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2021 is coming to end really soon. And what a year again for the e-commerce industry. If the Coronavirus outbreak has boosted online sales, it has also affected the supply chain globally, currently causing troubles - and delays - from manufacturers to logisticians. This Christmas 2021 and the beginning of 2022 look challenging for e-commerce merchants… Let’s discover the main e-commerce fulfillment challenges and how to be prepared.
The state of e-commerce at the end of 2021
After a tumultuous 2020, we can already see a bump in worldwide retail sales for 2021. The global economy tends to reopen and consumers are spending more. Both brick-and-mortar and online sales benefit from this demand increase, with in-store growing 6.3% and e-commerce growing 17.9%.
Zooming in on the European Union, we can see a similar trend with retail sales increasing by 3.2% in September 2021 over the same month in the previous year (Eurostat). The leading markets are Germany, France, UK, and Italy.
In regards to e-commerce sales, similar to the previous year, 2021 has been quite lucrative for online brands and merchants. According to Adobe’s survey, global online sales may hit $4.2 trillion this year. An all-time record for sure that can be explained by the change in consumers behavior:
9% of U.S. consumers, 8% of Japanese consumers, and 15% of United Kingdom consumers said they had never purchased anything online before March 2020.
Europe as well is thriving when it comes to e-commerce sales. In 2021, a huge milestone is about to be passed with 500 million e-commerce users. The penetration rate is also projected to reach almost 60%. In addition, the online retail industry is expected to reach almost €800+ billion (Statista).
And yet, we don’t include the numbers for the 2021 peak season, during which they will explode.
Peak season is coming… hard
Peak season is usually the busiest season of the year in the e-commerce and logistics industries. The kick-off is given by Singles’ Day, followed by Black Friday, Cyber Monday, and finally Christmas. To put that into perspective, according to Salesforce report, consumers spent $1.1 trillion online worldwide between November and December 2020.
This year again, online merchants and brands have to expect an increase in those numbers. As we already saw, people are buying more and more online and getting used to it. In addition, shopping days like Black Friday or Singles’ Day are becoming more popular in Europe. Marketing and sales offers are flourishing online, which definitely impacts the number of online sales. Only benefits you are about to say. Well, yes and no. The pandemic not only impacted the demand and volumes coming from online sales but has also shown the fragility of the worldwide supply chain. It results in challenges to overcome in the upcoming months and years for online merchants and logistics professionals.
The main e-commerce fulfillment challenges for the end of the year
Don’t we all remember that picture of an Evergreen container ship stuck in the Suez Canal?
Source: Suez Canal Authority | AP
First of all, no the Coronavirus did not do that (sorry conspiracy theorists). Second, yes it was quite a surreal event (good memes came out of this though). Our point here is to show you how fragile the worldwide supply chain is, and how one event can now equally affect every link of that chain, from manufacturers to end customers, with short and long-term consequences.
Increasing shipping costs
The imbalance in the production and demand for goods with countries going into lockdown and opening up at different times has led to intensified competition. If competition is usually a good thing for customers - the more offers you have, the greater are the chances to get better prices in the end - this time it doesn’t seem to be the case.
Transportation capacities have been squeezed because of soaring demand, the shortage of containers, and saturated ports. The bad news is that industry experts don’t expect the prices to decrease significantly anytime soon. On top of that, fuel is getting more expensive which affects shipping costs.
Read our investigation about the impact of increasing logistics costs on e-commerce
Shortage in stock and material
According to logistics and economics experts, consumers can expect a record number of “out-of-stock” messages during their quest of finding the perfect Christmas gift on the internet by the end of the year 2021.
In fact, those kinds of messages are expected to be up 172% this holiday season compared with last year's numbers (Adobe Analytics). The product categories that are expected to face a shortage in stock are, without surprise, the most usually successful and bought for Christmas:
- Fashion and accessories
- Sporting goods
- Baby products and toys
- Electronics
If you have already prepared and secured sufficient stock levels, all you need to do now is to sell them during peak season. But be careful still to not create frustration to your customers by showcasing products that you don’t have anymore. In addition, have you thought about packaging material?
Materials such as plastic, cardboard, or wood are currently in a worldwide shortage state. Since Christmas (and peak season in general) is a really good opportunity to strengthen your brand with an unforgettable unboxing experience, you might find alternative solutions here in order to successfully fulfill your order.
Delivery delays
If “out-of-stock” messages weren’t enough, online shoppers may also face prolonged delivery delays. In the end, all the above-mentioned challenges will affect shipping and delivery times. In fact, the main issues right now are more on a manufacturing and logistics level. In other words, producers and carriers are the ones that face the most direct issues here with lack of product material and backlogs in the main hubs (ports, airports, truck loading, etc.)
Fortunately for online retailers - if we can say so - customers are more likely to cast blame for late packages on delivery carriers and external conditions, according to a survey from Deloitte.
Homepage of the Australian Post service regarding Christmas conditions for deliveries
What about the “after-party”?
5 million. That's the number of packages returned via UPS in the US during the first week of January 2021. “Fun” fact, there’s even a National Returns Day (January 2) across the Atlantic. Christmas marks the end of peak season, it’s also synonymous with returns and returns management.
We saw among those lines that the end of 2021 is going to be very challenging for e-commerce fulfillment, especially when it comes to delivering the goods. But those bottlenecks and challenges may also affect the reverse logistics by overloading the carriers and creating backlogs in replenishment.
Be ready for Christmas 2021 and prepare 2022
Several factors are coming together to complicate peak season and gift-giving this year. All along with this article, you can find some expert tips that can help you overcome those e-commerce fulfillment challenges on short notice and in the long run. Hopefully, 2022 will be a smoother year for the e-commerce industry.
Overall, what we have learned is that e-commerce and logistics have been highly demanded in the past months, and when you are not at the top of the e-commerce food/supply chain, this might be very challenging for your business. By partnering with e-commerce fulfillment experts like byrd, you ensure a sufficient and continuous level of successful order fulfillment and high-quality service to your customers.