The highs and lows of e-commerce shopping and fulfillment in the United States were on full display during the 2013 holiday season. Consumers hoping to avoid the congestion and chaos in brick-and-mortar stores increased their online purchases to US $69.2 billion for the fourth quarter of 2013, up 15.7 percent compared with the same period in 2012, according to U.S. Bureau of the Census figures. That growth in online sales, together with a surge in last-minute orders and an unusually short shopping season, made it difficult for U.S. shippers and the top two parcel carriers, UPS and FedEx, to fulfill e-commerce orders. Consumer outrage over late shipments forced a number of retailers, including Amazon and Kohl's, to respond by offering refunds and other financial concessions to affected customers.
While the events of the 2013 holiday season are now history, the challenges facing retailers and shippers are not over. In the high-growth, constantly changing e-commerce environment, every touch-point—from shopping, to purchasing, to fulfillment—presents an opportunity to either create a truly customer-centric experience or to cause customer dissatisfaction.
Keeping up with the consumer
To succeed in e-commerce fulfillment, retailers must find ways to meet consumers' increasingly high expectations. Online buyers desire a retail experience that combines the simplicity and security of online shopping with the ease and familiarity of in-store interaction. They expect their orders to be delivered within one to two days, and they want free or discounted shipping.
Consumers also demand a flexible store policy that allows for various combinations of purchases and returns, in-store or from home. Increasingly, they expect a unified and personalized shopping experience provided through a retailer's online/mobile app or by a knowledgeable in-store associate.
Developing the capabilities that are necessary to execute a desirable e-commerce strategy will require retailers to reassess and optimize their current services and operations. This will be challenging in an environment where changing consumer preferences continually alter business models. And it will only get harder as omnichannel expectations continue to rise and retailers are pushed to offer additional products and services, both online and in-store.
Innovation despite constraints
Retailers are continuing to innovate in response to market demand, but they're doing so within the bounds of several constraints. The biggest, perhaps, involves shipping capacity. The problems with shipping reliability in 2013, for instance, caused many to wonder whether capacity issues will persist as e-commerce continues to grow. It seems likely that the large retailers will continue to stretch parcel carriers' capacity during peak periods, forcing other retailers to develop alternative strategies. Additionally, recently announced plans by FedEx and UPS to institute volumetric pricing for all ground parcel shipments have major implications for retailers. Volumetric pricing is a response to the increase in e-commerce shipments—the lower ratios of package weight to package dimensions mean less cargo is carried in the same amount of space. Carriers hope that in response to their new rate policies, shippers will optimize their packaging and shipping practices by paying more attention to efficiency and weight.
Meanwhile, Amazon, the largest e-commerce entity in the United States, is rapidly and boldly developing a host of new services that are designed to improve its customers' experiences and give the company greater ownership of its supply chain. To limit its dependence on carriers, for instance, Amazon is developing an in-house fulfillment service that includes a private fleet that will handle some of its same-day and expedited shipments. In addition, it is piloting warehousing and logistics partnerships with manufacturers to reduce the cost and time required to get products to its customers. Amazon is also looking to utilize regional carriers in some areas and the U.S. Postal Service for less populated markets and Sunday deliveries. All of these moves circumvent much of the national footprints of UPS and FedEx.
While Amazon may have price and distribution advantages in online commerce, traditional brick-and-mortar retailers are seeking a competitive edge by developing capabilities that leverage their storefronts and online presence to create truly omnichannel experiences. In the white paper Are You Ready? How to Create an Always-On, Always-Open Shopping Experience, Capgemini Consulting identified four key capabilities that retailers must possess if they are to effectively compete in this increasingly important area:
Inventory visibility—systems and processes to accurately track and manage inventory in their networks
Web-ready products—improved information about products and services sold online, and reduced time and labor required for retailers to bring items to market
Predictive customer analytics—information utilized to anticipate customers' needs based on past behaviors, in an effort to enhance the continuity of the omnichannel experience
Fulfillment strategy—revision of processes, modernization of technologies, and updating of physical infrastructure to support the omnichannel experience
Retailers that are investing in their supply chains to support these four capabilities are making it possible to provide omnichannel experiences for their customers. With these capabilities in place, they are achieving increased sales through alternate channels, improvements in productivity and inventory accuracy, reduced shrinkage, and faster fulfillment of customer demand.
