HOLIDAY 2016: Fulfillment Tips of The...

Fulfillment Tips of The ProsHOLIDAY 2016:

STEFANY ZAROBANDirector of ResearchInternet Retailer

WILLIS WEIRICHVP of Logistics

Neiman Marcus Group

PAUL STANLEYManager, Global Products and Market

DevelopmentFedEx

What’s at stake in Q4

The bad news about retailers’ holiday shipping strategies

The good news about retailers’ holiday shipping strategies

What to expect this holiday season

What retailers are doing to get ready

Agenda

What’s at Stake in Q4: Big Sales

37.2% Portion of annual online sales transacted in Q4 for key publicly traded e-retailers.

Retail sales (in trillions)

Source: Internet Retailer, U.S. Commerce Department

Q4 Matters More in Online Retail

2014

E-commerce sales (in billions)

1st-3rd quarter 4th quarter

$3.459

$1.249

$234.8

$108.231.5%26.5%

1st-3rd quarter 4th quarter

Some Retailers Get More than Half of Sales in Nov. and Dec.What percentage of annual orders are placed from November 1 to December 25?

Source: Internet Retailer’s 2016 Holiday Delivery Survey

8%

50%

32%

6% 4%

10% or less 10% to 25% 25% to 50% 50% to 75% More than 75%

Shipping Speed MattersHow important is being able to offer fast delivery to your holiday shopping business?

Source: Internet Retailer’s 2016 Holiday Delivery Survey

64%

27%

4% 5% Very importantImportantSomewhat importantNot important

The Bad News: Amazon Prime

markets whereAmazon Prime Same-Day is Available

27

The Good News

Slice Intelligence tracked the number of days

between order and delivery across index of 238 U.S.

merchants tracking 45,961,989 packages from

January 2014-January 2016 and found that retailers

shaved 2.9 days off delivery in two years.

6.3

3.4

Jan. 2014 Jan. 2016

AVERAGE MONTHLY

FULFILLMENT SPEED IN DAYS

Source: Slice Intelligence

Getting the goods faster

Source: Slice Intelligence

Source: Slice Intelligence

Leading retailers steadily increase delivery speedNo. of Days for Delivery

0

7.9

5.9

9.3 9.7

87.3 7.8 8

6.7 6.8 6.5

0

6.3 6

76.5 6.5

5.86.5

5.5 5.3 5.3 5.5

0

4.9

5.9 65.1

5.6

4.44.8

5.5

4.23.3

4.1

Apr-14 Apr-15 Apr-16

What to expect this holiday seasonU.S. Retail and Retail E-commerce Holiday Sales Growth 2010-2016 % change

Source: eMarketer.com

7.3% 6.3%

3.4% 2.9% 3.6%1.7% 1.8%

19.4%17.5%

13.3%12.1%

14.4% 13.4% 13.3%

2010 2011 2012 2013 2014 2015 2016

Retail Holiday Season Sales Retail E-commerce Holiday Season Sales

Expect another strong holiday season for e-commerce but a sluggish one for total retail sales.

E-commerce sales growth will maintain its 13%+ growth rate for the upcoming season.

Mobile is playing a bigger role in holiday season salesPercent of Nov/Dec web sales on mobile

Source: IBM

5.3%10.4%

15.7% 17.8%22.6%

31.0%

2010 2011 2012 2013 2014 2015

Smartphone traffic is on the riseShifting holiday traffic patterns

Source: Adobe Systems Inc.

56%50%

14%11%

30%

39%

2014 2015

Desktop Tablet Smartphone

In 2015, U.S. mobile holiday sales grew 59% year over year to $12.65 billion, which accounted for 18% of U.S. online retail sales during the season According to comScore data. Mobile traffic to retail. Sites outpaced desktop traffic every day during The 2015 holiday season.

Source: Internet Retailer’s 2016 Holiday Delivery Survey

Peak ordering timesDuring which of the following time periods do you get most of your holiday-related sales?

1%

3%

12%

16%

26%

32%

8%

2%

Wednesday before Thanksgiving

Thanksgiving

Black Friday

Thanksgiving weekend (Saturday and Sunday)

Cyber Monday

First week of December

Second week of December

Third week in December

Customers are ordering later

During the 2015 holiday season, did your customers place more orders closer to Christmas and expect delivery by Christmas Eve, than they did during the 2014 and 2013 holidays?

62%

38%

Yes No

Source: Internet Retailer’s 2016 Holiday Delivery Survey

Source: Internet Retailer’s 2016 Holiday Delivery Survey

Late ordering will accelerate this year

Last minute orders mean last minute shipping and Retailers have adjusted delivery windows by shipping later to accommodate.

More than two-thirds of the retailers surveyed plan to ship orders later in the season this year than last year to keep customers happy.

67%

33%

Yes No

WILL YOU SHIP ORDERS LATER INTO

THE HOLIDAY SEASON THIS YEAR?

Source: Internet Retailer’s 2016 Holiday Delivery SurveySource: Internet Retailer’s 2016 Holiday Delivery Survey

Percent of holiday packages shipped for freeWhat percentage of all holiday packages are shipped free?

Source: Internet Retailer’s 2016 Holiday Delivery Survey

29%

17% 17%15%

22%

10% or less 10.1% to 25% 25.1% to 50% 50.1% to 75% 75.1% to 100%

Free purchase thresholdWhat is your minimum order threshold for offering free shipping?

