Will the 2015 peak pass by incident free … no major calamities or crises? So far, despite pockets of isolated difficulty, it is starting to look that way; things are certainly less febrile than they were this time last year, even though we’re perhaps not quite out of the woods. This feature from eDelivery Magazine issue 02 was written as a retrospective on the 2014 peak, and some of the points of concern make for interesting reading. Although it was written less than a year ago some of the discussion points, such as surge pricing for delivery or restricted five-day shipping on Black Friday, seem at once fantastical and quaint. One wonders what this year will come to look like in 12 months’ time.
The scale of last year’s peak caught most people out. The total value of sales on Black Friday were said to be £810m, with a further £720m following hard on its heels on Cyber Monday; the British public was spending £6,000 per second. A few weeks after that, Christmas 2014 sales reached £53.6bn.
Those are eye-wateringly large sums that surpassed all the published predictions, and their knock-on effect on deliveries is now the stuff of legend. Yodel, the nation’s second largest carrier, was hit by 600,000 additional parcels to be processed and delivered. Handling those in accordance with its usual workflow would have required an extra 5,000 staff, just for that one weekend.
Neil Ashworth, CEO of CollectPlus, thinks last year’s Black Friday and Christmas peak was all too vertical and that the future must become more horizontal. He is referring, of course, to getting away from silo-mentality.
“Retailers’ marketing teams will have decided what deals they were going to run. They will have talked to their supply chain colleagues, and with the distribution teams, but that information won’t automatically have been passed on to the carriers, and as a consequence you have to wonder if the right plans were put in place – I don’t think they were,” he explains.
As big and as bad as the 2014 peak was, Ashworth cautions that it was only the tip of the iceberg, and must be seen as a warning to get things right in future.
“Over the previous four years that we experienced Black Friday in this country, it generally just resulted in a bit of PR for Asda and Amazon, but last year saw everyone pitching in. That’s why I think there’s an obligation for this coming Christmas to be a more horizontal one.”
Understanding the ripple effect within your own organisation is one thing, albeit an important one, but the consequences go far beyond that. Ashworth continues to explain: “There were some really interesting outcomes from Black Friday. Reiss didn’t do anything – no Black Friday promotions at all, yet they saw a 30% uplift. Why? Because the customer is out there looking for a deal.
“There’s a consequential effect not just down your own supply chain but in parallel supply chains and retailers will have to think not only about how they will be affected by their own actions, but how the actions of others might affect them too. That’s a really complex problem and it’s only by the industry coming together that we can solve this in a successful way.”
Are you listening?
All the predictions of what was likely to happen in 2014 were completely outstripped and made to look way too pessimistic. Yet everyone knew something was coming, right?
There’s an interesting parallel to be found in nature. Immediately before a tsunami hits the coast, the sea is effectively sucked away from the shore. So, if you’re walking along the beach and the sea recedes unexpectedly, you’ll know something extraordinary is about to happen – and it could be devastating.
Back in the retail sector, the drop in carrier volumes experienced in October 2014 could have been similarly interpreted. If shoppers stopped shopping there had to be a reason, a cause, an explanation.
Monitoring what’s going on in the market, and what’s caught the imagination of the public, has never been easier, thanks to social media. So why not use it? Listen to social chatter to track the things you ought to be aware of – like Black Friday.
Had you done that in 2014 it’s likely you’d have picked up on the early warning signals shoppers were giving out; they were gearing up for big bargains, waiting to make their spending go further, and hoping to combine Christmas shopping with Black Friday / Cyber Monday deals.
Two things to do this October then … hold your nerve and pay attention to social listening.
A third thing to consider, although this is a bigger industry-wide move, might be to think like Uber.
Delivery Uber alles
Uber has turned the taxi industry on its head. One of the tactics it uses to balance supply and demand is surge pricing. Although it comes in for a good deal of criticism, perhaps surge pricing is something the carrier sector needs.
Back to Neil Ashworth: “Customers acted in precisely the way the retail industry hoped they would.
“Would you like 75% off the price of a TV? Go on then.
“Would you like it next day? Go on then.
“Would you like free delivery? Well, why not.
“You add these things together and it creates the perfect storm, or the perfect calamity. We’ve got to start thinking about how we desegregate some of these things.
“So, you can have 75% off, but it’s on a five-day promise. If you want it next-day you’ll have to pay a premium. By doing that we might actually start to get back into the market some sense of the value of the logistics process.”
If surge pricing is a stick that can be used to encourage shoppers to accept a more measured approach to deliveries, Tobias Hartmann, VP for Client Success, Operations and International, eBay Enterprise advocates the use of a strategically deployed carrot.
“One approach to dealing with Black Friday volumes is to incentivise click-and-collect for shoppers,” he says. “This helps retailers to better manage volumes by reducing the number of carrier deliveries during peak demand. Ship-from-store also decentralises the fulfilment process by turning high street stores into mini-distribution centres. In-store fulfilment prevents bottlenecks and has the added benefit of helping to meet demand when stock movement is at its most volatile – research with eBay Enterprise clients shows that ship-from-store drives up to 20% incremental demand through improved product availability.”
The weakest link
When we spoke to John Munnelly, Head of Operations at John Lewis, last month, he too stressed the importance of click-and-collect as a way of countering some of the excesses of peak delivery overloads. “If all our orders were heading out to a carrier, when you look at the likes of Black Friday last year, when we saw something like 2.6 orders per second, that would start to be a problem. The thing about retail is, when it comes to carriers, we’re all sharing the same resources.”
Click-and-collect can shoulder some of the logistical burden, but it also guards against an explosion of costs. After all, it costs more to send a parcel to a customer than to put it on a shelf in a store.
Munnelly continues: “The thing with Black Friday is that it’s never going away now, in my opinion, and we’ve all got to make sure the supply chain is joined up like never before, because more than ever you’re only as strong as the weakest link.”
The final link in that chain is, of course, the last mile and it’s here that there are some relatively easy wins waiting to be uncovered.
“The cost of failed first time delivery added up to almost £750m in 2014 alone,” says Becky Clark, CEO of NetDespatch. “These costs include: extra journeys in second attempt delivery, extra paperwork, loss of reputation for the retailer when goods are late or don’t arrive at all, loss of productivity from the consumer who has to wait at home for deliveries, or chase up failed delivery attempts.”
Tighten up on your first time delivery hit rate and two bonus points await you – reduced costs and better productivity. The quicker your vans empty, the sooner you can refill them and get them back out on the road, the sooner your potential backlogs are dealt with, and you get all the attendant cost savings of not having to attempt delivery again and again.
Easier said than done? Sure, but most things are. The road to success is not paved with easy options, but with creative problem solving. Partnering with organisations that give you a new twist on deliveries and collections can add a valuable additional string to your bow. Boxes, lockers, community collection points – the sky is the limit. All these options currently exist and are only likely to grow in importance.
Whether it’s Yodel’s decision to pause for breath while overcoming Black Friday volumes, M&S’s reported problems at Castle Donington, or the demise of City Link, the challenges last year’s peak threw up were almost as varied as they were numerous. It ought, therefore, to be as plain as the nose on your face that there’s no silver bullet, no single solution waiting in the wings.
But whether it’s social listening, a stick and a carrot, or strategic partnerships to give you a leaner last mile, you have to do something and you can no longer act in isolation; you need to marshall your skills, offer commercial ways to reduce the impact of ‘free/tomorrow’ and listen intently to your colleagues and the rest of the market in order to be one of the winners, smiling the day after Black Friday.
This article first appeared in the second print edition of eDelivery Magazine (EDM02) under the heading ‘Leading the 2015 Peak.’