Monthly Archives: December 2019
On November 30 I put in an online order on a website (it wasn’t Amazon). By December 10, it was well beyond the expected delivery date and my order had not arrived. I sent the company a WIMS e-mail. Online retailers and delivery companies are familiar with WIMS coming from customers. It means where is my “stuff”? They dread WIMS emails and customer service phone calls. It drains their time and resources. Package tracking numbers were invented to decrease WIMS inquiries. E-commerce companies send package update e-mails, text messages, and push notifications simply to avoid the dreaded WIMS.
The company responded to me the same day and said that due to Black Friday/Cyber Monday/E-Mails Everyday sales they were experiencing greater than the normal number of orders. They were processing orders in “a little bit longer” than their 12-hour guarantee. My order was approximately 10 days behind schedule, which comes out to 20x, or 2,000% beyond their 12-hour guarantee. To me, that exceeds “a little bit longer,” but I’m not here to argue semantics.
Everyone knows that the “holiday shopping season” is a strain on retail logistics. FedEx and Amazon broke up this year. The US Postal Service pretends that it can handle all the packages, but everyone knows that they are hemorrhaging money to make the deliveries. UPS strains every year to handle the influx of deliveries in December. There are so many extra packages that they have to sort in the open air out outside of their distribution centers and hope that it does not rain.
This year is particularly straining on the system because there are fewer than the usual number of days between Thanksgiving and Christmas. Rumor has it that Jeff Bezos asked the Pope to push back Christmas by a few days, but all the Pope could do was get the Jews to make Hanukkah late in December.
Companies prep their supply chains all year long for the one month that accounts for 20% – 30% of their annual sales. That’s equal to roughly $1.1 trillion, or the entire annual gross domestic product of Mexico. Only 14 world countries earn more in a year than US retailers earn in one frantic holiday shopping season. Put another way, holiday sales are equal to the combined national income of the 93 least productive countries in the world, from Tuvalu ($40 million) to the Democratic Republic of The Congo ($37.6 billion).
Merchandise has to be planned, orders have to be placed, and warehouses need to be stocked to get ready for all the extra orders that start rolling in the week of Thanksgiving. More than 700,000 temporary workers are hired during the holiday season. That’s roughly equivalent to permanent hiring in August, September, October, and November combined.
All of these preparations beg the question, is it worth it for the retailers? When they look at the whole year, does the extra effort in December really primp their feathers? Does it prime their profits? There are certainly extra sales, but does it translate into a profit margin? There’s certainly the risk that it does not. Costs can overwhelm the potential revenue. Competitive discounting can erode the profit margins to zero or below. Returns are also a perennial problem that add costs and decrease revenues. Tariffs are an additional problem this year. Retailers will try to manage them and pass costs on to consumers, but they could get the calculations wrong or there could be some perturbations in the economy and consumers balk. This would leave retailers with extra stock come Christmas Day and they will have to liquidate it in the New Year.
The risk, the chaotic mobilization, and the agita of the whole operation make me wonder if it is all really worth it, economically. After all, the company I made the order from and missed their 12-hour guarantee by 228 hours must have known that flooding the market with deals would lead to an influx of orders. They could offer reasonable prices and clever marketing ploys all year long. They would not have to bear the costs of the holiday buildup nor the risk of it going poorly, they would hopefully still make the same sales, but gradually over the whole year, and my box would have arrived a week-and-a-half ago.
The commercial sector could attempt to modulate sales over the year. I know they will not. It’s about materialism. Through marketing, retailers want consumers to buy more than they would have otherwise. They want people to buy more for themselves, for their friends and families, and even for poor children they don’t even know. Banks want people to buy on credit so borrowers make interest charges in the next year. The holiday shopping crush is not about making annual sales plans, it’s about making up sales. 26% of holiday sales get returned anyway. 26% of the cardboard was for naught. 26% of the plastic did not have to get rendered. 26% of the working capital could have gone into other productive endeavors. 26% fewer WIMS e-mails.
Sure, sure, I’m a Scrooge, I’m a Grinch. I’m a Jew – maybe I don’t get it. In reality, I do not have a problem with the holiday spirit. I don’t see anything wrong with taking an uplifting religious story and using it to spread cheer and inspire. The whole Santa Claus thing is cute and has led to a few good movies. Go ahead and get a few gifts for people that are important to you and for whom you want to show appreciation. But gifts for your one-year-old nephew, your sister-in-law, every parent, grandparent, and sibling, plus stocking stuffers (the Don Draper that invented stocking stuffers is a commercial marketing evil genius) is beyond any level of reasonable expectations. It’s unsustainable from an environmental perspective. Imagine if there was no Christmas and December was just like any other month. Would your world be much different? Would your one-year-old nephew love you any more or any less? I don’t even think it would negatively impact the economy. Certain companies may not be as well off, but all of the working capital that goes into the holiday shopping season could be deployed more evenly throughout the year for other productive campaigns, yielding income, productivity, and a more efficient economy.
I do see a bit of a divergence in the economy. Over the last few years, some successful companies have turned to subscription models. Rather than requiring consumers to actively seek out and purchase a product, consumers sign-up for a subscription and receive products or updates regularly. Microsoft has been extremely successful with Office 365. This is an Office product that periodically updates with new features, rather than requiring the user to buy new discs every few years and installing new versions of the software. Adobe and AutoDesk, who offer design software, have also been on a tear with this software-as-a-service (SAAS) model. Over the last five years, subscription boxes have been all the rage in retail. Food kit boxes seem to have lost their footing, but many companies are excelling with this model. Stitch Fix (SFIX) announced very promising quarterly earnings last week.
Disney, NBCUniversal, Apple, and AT&T WarnerMedia are all trying to get in on the streaming game. Remember when you used to ask for DVDs for the holidays? Many people don’t even have DVD players anymore. Even video games are turning to streaming. Google and Apple are both offering new services on this front. Amazon Prime makes it so easy to instantly gratify yourself with any item you want that some people may not have any items left on their wish lists for the holidays. In a way, Amazon Prime is Amazon’s way of preparing itself for the post-retail landscape. In an economy where people meet their product and services needs and wants throughout the year, buying and gift-giving in December serve less of a purpose.
For now, subscription companies are still playing the Black Friday game and trying to lure more people into signing up. The natural extension of these services is that they will start trying to get people to purchase their friends or family members trial subscriptions or full-year subscriptions. That does not feel as in-line with the materialistic spirit of Christmas, so I can only hope that the further subscription retail will lead us to a less consumption-centered holiday season.