We are entering the most important months of the year for small businesses and online sellers as we head into holiday shopping season.
With the Covid pandemic impacting logistics and shipping operations last year, especially around Cyber Monday and Black Friday and leading into December, many buyers and sellers complained about late packages.
Multiple circumstances all came together to cause the COVID pandemic to adversely impact deliveries during the 2020 holiday season. It could be argued that it was a perfect storm of conditions.
- More consumer purchased gifts online as they avoided shopping in person.
- Traditional retailers focused on online sales, driving more consumers to shop online.
- Many large shippers underestimated shipping volume, resulting in significant shipments being handed over to the USPS. Unlike private couriers, USPS is required to take in all packages which added to the woes of the U.S. Postal Service.
- There wasn’t enough time for the shipping industry to establish adequate logistics resources to deal with the significant increase in shipping volumes for 2020 holiday season.
- Logistics and mail operators lost workers and worker productivity due to COVID safety protocols.
At times, the shipping situation was so chaotic that the term #Shippagedon trended on social media. There is no doubt that frustration among sellers, merchants, retailers, buyers, and consumers was great, especially as the days counted down to Christmas Day.
Retrospectively, it would be unfair to blame the shipping industry since so many unprecedented situations came together to create a holiday season some would rather forget.
2021 Holiday Season
In the late Spring, we seemed to be heading towards normality this year. But then the Delta variant began spreading across the country, and while some states are seeing reductions of summer highs, other states are seeing increases now.
It appears, the Delta variant may bring back a bit of caution among shoppers who once thought they would be visiting retail stores again for holiday gifts.
Airlines are already providing the first sign that people have become increasingly concerned with the variant as air travel sales have declined below expectations.
If this trend continues, there is a good chance the Delta variant will become a crucial factor in 2021 for online merchants and sellers, potentially leading to higher sales than some predicted.
Without question, everyone involved in online commerce learned something from last year’s holiday season and has invested in infrastructure or made operational adjustments to avoid another chaotic season.
Even consumers may begin holiday shopping earlier than they did last year in order to avoid late deliveries.
With questions looming for the 2021 holiday season, we asked 13 industry experts for their perspectives and suggestions what small business owners selling online can expect this year.
- How ready is the industry?
- What new strategies can sellers deploy?
- How do new regulations impact sellers?
In regards to package deliveries during this year’s US holiday season, I expect things to continue to have ups and downs like we experienced in 2020 as more people continue to buy online.
That said, eBay has partnered with all three major US carriers (UPSPS, FedEx, UPS) to provide great shipping rates as well as protections for sellers who ship on time but have their packages delayed through no fault of their own.
eBay will continue to be transparent with buyers to both set expectations and let buyers know what they can do to ensure packages arrive in time for the holidays.
We have had 18 months of unpredictability from COVID-19 and last year’s pandemic-riddled holiday season to try to get a better sense of what to expect this year, but there is still a lot of uncertainty going into these next couple months.
The big delivery companies have announced their rate increases for the holidays, but they aren’t saying much about improving or ensuring delivery performance.
That puts merchants in a challenging spot because they will have to pay more but still can’t promise their customers that they’ll be able to meet delivery expectations.
I’m encouraging brands to take a few important steps now if they haven’t already:
- Start holiday sales and promotions even earlier this year – just like Amazon and Target did last year – to get ahead of any shipping and delivery delays in December.
- Set clear expectations with customers about which products will get delivered and which are more likely to be delayed. Include estimated delivery dates to eCommerce cart and checkout pages and give customers choices for expedited delivery.
- Add buy online, pick up in store and/or local delivery options to storefronts so that nearby shoppers can skip shipping entirely.
There is going to be a lot of unpredictability again this holiday season, and transparency and communication are going to be key for merchants to avoid disappointing their customers.
Merchants should be prepared for Peak to start much earlier this year and should be aggressive in their promotional schedule in September and October.
However, I don’t expect to see merchants discounting as deeply this holiday as in the past. With limited inventory, their focus will be on driving higher cart values and additional items at greater margin.
My advice to merchants this peak is:
- Advertise early and be clear in your messaging. Remind shoppers that they have to order early if they want guaranteed delivery, and let them know that inventory is limited this year. If they wait, they may be left with very few options.
