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By the Numbers: Holiday 2015

A pivotal season that unwrapped significant supply chain questions for 2016

Now that the holidays are over and you’ve had a chance to settle back into a semi-normal routine, we thought it might be helpful to provide a brief, insightful look back at the 2015 holiday season. It was a pivotal season that will likely have an impact on holiday retail distribution and logistics for years to come. Consumer behavior and expectations took a sharper turn than expected in three key areas. Those changes may have a ripple effect, both competitively and operationally, for retail supply chain management. To understand that impact, let’s start with a quick glance at unexpected shifts in eCommerce, Mobile Buying and Last Minute Shopping.

Before the holiday season began, a number of research firms predicted that holiday eCommerce would increase by about 14% over last year to exceed $70B in holiday sales. In their annual pre-season holiday report, comScore estimated that Amazon would rake in about 20% of the online holiday revenue. And several studies predicted that the portion of online holiday purchases made on mobile devices (vs. laptops) would increase by more than 40% over 2014 to drive approximately 17.5% of online holiday sales. But that’s not what happened.

Record-breaking eCommerce

The average consumer planned to spend about $804 for gifts in 2015, up nearly 5% from last year. And studies are showing that overall, retail spending between November 1 and December 15 rose 2.4% over the previous year. While these stats may be good news for the economy, they also reflect unwelcome news for many brick and mortar retailers, since the growth in online sales significantly outpaced the growth in overall holiday revenue. Online purchases and buying behavior also significantly surpassed pre-season industry estimates. And did so in a few ways that will have many retailers (both brick and click) rethinking aspects of their supply chain models.

Holiday eCommerce exceeded pre-season estimates significantly. Online sales topped $3 billion on Cyber Monday (up 16.4 % from last year), making it the biggest day of online sales in US history. And, online sales over Black Friday Weekend also rose more than 16%, generating nearly $4.5B in online sales. All in, eCommerce generated nearly as much revenue over just the four days that followed Thanksgiving as it did for the entire holiday season the previous year. Amazon’s Cyber Monday was 21.1% better than 2014. And their Black Friday was up 20.8%.

According to ShopperTrak, Black Friday sales for brick and mortar retailers dipped more than 10% compared to 2014 ($10.4B vs $11.6B). A study by RetailNext showed that sales at physical stores declined 5.8% from Nov. 1 through Dec. 14, and traffic was down 8%. Meanwhile UPS, FedEx and the USPS struggled to accommodate significantly more packages than the 1.5 billion (combined) that they anticipated (and those estimates were already 10% higher than last year).

An (un)expected surge in mobile buying

Mobile buying (transactions made on a smartphone or tablet) also became much more of a factor than expected. Multiple sources reported that mobile site visits made up more than half of the Thanksgiving Weekend online traffic. Overall, mobile accounted for 32.1% of all online holiday purchases (vs. 17.5% pre-season estimates by industry experts). Amazon says that more than 70% of holiday purchases were made via a mobile device.

A greater push to the last minute

The convenience and price benefits of online shopping combined with the anytime accessibility of mobile devices is clearly changing the ways consumers do their holiday shopping. And that’s happening faster than experts have predicted. Along with that shift come new, more pressing, consumer demands and expectations when it comes to product availability and delivery.

Almost 60% of consumers polled by market-research firm NPD Group said they hadn’t completed half or more of their shopping as of Dec. 13, up from 50% only a year earlier. By December 15, according to the National Retail Federation, the average holiday shopper had only completed 53.5% of their shopping.

To take advantage of this shift, Amazon aggressively established 24 major markets (representing nearly 30% of North America) for same day shipping before the holiday shopping season began. Their strategy appears to have worked. Amazon signed up more than 3 million Prime members during the third week of December alone (to get free shipping and engage in last minute ecommerce on the Amazon site).

The take-away

To stay competitive, retailers and manufacturers have to rethink their supply chain and adapt, but that’s not easy. Products need to be more available and they need to be delivered faster. Competitive responsiveness requires additional distribution locations that are in closer proximity to the customer. That can be a daunting, expensive proposition… unless you consider an on-demand warehousing model.

On-demand warehousing connects organizations in need of additional space to organizations with extra space without requiring technology investments, additional resources or long-term leases. It can give retailers and suppliers a competitive edge by enabling them to meet the changing buying behavior and right-now expectations of consumers (especially around the holidays).

What do you think? What can manufacturers and retailers do to stay competitive in an increasingly complex and rapidly changing environment?

Related Articles and Resources:

Amazon Aims Now for the Last-Minute Holiday Shopper

Holiday Shoppers Wait Until the Last Minute for Deals

NRF Holiday Headquarters 2015

90% of Holiday Shoppers Still Have Lists to Wrap Up

Don’t Let Amazon Eat Your Lunch This Holiday Season

3 Things Black Friday Taught Us

Ecommerce Thinned Crowds Mobile Devices Drove Traffic

E-Commerce holiday spend will reach $70 Billion