Source: Internet Retailer’s 2016 Holiday Delivery Survey

5%

16% 17%

13%

34%

15%

$25 or less $26 to $50 $51 to $75 $76 to $100 More than $100 We offer freeshipping on all

orders

Covering delivery costs

Nearly a half of retailers from our survey require customers to pay for shipping while a quarter cover all deliver costs. Based on the importance of free shipping it’s important that retailers make that an option even if it requires building the shipping costs into the price of products sold, and nearly 30% are already using that strategy.

DO YOU PASS ALONG THOSE DELIVERY

COSTS TO THE CUSTOMER?

Source: Internet Retailer’s 2016 Holiday Delivery Survey

Who pays for shipping?

24%

47%

29%

No. We cover all delivery costs.

Yes. We require that customers pay for shipping.

Yes. We offer free shipping, but we build the price ofshipping to our product pricing.

Source: Internet Retailer’s 2016 Holiday Delivery Survey

How retailers plan to expedite holiday shippingWhat are the biggest changes you made to expedite holiday shipping and delivery this year?

49%

15%

12%

11%

9%

9%

8%

24%

Expanded fulfillment staff

Added more national carriers

Integrated order and customer service management system with carriers’ tracking system

We now ship online orders from stores

Added more regional carriers

Leased, built or opened more warehouse space.

We now enable consumers to buy online and pick up in stores

Other (please specify)

Make mobile work

Start holiday promotions earlier

Prepare to ship later into the season

Now what?

Stefany Zarobanstefany@verticalwebmedia.com

Thank You!

Neiman Marcus

Holiday 2016: Fulfillment Tips of the Pros

Internet Retailer Webinar

October 4, 2016

• Traditional Peak Planning Considerations

• Key Differentiator in Planning

• One Additional Consideration

• Helpful Tips

Agenda

We will look at the following –

• Capacity – Network throughput and provider assets to adequately support volume.

• Contingency – When the unexpected occurs, what options do we have to flex the network.

• Communication – Who needs to be informed of logistics plans and what is the peak season cadence.

Traditional Considerations

Logistics practitioners start with an initial focus –

• Capacity – Is your organization partnering with providers and at what level of detail?

– Neiman Marcus approach is to partner with FedEx to create daily forecasts of volume segmented by service type and location with a focus on individualized variables (i.e. dock space, building configuration, market knowledge).

• Contingency – Do you develop contingency plans in advance or hope for the best?

– Neiman Marcus carefully reviews FedEx contingency plans and makes adjustments to controllable factors in advance and during peak season to mitigate risk.

Traditional Considerations

Diving a little deeper into capacity and contingency.

• Communication is the differentiating factor!

Traditional Considerations

What about communication?

Logistics will share many points, i.e. impact to budget, shipping requirements, problem vendors.

The key is to have reciprocal communication.

• Here are some examples to illustrate the importance.

– Logistics shares budget impacts but ask what demand forecasts exist to ensure aligned metrics.

– We share shipping requirements with vendors but ask merchandising of shipping attributes, i.e. dry ice, package dimensions.

– We give marketing cutoff dates but ask what promotions are being planned to better secure capacity.

– We tell our providers our Holiday plans but do we know their network investments, areas of concern, etc.?

The differences are subtle but can overcome the need for last minute heroics.

Communication

What exactly is reciprocal communication?

• For many, Christmas marks the end of the Holiday Season but for logistics its just intermission.

• Post Christmas Considerations

– Inventory replenishment

– Gift card sales

– Returns (Reverse Logistics)

– Analysis of peak performance

– Review with internal and external partners for next year

Tis the Season

One final consideration – Do not get post Christmas letdown

Christmas 2016 – Sunday Impact

Have you evaluated your plans relative to provider operating plans?

• Identify the gaps. It is the only way to understand your organization’s unique situation.

• Build a realistic plan. If you have never had conversations, it will take time to build structure and understanding. You likely will not solve in one year.

• Start somewhere. Every organization is different. Start where you will have success and build on it.

Helpful Tips

So where do you start?

Willis WeirichWillis_Weirich@neimanmarcus.com

Thank You!

Meeting Customer ExpectationsPaul Stanley

October 4, 2016

October 4, 2016 32IR Holiday | FedEx

Getting your transportation and logistics implementation right is essential to your success, particularly during the holidays

Fast

Flexible & Convenient

Information Intensive

Retailers need to develop a logistics strategy to meet new and evolving customer needs

2 to 7 days, final mile by USPS

Days in Transit

1 63 542 7

Next day to 5 days (cont’l US)

Next day to 3

0

Same day

October 4, 2016IR Holiday | FedEx 33

SOURCE: Radial and CFI Group’s Q2 2016 survey of 500

customers as part of its annual Holiday Outlook Survey

Fast

• 71% of consumers

expect orders within

5 days

• 17% of respondents

expect delivery within

2 days

FedEx Office

FedEx Express

FedEx Ground

FedEx SmartPost

Customers want to receive packages on their terms – when, where and how they want them

October 4, 2016IR Holiday | FedEx 34

SOURCES: Retail Week, Sep 2015; Bower, Maxham, 2012

Flexible &

Convenient

• 74% would shop more

online if they had more

control over delivery

• Post-return spending as a %

of pre-return spending

following free returns

exceeds 4X

Consumers want information and personalization

October 4, 2016IR Holiday | FedEx 35

SOURCE: FedEx Research, 2015

Information

Intensive

• 43% won’t call if a link

to tracking information

is included in order

confirmation email

Thank You

Paul Stanley

paul.stanley@fedex.com

Q&A?