- Advertise fast, free shipping. Shoppers will be anxious to receive their holiday items, and advertising your shipping promise will drive more conversions at the top of the funnel. In our 2021 consumer survey, 69% respondents said they were either somewhat or much more likely to click an ad that mentions free 2-day shipping shipping.
- Distribute your inventory to deliver on those promises without hurting your margins. The most effective way to meet consumer expectations for 1- to 2-day delivery is to stage inventory as close as possible to your end customers, enabling 2-day ground shipping to your best customers.
- Don’t expose all of your inventory on a single channel. Ring-fence your inventory to feed your most valuable sales channels. Otherwise you’ll risk selling through all your inventory on a low-margin marketplace, leaving you with no opportunity to grow your direct channels and build relationships with your customers.
DHL eCommerce Solutions
At DHL eCommerce Solutions, we have been preparing for peak 2021 since the first quarter of 2021. We had a very active first half of the year processing large volumes partly due to several online merchants looking for alternative providers.
As consumers began going back to brick-and-mortar shopping in the second half of the year, growth rates began inching back to pre-pandemic levels.
Nevertheless, with so much uncertainty with the rise in Delta variant cases in the U.S., this peak season can always mirror the last holiday season coupled with ongoing carrier capacity constraints in the market.
As a company, we’re better prepared and see more of our apparel, fashion, consumer electronics, and other customers also forecasting their volumes and planning to launch holiday promotions earlier this year.
At DHL eCommerce Solutions, we began peak season volume forecast discussions with our online merchant customers in August, something we typically do in September.
In the logistics industry, 2020 taught us several important lessons but three in particular. You can never plan early enough; being flexible is necessary and having ongoing conversations with our customers to help them grow and be flexible is part of building a solid carrier-customer relationship.
With the continued surge in eCommerce demand, retailers and consumers have come to recognize that the unpredictable and unexpected are often completely unavoidable. With an upcoming Peak season that may prove busier than 2020, properly preparing is key.
I firmly believe that one of the keys to a successful holiday shopping and shipping season lies in providing various ways for retailers and consumers to ship and receive their packages.
There isn’t a one-size-fits all solution, and my teams at FedEx are constantly devising ways to offer more choice for retailers to get their products into the hands of consumers that want them.
Take, for example, the concept of ‘fast’ delivery. While speed of deliveries has recently been heralded as the pinnacle of successful shipments, we are finding that predictability is overriding ‘fast’ in terms of preference.
A March consumer study commissioned by FedEx found that convenience is less about receiving items fast than it is about reducing the time and effort it takes to shop at brick-and-mortar stores.
At FedEx, we do this through our commitment to seven-day residential delivery to get packages to customers’ homes – every day of the week.
We’re also investing in our infrastructure by adding new hubs and sorting facilities, enhancing package handling and delivery capabilities, and adding tens of thousands of team members to help keep pace with demand.
A trend we’ve seen during the pandemic is the rise of side hustlers. Many makers and creators, and even those who have experienced job losses or pay cuts and are searching for additional income, are launching their own businesses online via eCommerce platforms like Shopify, eBay, and Etsy. 48% of our new customers who started shipping with us during the pandemic are side hustle businesses.
A rise in side hustles directly correlates to a rise in SMBs, who will need to rely on shipping companies to get their products out to their customers in a timely manner. With the upcoming peak season and surcharges, the need for shipping companies to meet these demands will be amplified.
That’s why companies like Sendle aim to alleviate some of the stress small businesses face by offering a simple, reliable, and affordable shipping option designed specifically for them and with no surcharges attached. We exist to help small businesses and side hustlers succeed online well into the future beyond the COVID eCommerce boom.
In 2021, regional carriers are playing a bigger role in the shipping process compared to last year, as many shippers have increased their logistics supplier diversity.
eCommerce hasn’t slowed down since the beginning of the pandemic, and we don’t see it slowing down anytime soon. For example, at Sendle we continue to experience record package volumes.
With peak season around the corner, shipments are expected to slow down more than any other time of the year and 1-2 day deliveries are less and less likely to be achievable (and sustainable), especially for small businesses.
So small businesses and consumers need to alter their delivery expectations.