The new e-commerce landscape
A new e-commerce landscape is emerging as a result of the trends and developments mentioned above. Within this environment, retailers, online leaders, shipping leaders, regional carriers, and the U.S. Postal Service can all succeed by occupying different niches (summarized in Figure 1).
First, retailers should focus on developing omnichannel capabilities as a means of competing against Amazon, which has advantages in price, fulfillment capability, and speed. Meanwhile, online leaders, such as Amazon and Wal-Mart, will continue to leverage their size to invest in capabilities that allow them to lead the market on price and speed. On the shipping side, leaders such as FedEx and UPS should continue to invest in infrastructure and e-commerce-specific capabilities. If, however, Amazon develops transportation and delivery capability for itself, it will likely look to offer that as a service and could become a major competitor to the parcel carriers. Regional carriers and logistics service providers should consider partnerships with larger retailers and online leaders, build capabilities in niche markets, and examine methods for shipping products with specialized shipping needs (such as beverages, for example). And finally, the U.S. Postal Service should try to capitalize on its "last mile" scale and capability, positioning itself as an asset that can support other carriers and retailers that want to increase their delivery reach.
Companies seeking to navigate this emerging e-commerce landscape would be wise to determine whether or not their existing facilities can support the increasing consumer demand for omnichannel fulfillment. They should also understand what supplemental warehousing and fulfillment capacity and capabilities will be needed, and how retail models that allow for in-store pickup and return of online orders will need to be supported by warehousing and fulfillment operations. Both retailers and carriers should evaluate increased partnership with 3PL providers and other supply chain specialists to ensure they possess the capabilities required to handle expedited fulfillment and satisfy increasingly complex customer demands. Evaluating these areas will allow retailers and carriers to determine their strategic options, current operational readiness, and whether investment in new infrastructure will be needed to support their e-commerce business.
Investing in artificial intelligence (AI) is a top priority for supply chain leaders as they develop their organization’s technology roadmap, according to data from research and consulting firm Gartner.
AI—including machine learning—and Generative AI (GenAI) ranked as the top two priorities for digital supply chain investments globally among more than 400 supply chain leaders surveyed earlier this year. But key differences apply regionally and by job responsibility, according to the research.
Twenty percent of the survey’s respondents said they are prioritizing investments in traditional AI—which analyzes data, identifies patterns, and makes predictions. Virtual assistants like Siri and Alexa are common examples. Slightly less (17%) said they are prioritizing investments in GenAI, which takes the process a step further by learning patterns and using them to generate text, images, and so forth. OpenAI’s ChatGPT is the most common example.
Despite that overall focus, AI lagged as a priority in Western Europe, where connected industry objectives remain paramount, according to Gartner. The survey also found that business-led roles are much less enthusiastic than their IT counterparts when it comes to prioritizing the technology.
“While enthusiasm for both traditional AI and GenAI remain high on an absolute level within supply chain, the prioritization varies greatly between different roles, geographies, and industries,” Michael Dominy, VP analyst in Gartner’s Supply Chain practice, said in a statement announcing the survey results. “European respondents were more likely to prioritize technologies that align with Industry 4.0 objectives, such as smart manufacturing. In addition to region differences, certain industries prioritize specific use cases, such as robotics or machine learning, which are currently viewed as more pragmatic investments than GenAI.”
The survey also found that:
Twenty-six percent of North American respondents identified AI, including machine learning, as their top priority, compared to 14% of Western Europeans.
Fourteen percent of Western European respondents identified robots in manufacturing as their top choice compared to just 1% of North American respondents.
Geographical variances generally correlated with industry-specific priorities; regions with a higher proportion of manufacturing respondents were less likely to select AI or GenAI as a top digital priority.
Digging deeper into job responsibilities, just 12% of respondents with business-focused roles indicated GenAI as a top priority, compared to 28% of IT roles. The data may indicate that GenAI use cases are perceived as less tangible and directly tied to core supply chain processes, according to Gartner.
“Business-led roles are traditionally more comfortable with prioritizing established technologies, and the survey data suggests that these business-led roles still question whether GenAI can deliver an adequate return on investment,” said Dominy. “However, multiple industries including retail, industrial manufacturers and high-tech manufacturers have already made GenAI their top investment priority.”
