Heading Into Holiday Peak, Shipping Challenges Expected for SMBs
Many consumers began holiday shopping as early as July for the 2022 season; still, as the holidays approach, experts say brands and retailers can expect another year of hectic, peak levels of shipments.
According to data from Ware2Go, the UPS company that simplifies the end-to-end supply chain to enable merchants to compete and grow, a full 95 percent of merchants have had to adjust their planning in response to supply chain disruptions and market conditions, starting with inventory planning. For 68 percent of small- and medium-size businesses (SMBs), this means changing up their inventory ordering strategy in some way this holiday season including changing the types of products they’re purchasing (33 percent), ordering more inventory than in previous years (23 percent) and ordering inventory earlier than previous years (21 percent).
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The good news for SMBs, Ware2Go’s data indicated, is that consumer preference for online shopping is up, with 83 percent of consumers reporting that they often discover new brands when they shop online, presenting opportunities for SMBs to reach more shoppers.
However, when it comes to shipping, consumers’ expectations are rising. While Ware2Go’s consumer survey data found that in 2021 57 percent of consumers said they had lowered expectations for timely shipping, this year, only 16 percent have lower expectations around one- to two-day shipping. Sixty-five percent of consumers also expect small brands to ship as fast, or faster, than major chains.
With an approach rooted in analytics, Ware2Go has been a go-to for many SMBs combatting the continuous challenges of today’s consumer expectations. Notably, the company reported 75 million requests during peak season in 2021, compared to 42 million in 2020. In fact, 18 percent of Ware2Go’s customer base who previously used Amazon for fulfillment needs now rely on Ware2Go. For the customer, shopping with a brand that uses Ware2Go over Amazon, offers the advantage of keeping their data while brands are able to effectively drive sales.
Here, Steve Denton, chief executive officer of Ware2Go, speaks to WWD about the challenges facing SMBs ahead of a challenging holiday season, learnings from seasons past, and the strategic approach that Ware2Go brings to its partners.
WWD: How would you describe today’s challenges and competitive retail environment for these SMBs?
Steve Denton: The retail environment is competitive on all fronts — from cost-per-click advertising, all the way down to warehouse space and carrier capacity. At Ware2Go, we’re addressing three main challenges for our merchants.
Consumers have high expectations around fulfillment. We’ve known for a long time that they want one- to two-day delivery. Frankly, that’s old news. Today’s consumers are all individuals, and they want options. When they log on to an e-commerce marketplace or direct-to-consumer website, they expect a personalized experience. They want custom recommendations based on their browsing history, notifications when their size is low in stock, and they want options when it comes to fulfillment. They expect to see same-day, two-day, pick up in store and sustainable shipping options.
The lines between business-to-business and business-to-consumer have been blurred. No brand can just pick a lane anymore. They have to be set up to serve business-to-business and business-to-consumer customers with the same level of service — I like referring to it as business-to-everyone. Business-to-business shoppers are flocking to e-commerce, just like business-to-consumer. That means the entire commerce experience has to be digital.
The e-commerce explosion has changed labor planning in warehouses. Most sales come in over the weekend, so outbound order volume is highest on Monday and Tuesday. Then it softens throughout the rest of the week. It’s difficult to negotiate for labor if you can’t guarantee steady volume throughout the entire week.
WWD: What are the challenges facing SMBs this holiday, particularly as peak season approaches?
S.D.: The supply chain is in better shape than it was this time last year, but we’re certainly not out of the woods yet. Freight rates are still elevated, and 42 percent of merchants report that the cost of freight has eaten into their margins this year.
Warehouse capacity is tight, especially on the coasts. A lot of those capacity issues can be traced back to obsolete inventory. Many merchants are holding on to inventory that didn’t sell this year. Our survey data shows that 23 percent of merchants feel they overbought on inventory this past year, and 19 percent feel they invested in the wrong types of inventory. All of that deadstock is taking up valuable warehouse space that could be used for incoming seasonal products.
Major retailers are facing many of the same challenges. We’ve all heard the predictions of deep discounts headed our way as big brands try to offload some of their obsolete inventory. However, those enterprise companies have a lot more leverage when they’re negotiating for warehouse space and labor. They’re shipping higher volumes over the road and over the rails, so they’re also getting better freight rates.
SMBs can learn from that — there’s power in numbers. That’s why our model works so well. We’re aggregating merchants’ inventory and shipping volumes to give them that same kind of negotiating power. With our diverse network of partners, we can get them the space, labor and service levels they need to compete and win.
WWD: Looking back at holiday 2021, were there any particular learning moments you can share with SMBs?
S.D.: We surveyed consumers right after the 2021 holiday season and learned that 57 percent of consumers made a purchase from a new retailer last holiday — 37 percent did so because their preferred retailer was out of stock. This shows that consumers have a wealth of options. If you don’t have the right inventory in the right place at the right time, you’ll miss out on the sale.
On the other hand, if you do have your inventory in the right place at the right time, you have to let consumers know that you have it on hand and that you can get it to them quickly. Advertising fast shipping promises at the top of the funnel is where you can really turn your supply chain into a competitive advantage.
WWD: How does Ware2Go help companies to simplify distribution fulfillment?
S.D.: When a merchant enters our network, we take a data-driven approach to helping them decide exactly where their inventory needs to be distributed. We use our network optimization tool, NetworkVu, to ingest their historical sales data, identify where their customers are, and pinpoint the best warehouse locations to help them offer two-day ground shipping across the country.
We’ve built a digitally connected supply chain that is as flexible and scalable as their digital sales channels. Our technology is integrated into our merchants’ tech stack so they’re not having to manage multiple platforms. They have a complete end-to-end view of their business, and they can pivot quickly when they see changes in demand patterns or identify new opportunities.
We’ve also aggregated and simplified fulfillment reporting to give merchants real, actionable business insights. We’re helping merchants better manage their inventory to prevent stockouts, optimize inventory carry costs and focus on their top performers.
WWD: Can walk us through Ware2Go’s strategic approach to working with SMBs?
S.D.: When we enter into a partnership with a merchant, we make it our business to provide them with the tools and insights they need to meet their full potential.
We’re leveraging machine learning and artificial intelligence in some really exciting ways. We can tell merchants not only where they should be stocking their inventory, but how much they need to stock in each location, which skus are their top performers (and which ones are losing money), and which geographic markets they may want to expand into. Because these insights are based on machine learning, our recommendations only get more accurate the longer a merchant works with us.
WWD: How does Ware2Go stand apart from its competitors?
S.D.: One of the things I’m most proud of is our commitment to create a more sustainable supply chain. E-commerce demand has increased most merchants’ carbon footprints, and we help mitigate that. That’s why every shipment that goes through our network — from full truckload to small parcel — is carbon offset at no additional cost to the merchant. It’s not something they have to enroll in or manage themselves. It’s just part of doing business with Ware2Go.