Without order fulfillment, there are no sales. That truth only grows in importance during the holiday season. And not just because the holiday season is one of the most important sales periods for most retailers. Failure to meet consumer expectations during the peak period can hurt customer satisfaction and can even lead to holiday anxiety.
But even with the best of efforts, getting your order fulfillment together is a challenge. The holiday season brings order spikes, high demand, and strain on the supply chain.
Still, careful planning with the right strategies can help you manage your problems effectively. Let’s dive into the 2023 holiday season and explore how you prepare for this year's order fulfillment challenges.
Retail holiday sales in 2023 are projected to grow between 3.5 and 4.5 percent. That results in estimated totals of around $1.54 to $1.56 trillion in sales during the November to January timeframe. In addition, holiday eCommerce sales are anticipated to increase between 10.3 percent to 12.8 percent compared with the same period in 2022. A strong labor market and income growth for the year should offer retailers positive looking sales trends, with overall sales growth a bit lower than last year ( 7.6 percent observed growth in total 2022 holiday sales) but accelerated growth in eCommerce sales ( which grew just 7.9 percent in the 2022 holiday sales season).
Such continued sales growth bodes well, especially since. 2022 generally was a cautious period for consumers. Inflation ate into consumer buying power, and that caused consumers to spread out purchases. People waited for discounts, especially as post-pandemic supply chain issues caused excess inventory to build.
But even with that hesitancy, the run-up to Christmas of 2022 saw positive numbers with online sales. Total retail sales also continued an upward trajectory, despite coming in lower than forecasted at $936.6 Billion.
That should give merchants relief as economic conditions further stabilize towards the end of 2023. Already, retail and food sales are up this September by 3.8 percent compared to last year. Plus, as of August 2023, personal income in the U.S. increased by $87.6 billion month over month, and personal consumption expenditures by $83.6 billion from the prior month.
Those numbers suggest that consumers are ready with the holiday spirit. Participation levels are back, with 95 percent of consumers planning to purchase during the seasons. Expected average spend is above pre-pandemic levels as well, with people budgeting $1,652 this season’s spending on average. The cost of living crisis may affect consumer demand, but sentiment for 2023 remains stable and healthy.
While the overall economic picture appears fine, several unique conditions may challenge your order fulfillment this holiday season:
While general shipping and logistics conditions look positive this year, what order fulfilment issues will pop up in the 2023 holiday season? At Justt, we see four primary difficulties:
The average rate of returns in 2022 stayed flat at 16.6 percent of retail sales. But nearly 11 percent of that $212 billion in returns were fraudulent. Such refund abuse only increases during the holiday spike (some research suggests a return rate increase of 2.2 percent in 2023).
Moreover, fraudsters also seem incentivized toward refund abuse. Case in point, there are now guide books that teach consumers how to take advantage of store policies, like Bob’s Refunding eBook. And with 3DS 2.0 implemented widely in Europe as part of PSD2, many fraudsters in European markets moved away from payments from payments fraud to return fraud and refunds abuse. Messing with retailers return and refund policies is currently one of the easiest ways for scammers to make money, especially amid the background noise of the holidays.
Wardrobing is the unethical practice of using an item with the intention of returning it after use. Such actions hurt product resale value and increase costs through restocking expenses and tie up inventory.
Wardrobing is a form of policy abuse. Lost item value (also known as shrink) accounted for $112.1 billion in losses in 2022, and damage to garments by those engaged in wardrobing may factor into those numbers. It is likely that during this holiday season (and its many gift exchanges) wardrobing will once again occur. It is a holiday issue that needs addressing, as a valuable garment disappears during your best sales opportunity period only to be returned in January.
As demand increases during the holidays, inventory strains. Lack of preparation and incorrect product forecasting often result in missed sales opportunities, customer dissatisfaction, and lost revenue.
But merchants aren’t solely to blame. As already stated, the supply chain for 2023 is still settling. Experts have noted problems with last-mile delivery, cash-strapped small suppliers, strain from multi-channel consumption and geopolitical tensions.
Whatever the proximate cause, shipping volatility threatens the success of your holiday order fulfillment strategy.
With a simple button-click, a consumer can reverse a legitimate sale. Unfortunately, the spike in card-not-present sales during events such as Black Friday and Cyber Monday also create a spike in payment and friendly fraud. That often results in a subsequent jump in chargebacks as the post-holiday blues set in.
Moreover, consumers appear more open to the use of a chargeback in 2023. Seventy-eight percent of American respondents admitted filing at least one chargeback over the last year, according to a May survey sponsored by Justt. That response share reflects a 12 percent increase over 2022 (66 percent). In addition, 29 percent of Americans engaged in 3 or more chargebacks over the past year, showing greater willingness to use chargebacks by the consumer.
The efficacy of your order fulfillment process directly impacts your chargeback volume. Twenty-seven percent of Americans will wait just 2-3 days for product delivery before filing a chargeback. And only 10 percent will wait more than 15 days. Timely shipments are important to consumers.
And yet, 24 percent of consumers listed “goods or services not received” as the primary reason for filing a chargeback. In addition, thirty-nine percent of stores with both online and in-store presence said “goods not received” was the top non-fraud reason code they did not challenge. There is a disconnect between consumer expectations and merchant fulfillment—and it's resulting in holiday chargebacks.
Luckily, there are several steps you can take to manage each of the above-mentioned order-fulfillment problems:
Defenses against return fraud focus on establishing clear expectations for all your customers and then tracking their behavior across all touchpoints with your business:
Wardrobing defenses focus on building fair return policies that specify exact return conditions.
Managing low inventory issues involves preparation and prediction. Here are some possible steps you could take leading up to the holiday season:
To prevent order fulfillment chargebacks, focus on good customer communications:
Order fulfillment during the holiday shopping season is a complex endeavor. Economic expectations for 2023 are positive, but the flurry of holiday activity can expose you to a high volume of chargebacks or return fraud. To succeed, engage in careful planning, optimize your inventory, establish clear refund policies, and build a chargeback defense strategy. Proactive steps will ensure a seamless shopping experience during the festive season.
To learn more about how your company can handle payment disputes that arise from order fulfillment issues read the Justt blog.