Speed of delivery and greater demand for 1-2 day delivery is a growing concern for the environment. Faster delivery speeds lead to an increase in the reliance on air cargo which has greater carbon output and a greater cost to the environment than other forms of delivery.
This is where retailers and transport and logistics companies really need to look at their customer expectations, environmental impact, and the ways they can take responsibility for that as the industry booms.
The tax compliance burden will grow significantly: Because omnichannel and cross-border sales are expanding due to the acceleration of eCommerce, retailers should continue to expect increasing tax obligations this holiday season.
For retailers that ramp up their domestic online sales or launch into new channels for the first time this season, they will likely trigger new obligations to register and collect sales tax due to economic nexus laws.
If a small retailer is selling outside of the US, they will face an array of cross-border compliance challenges. This will especially be the case for any retailer selling into the EU due to value-added tax (VAT) reforms that went into effect in July.
US retailers should be familiar with the Import One-Stop Shop (IOSS), which allows sellers to register with one member state to import goods under 150 euros across the EU.
Tax is often thought of afterwards, but has a direct impact on checkout costs, shipping delays, and the consumer experience if not proactively addressed.
Pickup and BOPUS will define traditional retail during the holidays – Due to rising cases of the Delta variant, it’s likely that many consumers will want to limit public exposure and continue to rely on eCommerce for much of their holiday shipping this year.
As a result, shipping and logistics supply chains will be overburdened, causing shipping delays and capacity constraints throughout the holiday season.
For consumers that don’t want to risk packages not arriving on-time, low-touch shopping options, like curbside pickup and buy online, pick up in-store will be widely used.
Retailers should be prepared to offer blended shopping and delivery experiences for consumers that want to shop online and pick up their purchases close to home.
Success will hinge on technology and infrastructure: Because most shopping will take place across a range of channels and consumers will request flexible delivery options, success during the 2021 holiday season will lie in every retailer’s ability to offer an omnichannel experience.
To meet these expectations, an investment in next-generation technologies will be need to offer a blend of online and in-person experiences.
This includes personalized shopping experiences across online channels, flexible order pickup options, and accurate checkout costs everywhere.
There’s been a lot of learning in logistics this past year. I expect to see a number of the learnings applied in this holiday season, if they haven’t already. As was mentioned in 2020, cutoff dates for holiday shipping are getting earlier and earlier, and I expect this to hold true this year.
One of the key things I believe smaller shippers learned this year is the importance of carrier choice and diversification. For a long time, the carrier mantra was “the more you ship, the more you save.” Now, we’ll start to see shippers using whoever has capacity.
That being said, sellers should anticipate carriers restricting volume near the holidays like they did last year. This could once again overwhelm those without restrictions like USPS.
With that in mind, sellers should be asking themselves: do we know where our retail drop-off locations for all carriers are? Are we prepared to use the drop-off locations for regional parcel carriers too? These are important factors that need to be considered.
Like last year, we’re also seeing buyers consider getting gifts sooner to avoid delays and arriving after Christmas. This buying habit has more to do with the fear of inventory scarcity than with shipping lead times, however, that fear is more pronounced now.
I expect Black Friday/Cyber Monday specials will likely be more around ‘we have inventory of this product’ than a rock bottom discounting of a product. This means inventory visibility for the merchant to their vendors, warehouses, retail stores, and other channels will be more important than ever before.
That could also lead to third-party fulfillment playing a larger role with SMBs to meet delivery times. The idea here is that sellers should be able to delegate a limited quantity of orders to a fulfillment center.
Previously, merchants only did this when they felt a 3PL could manage the process more efficiently and cost-effectively; this is still true. However, now SMBs are concerned with reducing days in transit and getting the product closer to the end consumer.
Additionally, selling vehicles such as subscription boxes means that a merchant needs to delegate certain order types to 3PL’s so they can focus on sales to their direct channel.
One thing that hasn’t been talked about much that will likely impact seasonal sellers is changes to VAT and other international trade rules.
Seasonal sellers may be unaware of these changes and how they will impact them. The EU enacted VAT on ALL shipments, not only ones where the threshold is 22€ or lower, as of July 1st, 2021.