An overwhelming majority (81%) of shoppers do not plan to increase their holiday spend this year over last year, revealing a significant disconnect between retail marketers and shoppers in the weeks before peak season, according to online shopping platform provider Rakuten.
That result flies in the face of high confidence levels from retailers who have been delaying their marketing spend, as 79% of marketers are optimistic they will reach holiday sales objectives, and 65% are timing their spend as late as November.
However, consumers are nervous about supply chain disruptions. Almost half (42%) of shoppers have started their shopping early to avoid shipping delays, while 32% plan to do more shopping in-store to avoid potential delays. The results come from a survey conducted online within the U.S. by The Harris Poll on behalf of Rakuten from Sept. 5 – Sept. 9 , among 2,100 consumers aged 18 and older and 101 retail marketers.
"There's a clear disconnect between marketer perception and consumer realities, but this presents a unique opportunity for retailers to capitalize on the shortcomings of their competition," said Julie Van Ullen, Chief Revenue Officer at Rakuten Rewards. "As shoppers plan to spend less overall, there become fewer opportunities for retailers. This makes it evermore important for retailers to invest in strategies that set them apart throughout the entire holiday season.”
Three reasons behind the diverging views are:
Inflated prices. Even with softening inflation rates, nearly half (46%) of shoppers report that it will have the greatest impact on their holiday shopping strategy. Conversely, only 20% of marketers believe that to be true.
Election nerves. Shoppers anticipate that the upcoming election will have an impact on inflation, with 57% believing it will increase.
Weak brand loyalty. A majority of marketers (98%) believe shoppers will remain loyal to brands, but fully 42% of shoppers indicate they will prioritize finding the lowest prices by trading down to lower-quality brands and products for more affordable alternatives.
"Loyalty is up for grabs this holiday season, and success for retailers will hinge on offering value beyond just reduced prices," Julie Van Ullen, Chief Revenue Officer at Rakuten Rewards, said in a release. "Our research revealed that shopper concern extends beyond just price, and retailers will need to address those concerns with comprehensive deals that include several table-stake incentives. Incentives like free shipping, buy now pay later services, and elevated Cash Back will be important for maintaining a loyal shopper base."
Regardless of the elected administration, the future likely holds significant changes for trade, taxes, and regulatory compliance. As a result, it’s crucial that U.S. businesses avoid making decisions contingent on election outcomes, and instead focus on resilience, agility, and growth, according to California-based Propel, which provides a product value management (PVM) platform for manufacturing, medical device, and consumer electronics industries.
“Now is not the time to wait for the dust to settle,” Ross Meyercord, CEO of Propel, said in a release. “Companies should approach this election cycle as an opportunity to thrive in the face of constant change by proactively investing in technology and talent that keeps them nimble. Businesses always need to be prepared for changing tariffs, taxes, or geopolitical tensions that lead to unexpected interruptions – that’s just the new normal.”
In Propel’s analysis, a Trump administration would bring a continuation of corporate tax cuts intended to bolster American manufacturing. However, Trump’s suggestion for spiraling tariffs may benefit certain industries, but would drive up costs for businesses reliant on global supply chains.
In contrast, a Harris administration would likely continue the current push for regulatory reforms that support sectors like AI, digital assets, and manufacturing while protecting consumer rights. Harris would also likely prioritize strategic investments in new technologies and provide tax incentives to promote growth in underserved areas.
And regardless of the new administration, the real challenge will come from a potentially divided Congress, which could impact everything from trade negotiations to tax policies, Propel said.
“The election outcome is less material for businesses,” Meyercord said. “What is important is quickly adapting to shifting policies or disruptions that address ‘what if’ scenarios and having the ability to pivot your strategy. A responsive manufacturing sector will have a significant impact on the broader economy, driving growth and favorably influencing GDP. One thing is clear: the only certainty is change.”
With that money, qualified ports intend to buy over 1,500 units of cargo handling equipment, 1,000 drayage trucks, 10 locomotives, and 20 vessels, as well as shore power systems, battery-electric and hydrogen vehicle charging and fueling infrastructure, and solar power generation.
