The 2023 holiday season is a critical peak period for retailers full of unique challenges in order fulfillment due to increased consumer demand and supply chain complexities. Retail holiday sales are expected to grow, with projections indicating a growth of between 3.5 and 4.5 percent, amounting to an estimated $1.54 to $1.56 trillion in sales during the November to January timeframe. eCommerce sales are particularly strong, anticipated to increase between 10.3 percent to 12.8 percent compared to the previous year.

The state of order fulfillment in 2023:

Input Costs and Container Rates: The market is experiencing some stabilization in raw material prices, and transportation and warehousing costs have seen a year-over-year decrease of 5.7 percent as of September. Moreover, the freight rate index showed a significant drop to $1,700in August from a record high of nearly $10,400 in September 2021, indicating the availability of shipping capacity to address supply bottlenecks. Nevertheless, in the long run market volatility in freight rates deter investment in new shipping capacity, which could lead to supply chain bottleneck issues in the future.

Industry Upheaval: The geopolitical landscape, particularly the Russian invasion of Ukraine, has led to multiple port closures in the Black Sea, exacerbating the challenges in the freight industry. This situation contributes to a "stop-go environment" in the supply chain, complicating timely order fulfillment.

Inflation: While inflation is showing signs of a downtrend, its impact on consumer spending remains a concern. The Federal Reserve's interest rate hikes have led to a decrease in disposable income, which could influence holiday shopping behaviors. Despite these factors, retail sales increased by 0.7 percent in September, more than expected, indicating a still-active consumer base.

A look at the 4 major order fulfillment issues for the 2023 holiday season and how retailers can better prepare for them.

1. Return Fraud and Refund Abuse: The average rate of returns in 2022 remained at 16.6 percent of retail sales, with nearly 11 percent of that $212 billion in returns being fraudulent. This highlights the challenge retailers face in managing return policies during high-demand periods.
   
   Implementing clear return policies, tracking customer behavior, and coordinating across departments can help mitigate return fraud. Adjusting margins on high-risk items and creating blacklists of policy abusers can also be effective.


2. Wardrobing: This practice affects product resale value and increases costs. In 2022, lost item value, or shrink, accounted for $112.1 billion in losses, with wardrobing contributing to these figures.
   
   Establishing fair return policies that specify exact return conditions, educating staff, and offering exchanges can reduce the impact of wardrobing.


3. Inventory Management: The volatility in the supply chain threatens the success of holiday order fulfillment strategies. Retailers must navigate these complexities to avoid missed sales opportunities and customer dissatisfaction.
   
   Near-sourcing, using historical data for forecasting, maintaining safety stock for popular items, and segmenting products by demand levels can help manage inventory more effectively.


4. Chargebacks: The increase in online sales during events like Black Friday and Cyber Monday leads to a spike in chargebacks. In 2023, 78 percent of American respondents admitted to filing at least one chargeback in the last year, reflecting a growing trend in this area.
   
   Setting clear customer expectations, improving communication, and deploying excellent customer service are key. Utilizing chargeback defense tools can also aid in managing and preventing chargebacks.

Order fulfillment during the holiday shopping season is a complex endeavor. Economic expectations for 2023 are positive, but the flurry of holiday activity can expose you to a high volume of chargebacks or return fraud. To succeed, engage in careful planning, optimize your inventory, establish clear refund policies, and build a chargeback defense strategy. Proactive steps will ensure a seamless shopping experience during the festive season. For a more comprehensive look at major fulfillment issues, read the original article here.