As the holiday shopping season approaches, online retailers are gearing up for one of the busiest times of the year—Black Friday. However, a recent report reveals that rising shipping charges during this peak period could significantly affect the profit margins of independent electronics retailers, posing difficult choices for many.
The ‘E-commerce Peak Season Benchmark Report 2024’, published by the order fulfilment software provider Mintsoft, provides crucial insights into the challenges faced by small and mid-sized e-commerce businesses in the UK. The report highlights that almost a third of supply chain businesses reported increased carrier costs in November of the previous year compared to October. Alarmingly, 25% of these companies indicated they experienced cost increases of nearly 25% specifically during the week of Black Friday. The average shipping cost jumped from approximately GBP £3.50 to GBP £4.37 per item, an upward trend that can strip away the already thin profit margins these retailers typically operate under.
Shipping costs are not the only financial challenge. As consumer expectations rise for low or zero shipping fees, retailers find themselves in a bind, needing to decide whether to absorb these costs or pass them on to customers. Beth Chapman, Managing Director at Starlinks Global, a cross-border delivery service, voiced her frustration at the predicament retailers are facing. Highlighting what she termed as “the bad behaviour of profiteering from some carriers,” Chapman pointed out that high shipping prices during peak seasons only exacerbate the already intense profit pressures on retailers.
In addition to shipping issues, the report also revealed that retailers are struggling with staffing challenges. Over 90% of firms typically hire temporary staff to manage the increased demand during the festive season, yet nearly one-fifth of these companies have difficulty filling these positions. This staffing issue compounds the challenges of managing stock efficiently, especially as Mintsoft’s data indicates that around 58% of businesses faced stocks running out during last year’s peak season.
Claire Carter, Managing Director of ERP at The Access Group, Mintsoft’s parent company, underscores the importance of reviewing agreements with carriers to secure the best possible rates and terms. She advises that firms should strengthen their relationships with delivery partners, ensuring timely collections and deliveries while balancing costs. The competitive landscape of e-commerce means that even slight advantages in logistics can have outsized effects on both sales and customer satisfaction.
The technology employed by retailers can also play a crucial role in managing these challenges. Carter emphasizes the need for retailers to leverage technology and automation to fill labor gaps, maintain speed, and ensure accuracy in processing orders. Retailers equipped with advanced software can streamline operations, making it easier to manage the influx of orders during peak periods.
Industry experts also warn that failure to adopt effective technological solutions could leave retailers vulnerable during times of increased demand. Dave Pickburn, CEO of Stream, a logistics software provider, points out that increased orders are welcome but bring significant operational challenges, especially if they surge dramatically during peak times. Automating repetitive tasks like order processing, inventory management, and invoicing allows retailers to refocus their energies on addressing customer needs and rectifying any issues that arise.
As the holiday shopping season and ultimately Black Friday approach, retailers must be prepared to navigate a minefield of challenges. Stock management, hiring difficulties, and increased shipping charges are just a few of the complexities that retailers must tackle head-on to protect their bottom line.
In conclusion, understanding the European shipping landscape is critical for retailers looking to maximize profit margins. Innovative technology solutions paired with solid carrier relationships can mitigate much of the cost pressure retailers face. Whether by absorbing costs or passing them on to consumers, the decisions made in the coming weeks will define the financial health of many online electronics retailers this holiday season.