For example, funds going to the Port of Los Angeles include a $412 million grant to support its goal of achieving 100% zero-emission (ZE) terminal operations by 2030. And following the award, the Port and its private sector partners will match the EPA grant with an additional $236 million, bringing the total new investment in ZE programs at the Port of Los Angeles to $644 million. According to the Port of Los Angeles, the combined new funding will go toward purchasing nearly 425 pieces of battery electric, human-operated ZE cargo-handling equipment, installing 300 new ZE charging ports and other related infrastructure, and deploying 250 ZE drayage trucks. The grant will also provide for $50 million for a community-led ZE grant program, workforce development, and related engagement activities.
And the Port of Oakland received $322 million through the grant, which will generate a total of nearly $500 million when combined with port and local partner contributions. Altogether, that total will be the largest-ever amount of federal funding for a Bay Area program aimed at cutting emissions from seaport cargo operations. The grant will finance 663 pieces of zero-emissions equipment which includes 475 drayage trucks and 188 pieces of cargo handling equipment.
Likewise, the Port of Virginia said its $380 million in new funding will help to reach its goal of eliminating all greenhouse gas emissions by 2040. The grant money will be used to buy and install electric assets and equipment while retiring legacy equipment powered by engines that burn gasoline or diesel fuel.
According to AAPA, those awards will demonstrate to Congress that the Clean Ports Program should become permanent with annual appropriations. Otherwise, they would soon cease to be funded as backing from the Inflation Reduction Act (IRA) comes to a close, AAPA said. “From the earliest stages of legislative development in Congress, America’s ports have been ecstatic about and committed to the vision of implementing a novel grant program for the port industry that will complement and strengthen existing plans to diversify how we power our ports,” Cary Davis, AAPA’s president and CEO, said in a release. “These grant funding awards will usher in a cleaner and more resilient future for our ports and national transportation system. We thank our champions in Congress and the Biden-Harris Administration for committing to us and we look forward to working closely with our Federal Government partners to get these funds quickly deployed and put to work.”
The majority of American consumers (86%) plan to reduce their holiday shopping budgets this year, with nearly half (47%) expecting to cut spending by more than 50% compared to last year, according to consumer research from Relex Solutions.
The forecast runs against some other studies that predict the upcoming holiday shopping season will be stronger than last year, with higher sales and earlier shopping than 2023.
But Finland-based Relex says its conclusion is based on the shorter holiday shopping period of 27 days in 2024 (five days shorter than 2023), combined with economic volatility and supply chain disruptions. The research includes survey responses from 1,000 U.S. consumers in October 2024.
According to Relex, those results reveal a complex landscape where price sensitivity and decreased brand loyalty are reshaping traditional retail dynamics. That means retailers and manufacturers must carefully balance promotional strategies with profitability while maintaining product availability, since consumers are actively seeking better value and may switch between brands more readily.
"Retailers are facing a highly challenging season, with consumers prioritizing value more than ever. To succeed, retailers must not only offer attractive promotions but also ensure those deals don’t erode their margins. At the same time, manufacturers need to optimize their operations and collaborate with retailers to deliver value without sacrificing profitability," Madhav Durbha, Relex’ group vice president of CPG and Manufacturing, said in a release. The company says it provides a supply chain and retail planning platform that optimizes demand, merchandising, supply chain, operations, and production planning.
"This holiday season represents a critical juncture for the retail industry," Durbha added. "With reduced brand loyalty and a shorter shopping window, there’s no room for error. Retailers and manufacturers need to work together closely, leveraging AI-powered tools to anticipate demand, manage inventory, and run effective promotions," Durbha said.
In additional findings, the survey found:
Brand loyalty is eroding: About 45% of consumers say they're less likely to remain loyal to brands without meaningful discounts, while 41% will switch brands if faced with both poor deals and out-of-stock products.
Digital channels dominate deal-seeking behavior: Store and brand apps (60%) and email promotions (60%) are the primary channels for finding deals, while only 32% of consumers primarily search for deals in physical stores.
Supply chain concerns remain significant: Nearly 85% of shoppers express concern about potential disruptions, with electronics (60%) and clothing/accessories (57%) being the categories of highest concern.
Age significantly impacts shopping behavior: Consumers from age 45-60 show the highest economic sensitivity, with 60% cutting budgets by more than 50%, while shoppers aged 18-29 prioritize product availability over price.