Post #88: Looking forward to the holiday season?

For many people (your author included), trying to predict what tomorrow may bring is a hard enough task in this current very strange environment. Surely then, it’s absurd already to be thinking about the year-end holiday season? For the record, it’s just 50 days until Thanksgiving and fewer than 80 until December 25…

If retailers and logistics businesses have not made appropriate plans, then they should do so rapidly. We were intrigued to read recently the latest consumer insights and predictions report from Salesforce, arguably the global leader in CRM (customer relationship management systems), which discusses this very topic. Before year-end, Salesforce predicts digital sales to hit all-time highs and lead to strained shipping capacity as retailers seek to manage through the ongoing impact of the COVID-19 pandemic. 

Many businesses have been forced to operate at peak seasonal efficiency throughout most of 2020 as more people have moved their purchasing online. However, Salesforce forecasts not only a 30% year-on-year increase in global digital commerce (versus an 8% annual increase in 2019) but also a major pull-forward effect. With Amazon’s Prime Day taking place on October 13, the holiday buying season will probably start early this year. Consumers may also worry (with some justification) that if the virus worsens and lockdown restrictions are tightened, then it makes start to shopping as soon as possible.

It’s all well and good for new online records to be made – Salesforce predicts that digital commerce will account for 18% of total global retail sales this year – but the logistics headaches that might well arise from such developments are significant.Up to 700m packages may face shipping delays as orders are set to exceed capacity by at least 5%, per Salesforce. This dire forecast does not include the additional challenge posed by the return of unwanted/unsuitable goods, which would put more pressure on the system. 

Retailers are responding by trying to drive additional ‘BOPIS’ (buy online, pickup in store) and other similar initiatives. However, all roads lead to more demand for warehouse space. In the UK, new leases have been signed on 40m square feet of space year-to-date, versus a long-term annual average of 28m square feet, per recent comments from Savils, a leading rental agent. Anecdotally, we hear demand has been even stronger in the US. We should also be worried that if lockdowns tighten again, then it won’t just be gifts that need to be stored, purchased and transported, but probably extra pasta and toilet paper too. 

Disclaimers

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