

Instant promotion days may bring in business for e-tailers, but can only be regarded as disruptions to the smooth running of supply chains or the delivery scheduling of logistics companies. Or can they? Interestingly, Matthew Robertson, co-CEO at NetDespatch sees one of the key purposes of Prime Day, not as a promotional event, but as an aspect of peak planning. “Prime Day allows Amazon to test the systems it has in place to cope with peaks in orders,” he says. “This is essential if Amazon is to keep consumers’ trust and maintain its place in a competitive retail environment. With peak season approaching this testing is astute. Rigorous testing to ensure customer expectations are met is vital. A loss of trust equates to a loss of future revenue and profit. A poor delivery is one of the most obvious catalysts for losing customer trust.”

Mini-peak exercises – like Prime Day – may well serve such a purpose but with the peaks proliferating how will that affect logistics planning? Typically carriers take on extra self-employed drivers or seasonal warehouse staff in the run up to peak, they may introduced temporary hubs or build spare capacity into their depots, but with large scale promotional events potentially planned for several times a year – a “Black Friday of the Spring” perhaps or an American-style Mother’s Day (currently the second biggest sales event for US retailers) – will all those temporary staff and hubs have to become semi-permanent?

Add to that retailers constantly promoting faster deliveries, regardless of whether consumers actually need them or not, and the stresses of those peaks may well multiply. Same-day delivery can sometimes be essential: Argos reported a 36 per cent upturn in its Fast Track deliveries this summer during the brief heat wave “when customers wanted products like paddling pools and fans on the day”. But, as Joe Osmond, director of hub and depot operations at Hermes points out, even at Christmas, few really need 24-hour delivery “…as long as the presents are wrapped and sat under the tree by the Christmas break then customers will be satisfied”. Or at least they should be – as long as those enthusiastic retail sites promoting instant delivery take a realistic approach to managing customer expectation – especially at peak.

This article first appeared in the September 2017 edition of Logistics Manager.