The Dark Art of Black Friday Logisitics
In November 2010 a new day of high street sales hit the UK as the rise of multinational retailers and online shopping brought American 'Black Friday' across the Atlantic. As the day after Thanksgiving, in America 'Black Friday' was considered the date upon which people began their Christmas shopping and retailers slashed their prices to bring in the customers. Frenzied scenes of chaos ensued as people rushed to grab bargains on all types of goods on a first come first served basis. In 2014 Asda sold a month’s worth of TVs in 45 minutes, 16,000 tablets in an hour, and 60% of its entire Black Friday stock was sold in just two hours.
But recently, the scenes have not been quite as chaotic, with more people than ever before preferring to nab deals online rather than facing the push and shove of strangers in a store fighting for a purchase. This has led to a new emphasis on 'Cyber Monday' just after the Black Friday weekend where even more deals are advertised online. This year, Cyber Monday generated $3.07 billion in America with over 200 million visits to 4500 retail websites – this made it the biggest day of online sales in US history, up 16% from last year's record breaking amount. Here in the UK, consumers spent over £281million, the equivalent of £4.39 per person with traffic to retail websites growing to over 120% and mobile and tablet purchases accounting for over half of all traffic.
And the rise of e-commerce does not just manifest itself over the Black Friday weekend. Chris Christopher, director of consumer economics at consulting firm IHS, predicts that online sales during this winter shopping season will jump 11.7% this year to about $95 billion.
The Christmas period has always been a supply and demand logistical strain due to the high volume of sales in the run up to the big day. With the increase in online retail, even on days where vast sale reductions are designed to entice people into 'brick and mortar' stores to browse items on offer, there is more pressure than ever on the logistics industry to deliver the multitude of items that are ordered before the 25th December deadline.
The supply chain is the backbone of e-commerce as the rise of online retail is inescapably linked to its ease and convenience. As soon as the online process becomes too complicated or loses its effectiveness with delivery issues, a business will soon lose out to a more online focused competitor who can monopolise on these many stumbling points where others fall. Last year, Marks and Spencer was forced to delay online order deliveries by up to two weeks as their distribution centre at Castle Donington struggled to cope with the influx of orders of the Black Friday period. This proves how dangerous it can be if retailers fail to keep up with online delivery demand as if the supply chain is not streamlined, customers will search elsewhere. Indeed in a recent survey, 45% of shoppers say they would consider switching to a different retailer if they failed to provide a convenient delivery slot, 24% arguing they would simply stop shopping with the retailer altogether.
The omni channel customer is more demanding and wants their products delivered when and where they want. They expect you to have the product, or at least to make it clear how long it will take before the order ships. Providing 'track and trace' facilities is even more valued so that they will know exactly where it is in the logistical timeline from clicking 'buy' to arriving at their door or selected pick up point. This means that inventories of products are absolutely critical for online sales so that every item can be accounted for. Large retailers have to ensure that information systems are merged so that all product tracing can be accessed – something becoming easier with big data systems such as the Cloud.
But an added layer of difficulty arises from the fact that 30% of online deliveries are returned for various reasons which means that logistical issues do not even necessarily cease when the product is delivered to the customer. Returns are costly in terms of transportation, handling and warehouse costs so optimised stock knowledge is paramount to understand the movement of all products and ensure returned stock becomes available for purchase again as soon as possible. It may not be easy to be a 'brick and mortar' retailer in the online age but e-retailers also have their own headaches with the lack of a physical shop that people can go to for returns to be straight back on the shelf.
Online shopping has also changed logistics in terms of the size and shape of deliveries. In conventional retail to brick and mortar stores, logistics is purely the bulk movement of goods in large boxes and crates from shipment to warehouse to the main store. Now for personalised online logistics straight to the consumer, goods are in small individual parcels which have to be packed carefully to prevent damage in transit. To minimise packaging costs and to ensure all items of an order are delivered at the same time, it is also preferable to bundle items into one parcel which requires further streamlining in the inventory, warehouse picking and packaging process.
Perhaps the biggest threat to retailing logistics is the intense pressure for next day delivery that Amazon Prime has pioneered so effectively. The concept of Amazon was simple - to do business exclusively online to give the seller little overhead costs. Now the online retail giant has a stock valuation higher than most Fortune 500 companies and is so powerful as consumers know that Amazon will be competitive on price and sure to offer efficient and quick delivery services. There is no doubt that Amazon led the way in e-commerce logistics and continues to do so, being voted (along with John Lewis) as top supply chain management retailer last year. If other retailers fail to offer the same level of delivery services, then they are sure to lose out to Amazon. Optimising delivery efficiencies within a strict time constraint may be a competitive advantage, but it also offers logistical headaches of its own as it is difficult to achieve outside of large cities and third party logistics providers may be necessary to pick up the slack.
Some analysts have warned that the rise of online shopping will signal the death of the high street with supermarkets becoming 'dark stores' closed to the public and acting as warehouses where staff fill trolleys for thousands of online orders. But 'click and collect' options are actually becoming more widespread with over half of all online purchases in the UK opting for this convenient solution for those who do not have time to wait for a delivery at home. It also allows high street stores to be used almost as mini warehouses in central locations from which logistics teams can branch out. With the high price for warehouse real estate in cities and the need to sustainably manage fuel costs, using high street stores as mini warehouses may be an economical solution as the demand for same day delivery increases.
Shoppers perhaps seem stuck 'between the brick and a click' when ordering products this Christmas. The various delivery options are putting great strain and a new emphasis on logistics, supply chains and inventories than ever before. It is an issue that both high street shops and online retailers will have to continue to address as the appeal of online shopping continues to rise....and even more so in the run up to the busiest shopping period of the year at Christmas.