Radial CEO Laura Ritchey on What Retailers Can Expect in Peak 2023

Peak season is always one of my favorite times of year, despite the added pressure it creates to deliver in retail. The reason is simple: I get to see my teams excel at the top of their game and Radial clients celebrate meeting their customer expectations during one of the most highly orchestrated operational events each year. It’s challenging and thrilling and every year it drives home the reason why I love being in the eCommerce fulfillment industry — we may be processing orders, but we’re really in the business of making people happy. It’s true every day of the year; even more so during the holidays. Every year brings new opportunities to stretch beyond what we think is possible — and peak 2023 promises to be no less challenging.

I interact with retail businesses all around the globe, from some of the largest brands in the industry to mid-market operations, and every year we glean key insights and lessons learned to create a playbook for the next peak season. While we’re in full peak season preparation at the time of this article, peak season planning is evergreen and we continually build out best practices and recommendations. One of the things I get asked about quite often is what I see as the trends and forces influencing what’s next in eCommerce.

Peak 2023 is going to require us to be agile and to rely more heavily on data to plan and prepare for the unexpected. The pandemic taught us the necessity of being able to pivot and adapt quickly to disruption, change, and spikes in demand. I’m seeing some key forces indicating that this season will likely surprise us — but it shouldn’t take us unprepared.

Last year, we expected the holiday demand would shift earlier in the peak cycle; this did not prove true. Black Friday, Cyber Monday, and what we call Cyber Friday (the Friday after Cyber Monday) all hit records. The volume was once again concentrated in that very short window of time. This had a couple of impacts: all resources were strained and warehouses that were expecting order volumes to come in earlier in the month had people without work to do.  When that spike happened, some retailers had a hard time getting their orders out. The time from click-to-porch was supposed to be four days, and some were seeing eight to nine days, which did not make consumers happy. Transportation capacity was also constrained in that window and was extending eight to 10 days past Black Friday. Consumers were not pleased with this.

Radial recently conducted a consumer survey where 67% of shoppers say they will start their holiday shopping season in October, before Black Friday; but we have no way to know if this is truly going to happen. This tells me that retailers need a level of agility and planning that continues to be unknown even as we get close to the season.

Last year, retailers were dealing with excess inventory that they ended up having to discount in Q1 and Q2 2023. Unwilling to repeat that margin-reducing experience, they’ve ordered less inventory for this peak and many are investing in their demand forecasting abilities so they can pursue hot items as demand rises. We’re seeing retailers discount remaining excess inventory as a way to entice shoppers to purchase full price items that compliment the discounted ones. They are also keeping inventory closer to the consumer, with many using stores as distribution centers and store fulfillment options to bring eCommerce consumers into the store where they typically add to their baskets.

One of the most surprising findings in our survey (which will publish soon) is something that confirmed what retailers have felt forced to do because of inflationary cost increases: slow down shipping and delivery times. Our survey revealed that 37% of consumers agree a 3-5 day delivery time is reasonable for online orders — and 35% agree that one week is acceptable.

This corresponds with the finding that year-over-year, consumer expectations for 1-2 day delivery are coming down, by 15%. That’s a major shift in consumer expectations. Whether this is due to consumers having adjusted to a “slower” pace of life during the pandemic, their concern over carbon footprints, or if they’ve adapted as some major brands offer and encourage choosing slower shipping to consolidate orders or qualify for free shipping — I can’t say. But the fact that consumers are giving retailers more grace in delivery times is good news. Speed is no longer the only priority for consumer purchasing decisions.

One of the implications of this is how important it is for retailers to set realistic expectations with consumers; whether it’s 1, 2 or 7 day delivery timeframes. Consumers want to know what to expect and it’s that expectation that they hold brands to. Clear, transparent communication and automated notifications throughout the process are best practices; many of our clients have found that as long as shoppers know what to expect and are kept informed, they do not get disappointed to the point of abandoning a brand, even when disruption happens.

With speed no longer the only priority though, we see consumers valuing free shipping and flexible returns — part of a price consciousness for the total cost of purchasing. Retailers are still offering free shipping, but reverse logistics has become more of a sticking point. The high operational cost of returns has become something that retailers are actively addressing, and we’ve seen many start charging for returns-by-mail or restocking fees. Some are shaping consumer behavior by offering free returns in store, which cuts down on overall costs and brings shoppers into the store where they’re likely to buy additional items. But this doesn’t work for eCommerce only retailers. So, it gets complicated; how do you balance the cost of returns with the need to retain customer loyalty?

Our survey found that 58% of consumers expect brands to cover the full cost of returns and only 12% expect brands to charge for returns. This contrasts with the 66% of brands that are now charging for at least some aspect of returns. This mismatch in what consumers expect and what brands are doing may come at the expense of customer loyalty.

Consumers also have different expectations for the holiday season with 41% of consumers expecting an extended return period during the holidays, and 32% expecting the ability to buy online and return in store. Again, brands are going to have to find the right balance to address this issue and I expect return policies will continue to evolve as they do.

At Radial, we handle the entire reverse logistics process for eCommerce brands and we can often offset some of the cost that they would experience if they handled it internally. One of the strategies we use is we will keep our additional peak labor to process post-holiday returns because there are the most experienced and trained personnel. Some retailers let their extra peak people go and then have to ramp back up for the spike in returns, we find there is far greater value in keeping them employed until the returns volume has subsided.

Retailers can plan and tackle all of this on their own, or they can work with a partner like Radial that can help carry the burden of peak volume in partnership. Our clients typically come to us because they have a spike in the peak window where they go from handling 10,000 units a day to up to 200,000 units a day — and they just can’t scale to accommodate that. We have the labor planning, the systems, the technology, the capacity in our sites, and transportation relationships that allow us to do that. That infrastructure would be very costly for a retailer to build on their own. We have the agility that retailers need during peak.

Radial offers multiple aspects of the order fulfillment operations, including payment and fraud solutions — but one of the key added benefits clients receive is the advantage of our data. We sit down with our clients after peak season and evaluate lessons learned — then all of this aggregated, anonymized data gets compiled into our best practices playbook for the next peak season. That breadth of data would be very hard for a retailer to obtain on their own, and we have 30 years of data and counting.

Overall, retailers need to be prepared for the unexpected for peak 2023 and have the agility in  planning, technology, infrastructure, and operations to respond in the moment to changing volumes, channels, and consumer behaviors. Customers continue to expect convenience, product availability, on-time delivery, good communication, omnichannel and store fulfillment options, and a positive in store and online experience. They’re not looking for perfection from retailers during the holiday season, they’re looking for help in realizing their gift-giving goals. It’s about the smiles and squeals of delight when a gift is unwrapped, and more importantly, the connection that’s made and felt. We help brands keep their customer experience promises, and that’s what is truly rewarding about peak season.

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