This means the seller needs to collect the VAT from the buyer on all shipments ahead of time and then either use a Delivery Duty Paid (DDP) shipping method (i.e. through FedEx or UPS or DHL) or utilize the Import One Stop Shop (IOSS) and add to their Shipping Services File with the USPS (if shipping via a postal method or Delivery Duty Unpaid).
Customers want to support small/local/independent businesses, but their expectations are higher this year – In order to meet customer expectations this holiday season, SMBs will need to focus on free shipping options, informative reviews, and transparency into the shipping process.
Of those polled in a recent study, 70 percent say they are willing to pay slightly higher prices for products to support small businesses. This is particularly true for products the are exclusive to that merchant and not available at big-box stores.
That being said, consumers still want free shipping from SMBs and are more willing to support those who offer it. It’s a strategic advantage for SMBs to find a way to offer free shipping in as cost-effective a way as possible. This could include threshold-based free shipping (spend $50 to get free shipping) or offering slower services free and charging for faster/premium shipping services.
SMB retailers will need to focus on reviews ahead of the holiday season. 69% of U.S. respondents say they are more likely to consult online reviews for lesser-known small, local, and independent brands as opposed to big-box retailers.
This means SMB retailers need to focus now on gaining reviews (both onsite and on external review sites) from current and past customers on products and experiences.
That way, when new customers start doing their research during the busy season, there is plenty available to inform their decisions and encourage new business. With the massive flux of online merchants over the period of the pandemic, competition for attention will be fierce and a positive online reputation can be a major advantage.
Consumers want visibility into the shipment status of their orders. 84% of those polled rated this as highly important, which is not surprising given the many delays during 2020’s holiday season. From the point of order, merchants need to be clear if it’s unlikely a purchase may arrive in time for the holidays, both from a shipping and inventory perspective.
It’s crucial that merchants make sure they’re aware of shipping deadlines for the carriers and services they use. Post-shipment, customers want to know when their packages are expected to arrive, are out for delivery, and have been delivered. Offering this kind of visibility lets SMB merchants provide customers the peace of mind already expected of big-box merchants.
The shipping logistics sector, especially carriers like USPS, UPS, and FedEx, are more prepared, yes. But consumers should still expect delays this holiday season.
Shipping carrier giants like UPS and FedEx will be more prepared to handle a large volume of orders this year. But we’re still in another year of the Covid-19 pandemic, and carriers can’t build more infrastructure, like warehouses, as quickly.
A labor shortage and Covid outbreaks across warehouses will make it harder to get customers their items quickly. Consumers should start their holiday shopping earlier this year to ensure gifts reach their doorstep in time.
Carriers have learned that a healthy labor force is key to a successful peak season. For example, DHL organized a Covid-19 task force to communicate the latest health guidelines with employees.
Shipping carriers are encouraging drivers and package handlers to follow their local state guidelines, like wearing a mask. It’s very dependent on each delivery company, though. UPS is requiring vaccines for their office employees but not their front-line workers.
They’ll also see fewer deals and sales this year. Consumers will see the best deals well before Black Friday and Cyber Monday. This year will be a mix of shopping online and in-store to find the right products with the best deals.
This year, sellers need to be able to leverage multiple, strategically placed warehouses across the US. It’s a must for larger shippers, who have a smaller SKU count and heavier items to ship.
That being said, current freight costs are excessive, and it doesn’t look like they will be back to normal before 2022. It’s extremely hard for a smaller retailer to cost-effectively spread out their inventory across multiple locations around the country.
ShipHero Fulfillment takes on this load balancing burden, meaning we absorb the fluctuating freight costs because we are using our own trucks.
The shipping industry has learned that the returns process is tough, but there’s a huge opportunity in solving this problem for the seller.
Last year, ShipHero launched a partnership with Returnly, a smart returns platform to problem solve for returns logistics.
Customers no longer have to wait for a refund – they receive a refund as soon as the product is dropped off and scanned at a designated location. They also have an option to purchase the correct item before the original item is even returned.
This ultimately creates a more engaged customer base. Sellers need to focus on their business goals, identify what makes sense for the type of products they’re selling on a physical level and balance with what works financially.
Sellers don’t want to over promise something to customers and then underdeliver.
