Black Friday shipping charges impact retailer profits

A recent report has highlighted potential challenges for independent online electronics retailers as surge pricing on shipping this Black Friday could impact their profits.

The 'E-commerce Peak Season Benchmark Report 2024', released by order fulfilment software provider Mintsoft, compiles data from small and mid-sized e-commerce businesses across the United Kingdom. According to the report, almost a third of supply chain sector firms experienced increased carrier costs in November of the previous year, compared to October.

Data within the report indicates that a quarter of firms reported a cost increase of nearly 25% during Black Friday week, rising from an average of GBP £3.50 to GBP £4.37 per item. This situation adds further pressure to electronics retailers, already grappling with cautious consumer spending on non-essential items.

Carrier companies typically enforce a peak season surcharge from mid-November to early January to accommodate the high demand period covering Black Friday, Christmas, and January sales. This is challenging for retailers and fulfilment companies that face high consumer expectations for free or low-cost shipping, leaving them to either absorb the increased expense or risk their margins.

Beth Chapman, Managing Director at Starlinks Global, a cross-border delivery service, expressed concerns, "The bad behaviour of profiteering from some carriers that goes on during the peak season is frustrating. Retailers are struggling with price pressures and we should be working together to grow volume in a sustainable way. Not hiking prices as soon as it turns October 1st."

Ruhksar Ahmed, Director of Green Fulfilment, a third-party logistics provider, supported such viewpoints: "Retailers should be able to rely on their fulfilment partners and carriers to ensure they don't face huge price increases during peak season. In anticipation of our client's increased order volumes, we negotiate with our carrier partners to minimise price increases and guarantee service levels during the busiest e-commerce period."

Mintsoft's research unveils additional challenges regarding staffing and stock management. More than 90% of firms hire temporary staff to handle seasonal demand, though nearly a fifth struggle to fill these temporary roles.

The report also states that firms using Mintsoft's software processed 1.2 million orders last Black Friday, experiencing a 35% increase in order dispatches. Expectations are that order volumes might rise by another 14% this year, following a 17% increase in 2023, necessitating efficient processing to meet demand. However, stock management issues remain, with around a third of firms experiencing problems and 58% encountering a stock-out last year.

Claire Carter, Managing Director of ERP at The Access Group, Mintsoft's parent company, commented, "Although peak season surcharges are nothing new, they certainly add to the cost pressures already impacting small and mid-sized firms. We'd urge firms to review the contracts they have with all of their carriers and strengthen their partnerships with them to ensure they're getting the best deal, as well as timely collections and deliveries to meet consumer's expectations."

She further noted, "As our retailers and fulfilment partners know, the more technology they have and the automation it offers go a long way to plugging labour gaps, ensuring speed is met with accuracy, and offsetting higher costs, including shipping. Without the right combination of software and data intelligence, identifying the opportunities for peak efficiency can be difficult – it's never too early to prepare your tech-stack for busy periods."

Dave Pickburn, CEO of Stream, a logistics software provider, weighed in on the discussion, "Increased order volumes are always welcome, but surges, like those during peak season, bring significant challenges for retailers and 3PL providers, especially when those orders may increase by as much as 35% during peak season."

He advised, "Having the right software in place to automate as many functions as possible, means that businesses can handle those surges without adversely affecting the operation. Let the software deal with as many of those repetitive, mundane tasks such as order processing, inventory management, invoicing and dispatch. Retailers and 3PL providers can then deal with the exceptions and outliers, to deliver a seamless experience for their customers."