COVID-19 Market Shift Signals an Unprecedented Holiday Season

The rise of the digital-first economy, brought on by retail shutdowns and stay-at-home orders issued in response to the COVID-19 pandemic, has changed the way today’s merchants do business.

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Ware2Go announced results of a new survey illustrating that a majority of merchants are currently operating at peak shipping levels due to pandemic-driven demand.

The Pandemic’s Impact

The rise of the digital-first economy, brought on by retail shutdowns and stay-at-home orders issued in response to the COVID-19 pandemic, has changed the way today’s merchants do business. In fact, 77% of merchants reported changing their selling strategy in response to COVID-19, with 35% of merchants launching an online store for the first time. Consumers have flocked to online stores in record numbers, and shipping volumes for merchants have hit record highs. In addition, 56% of merchants reported an increase in new customers in the last six months, which is directly in line with Ware2Go’s consumer survey released in May, in which 55% of consumers indicated making a purchase from a retailer they had never shopped with before. Additionally, 28% of merchants say they have ordered more product than ever before, while 25% started selling new products, and 22% opened a new sales channel.

This volume shift from traditional sales channels to direct-to-consumer ecommerce channels led merchants to change their approach to order fulfillment as well. Consumer preference for fast shipping did not subside as a result of the pandemic, and merchants had to adjust their fulfillment strategy to meet the demands of their new selling strategy:

  • 56% began offering no-contact delivery
  • 34% added 2-day shipping guarantees
  • 28% began shipping direct to consumer

But many legacy supply chain models were unable to pivot overnight, leading 92% of merchants to report pain points managing their supply chain:

  • 38% struggled with on-time delivery
  • 36% experienced warehouse shutdowns
  • 24% found vendors weren't flexible with the change in their business model

O2 Natural Recovery – A Practical Success Story

Ware2Go’s merchant partner O2 Natural Recovery made a complete 180° in their go-to-market strategy. Prior to the pandemic, half of their sales were made as retail sales within independently-owned gyms. After gyms were forced to close their doors in March, O2 launched multiple campaigns that redirected customers to purchase their product through their Shopify store. The result was 10x growth in their direct-to-consumer sales, and through a flexible fulfillment partnership that enabled 98% on-time fulfillment, they grew their business 5x overall.

Unprecedented Holiday Demand in 2020

Merchants are now planning for an unprecedented peak season. Warehouses and fulfillment centers are already operating at peak levels, but 74% of merchants still expect to see an additional spike in sales for the holiday season. The Ware2Go survey also found that:

  • 56% believe peak will be at or above 2019 levels
  • 44% believe peak will be lower than 2019

Most merchants are familiar with the demands of seasonal spikes in demand, with 80% reporting some level of seasonality in their business, which inevitably results in its own supply chain challenges:

  • 48% of merchants report running out of stock during their peak season
  • 45.6% report delayed fulfillment and shipping speeds

Merchants are also well aware that holiday expectations for fast delivery are even greater, with 77% of merchants planning to offer 2-day shipping guarantees around the holidays, compared with 41% that offer 2-day shipping year-round.

The strategy most merchants seem to be taking to stay ahead of the holiday rush is to start sales early, with 50% of merchants beginning holiday promotions in September or October. But with so many unknowns surrounding this year’s peak season, merchants must be prepared for a range of possible outcomes. Ware2Go CEO Steve Denton believes that supply chain flexibility will win the day in this unpredictable market.

“The current situation requires merchants to prepare for a holiday season where historical trends are not as relevant, while maintaining the flexibility to adapt to today's new economy,” commented Denton. “Today's market conditions require merchants to leverage a flexible supply chain as a strategic asset for commerce.”