2020 certainly proved to be one of the most different, and difficult, peak seasons than ever experienced before. And while 2021 has showed signs of returning to some sense of normalcy, with pandemic restrictions starting to relax and customers returning to stores to shop, the recent increase of variants could have us returning to last year’s buying experiences.
However, if there are any silver linings it is sown into the fact that carriers now have experiences to draw from. They now know what they will need to increase capacity, whether it be facilities, vehicles or people resources. They have had the opportunity to plan jointly with their customers to ensure that disruptions are minimized and there is time to build in contingencies.
Without knowing the variables Covid-19 and its variants will bring, shippers should anticipate that the USPS will be better prepared this year—having managed through a once in a lifetime event.
They’ve had time to plan and secure the resources they need to better meet their service standards. They have reached out to their customers and technology partners to understand and plan for the challenges of peak season.
Overall, the lesson here is clear: Merchants that survived peak season 2020 got a crash course in resiliency. Those hard-won lessons will be critical this year as the entire supply chain responds to the next phase of the crisis.
Given what we’ve seen from merchants and shippers so far this year, the entire ecosystem will be far more prepared for this peak season than it was for the last one.
I do think that shoppers will adjust to what occurred last year and will start shopping earlier. I would also anticipate online sellers looking to advance sales earlier to enhance their customer’s experience.
Given this reality, it’s become increasingly important for merchants to develop contingency plans to help manage and preserve the customer experience in the event of delays.
Given that capacity issues have forced many carriers to cap volume, it’s never been more important for merchants to have alternative carriers to switch to in moments of crisis. Merchants need not just backups, but backups for those backups.
As eCommerce has continued to take center stage, we’ve seen the rise of merchants turning to technology platforms, like Shippo, to level up their shipping processes and operations.
Technology platforms have made this process effortless, allowing merchants to compare shipping rates across carriers, print labels, and provide delivery tracking to customers.
Moreover, technology platforms also streamline the process of tracking shipping volume across multiple carriers.
Returns are an important factor in the customer experience. Buyers want returns to be simple and cost efficient.
They also learned that buying online creates different buying habits. Bracket buying became a phenomenon with people buying a size below and above to ensure proper fit. This creates increased costs and more possibilities for customer dissatisfaction.
In 2021, it’s crucial for sellers to always be flexible — especially heading into holiday peak season — when it comes to shipping time frames.
As eCommerce sales continue to grow year over year, logistics providers are going to have to cope with demand.
Offloading to USPS for last-mile delivery has proven to be a cheaper alternative for several shippers at the cost of customer satisfaction. Sellers have to keep in mind that the end consumer will never change their habits retroactively to less convenient standards.
Once Amazon started next-day shipping, consumers began to adjust their expectations to ‘the new normal.’ Sellers are becoming more and more dependent on their shippers to keep up with Amazon’s shipping standards so they can continue to offer customer satisfaction through the entire customer lifecycle.
As COVID cases weakened, vaccines rolled out, and state regulations relaxed, many consumers opted in for BOPIS as an alternative to even the cheapest of shipping options.
In conclusion, sellers should never place too much emphasis on one method of shipping or delivery and should always keep in mind that customer convenience is ever changing and developing.
Huge Thank You!
We would like to thank our experts for providing great insight into what small business merchants and online sellers should expect from the 2021 holiday season. This would not have been possible without their participation.
- Avalara (Sales tax and international trade compliance)
- BigCommerce (Cloud-based online commerce platform)
- DHL eCommerce Solutions (Parcel carrier and on-demand fulfillment and warehousing solutions / 3PL)
- eBay (Online marketplace)
- FedEx (Parcel carrier and global logistics & delivery solutions)
- Sendle (Parcel carrier)
- ShipHero (Online shipping platform)
- ShippingEasy (Online shipping platform)
- Shippo (Online shipping platform)
- ShipStation (Online shipping platform)
- TYLER’s (Regional retailer with online shopping platform)
- Ware2Go (On-demand fulfillment and warehousing solutions / 3PL)
- How a New VAT Rule from BREXIT Now Impacts Every US Seller Shipping to UK Customers (eSeller365)
- How the IOSS and Recent Changes to VAT Costs Impact Shipments to the EU (ShipStation)
- Selling products with a CE symbol into the EU (eBay)
- State-by-state guide to economic nexus laws (Avalara)
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