The fourth tax quarter is typically a productive one for profit-hungry retailers and the industrial complex that supports these businesses, including packaging companies, third-party logistics, and branding and design agencies. The Black Friday sales holiday has grown bigger, more promotional, and much longer in kind. A holiday sales event that once began on the day following Thanksgiving, Black Friday became a week, a month, and then a season. Retail executives have begun to note this shift in consumer-driven media. Bonobos CEO Micky Onvural recently told Glossy:
We believed that October 1 was the beginning of holiday; that’s when we started to think about it, as many brands did.
In “The Failing Fundamentals“, I began the essay with a warning shot: “We have never seen such volatility as what November 2020 is shaping up to bring.” In the context of online retail’s skyrocketing gross merchandising volume, rising digital advertising costs as a result of enterprise involvement, COVID-related uncertainties, and a weakened United States Postal Service, the average retailer may be unprepared for the obstacles that are likely to come. Here’s the primary takeaway:
A paradox for Black Friday and smaller retailers is that the gross merchandising volume (GMV) in online retail for the month of November will achieve a record high. Most of this volume will be attributed to Walmart, Target, Dick’s Sporting Goods, Academy, Best Buy, and Amazon’s decision to emphasize eCommerce before (and potentially on) the biggest shopping day of the year. By closing all physical stores for Thanksgiving, the market can anticipate digital ad spend of historic proportions. This spend, in turn, may lead to a rise in customer acquisition cost (CAC) for smaller retailers.
In addition to prohibitive advertising costs, rising shipping fees and increased eCommerce competition, COVID-related uncertainties now include medical industry shipping through FedEx. In high-level logistics circles, there is credible concern that shipping lines are further disrupted as big box retailers, direct-to-consumer brands, and distributors of vaccinations converge on an already strained capacity. This is especially the case for perishable food retailers. A September 29 report by The Atlantic began:
On the day that a COVID-19 vaccine is approved, a vast logistics operation will need to awaken. Millions of doses must travel hundreds of miles from manufacturers to hospitals, doctor’s offices, and pharmacies, which in turn must store, track, and eventually get the vaccines to people all across the country. The Centers for Disease Control and Prevention, along with state and local health departments, coordinates this process. These agencies distributed flu vaccines during the 2009 H1N1 pandemic this way, and they manage childhood vaccines every day. But the COVID-19 vaccine will be a whole new challenge. [1]
In logistics leadership circles, executives have argued that the expansive operation will commence at the end of November, as many retailers will be taking on the highest volume of orders that they’ve earned all year. With little to no communication around the prospect of vaccinations shipping from factories owned by Moderna or the joint venture by Germany’s BioNTech and Pfizer, there is little solid data to rely upon, but shipping and logistics becomes the bottleneck for retail in a vulnerable consumer economy. The most vulnerable receiving medications they need will become the priority, and at some point, brands will need to plan around further interruption. That means customers will need to be made aware of evolving shipping status and the likelihood of longer-than-normal waits. An already struggling supply chain will need to account for slower shipments of raw materials, food stores, or consumer goods as other shipping lines are co-opted to manage overflow.
November and December should be winning months for independent retailers, small business owners, and brands. But if shipping channels are directly or indirectly impacted by the healthcare industry, smaller retailers should be prepared to move to the back of the line. There are exceptions. Amazon will spend $52 billion on warehousing and shipping, according to Digital Commerce 360 research. According to Bank of America’s Global Research, Amazon is now in command of nearly 175 million square feet of warehousing with the ability to process, pack, and deliver over 50% of the goods that it sells.
Amazon is approaching a truly vertically integrated logistics network on par with the largest delivery companies in the world.
In the 1960s, MIT Professor Edward Lorenz programmed a vacuum-tube-based Royal-McBee computer in hopes of using defense tools to predict the weather. He’d later note in a theory called the butterfly effect that a butterfly’s wings over the Amazon could impact weather in China. This phenomenon was called “deterministic chaos.” Another influence on retail, the shipment of dry-iced vaccinations and medical supplies will have an impact on Q4 logistics whether the shipping channels are conventional or more specialized. Why? Our logistics infrastructure is already at maximum capacity. Supply chain is strained, packages are late, and the USPS accuracy rate is likely lower than it was just two years prior. This is how eCommerce can intersect with an altogether unrelated world of healthcare and defense. The butterfly effect.
Enterprise retailers like Walmart, Target, and Best Buy will be largely dependent on the infrastructure that Amazon has left behind. We have never seen the culmination of factors facing retailers today. For the few who prepared for an early holiday season, these next weeks are still as important than the first weeks of October, if not more. But if the concerns around our logistics infrastructure are valid, the retail industry will need patience. Though the US economy is important to maintain, essential logistical transport is far more critical. It would be wise to prepare customers for added wait times and temporary frustrations. We’ve never quite seen a holiday season like the one that will come.
[…] nationwide logistics operation wanted to ship Covid-19 vaccines within the coming weeks and months might influence delivery instances, too. Meaning gadgets you need to return through mail could take longer to achieve warehouses, rising […]