Black Friday, the unofficial start to the holiday shopping season, will soon arrive and some shoppers will get started even earlier thanks to the likes of Walmart opening on the U.S. Thanksgiving holiday one day prior.
While shoppers will be worried about getting that $299 65-inch TV set or their hands on the year's hottest new toy, retail operations professionals should recognize how pivotal this holiday season may end up being on a number of fronts, notes Constellation Research VP and principal analyst Guy Courtin.
Customer Experience Is Now Table Stakes
“Retailers have to look at this season as it being as important to move merchandise as it is to continue building their customer experience roadmap, because the day of you do a transaction and then move on is long gone," Courtin says. "More and more, we’re seeing this where you’re having to build that contextual experience for the consumer. The relationship isn't going to end, it has to be part of a lifetime journey." This is the year for retailers to ramp up their data-gathering efforts, improve their after-sale supply chain, find better ways to handle returns and more, Courtin says.
No Black Friday for REI: But Why?
Outdoor retailer REI has received a good deal of attention for its announcement that stores will be closed, not open on Black Friday. This may be a bit of a ploy on REI's part, as it garners the type of positive free advertising that could resonate with its upper-middle class customer base, Courtin notes.
REI is notably keeping its online store open, meaning customers can still shop—perhaps while doing something outdoorsy. Beyond that, "the money that would have been spent at REI stores on Black Friday is still going to be spent, on a different day," Courtin says. REI may also be looking at its move as an opportunity to generate valuable data about its customers' shopping behavior on Black Friday.
A Question of Fulfillment
"Another thing to watch is how are brick-and-mortar players are going to leverage stores to fulfill online orders," Courtin says. "That is picking up more momentum. It’s not a new concept but has taken on some complexity. The scale of it is still small in comparison to traditional channels but it’s growing and there are real dire consequences if you screw it up."
Return Logistics: New Pressures on Traditional Players
Online shoe seller Zappos's practice of offering free shipping as well as free returns is forcing others to do the same, Courtin notes. "At any given moment, a large percentage of Zappos' orders are being returned, and they don't care," he says. "That's part of their customer experience."
A dirty secret of retail is the problems with tracking the true cost of customer service, he adds. It's not just about selling the product and shipping it to the customer, but also returns and resolutions.
It's time for retailers to take a hard look, if they haven't already, at their shipping policies in order to figure out when free shipping makes sense, and when it doesn't. "You need to start thinking about that, how you figure out those tiers," Courtin says.
Problems At the Edge of the Supply Chain
Package handling is causing major headaches for the mailroom at the University of Connecticut. The school is being forced to significantly rethink the way it handles packages because there are too many being received.
A report in Business Insider tabs Amazon Prime as a possible reason for the problems. The service offers two-day shipping as part of its $99 annual fee, which is waived for students for six months and then available at a discount. “If we’re starting to see these problems already, is this holiday season going to be the tipping point?" Courtin says.
More packages being delivered means potential problems for far more than campus mailrooms. You've also got to consider the strain it puts on residential building managers, as well as the increased risk of stolen packages. The latter obviously takes a much harder toll on customer experience than shoplifters do. "Shrinkage at the end of the supply chain is unlike shrinkage at the store," Courtin says.