Hot Sale: Recipe for Rewards or Painful Aftermath?

Peak events are great. They hold a disproportionate share of yearly revenue in e-commerce, and also pose the ultimate test of fulfillment performance. During these periods, as customers’ wallets are flung open, all the marketing and logistics brainpower and operational muscle of brands and marketplaces must be put to good use in order to fulfill those expectations.

Hot Sale, organized this year by AMVO for the 10th time in Mexico, is one of those frenzied times when customers find better deals, brands see a manifold increase in sales, and operations, customer service, and the e-commerce supply chain struggle the most. Although results are preliminary, in comparison to last year’s event, Mercado Libre increased its revenue by 47% to MX$1,100 (US$65)per order (El CEO), Tienda Nube reported an increase of 60% in revenue and 111% in number of orders at MX$1,329 (US$78)(El Economista), and the number of orders from our sellers at Melonn increased 466%, to  a MX$1,647 (US$97) average ticket. AMVO is publishing the actual results in mid-July.

Such a tremendous marketing and sales undertaking must rely on a robust logistics chain, capable of sustaining operational peaks equivalent to three to five times the daily demand during nine Hot Sale days and the following days. As is known, whoever gets fulfillment right, reaps the benefits of recurring, happy, online customers, but whoever gets it wrong, suffers the ungrateful, painful Hot Sale aftermath. Therefore, the stakes are highest during peak events for e-commerce brands.

As outsiders, buyers rarely see what a manifold increase in warehousing, packaging and transportation capacity entails. Unlike cloud computing, where you are simply one click away from increasing capacity, physical capacity must be carefully planned days or weeks in advance, and must be flawlessly executed in order to satisfy demand. At Melonn, we have found that there are five critical factors that must be carefully considered when preparing and executing fulfillment operations during peak events.

First of all, the adequate inventory levels for product and packaging supplies must be reached according to demand. This means, actually being good at demand forecasting and working together with the suppliers to have the necessary stock at the right time and place. This also means restocking several times as the event unfolds. If you get this right, you will avoid stockouts and late deliveries, which prevents lost sales and unhappy buyers; or excess inventory, which is a financial burden. Either deviation from the actual demand is troublesome.

Second, additional personnel must be hired and trained. This is easier said than done. Many companies will be looking for similar personnel, so talent attraction and incentives are critical. In modern e-commerce and logistics, quality and speed matters, therefore, ramping up the new personnel to the required performance levels and technology knowledge is paramount. If you get this right, your customers will experience consistency in their packaging. If you get this wrong, you would fail to dispatch on time or with the required quality. Would you want your customers to receive a subpar purchase? 

Third, transportation providers will be tremendously constrained. Therefore, increasing frequency of pick-ups, ensuring that your packages will be prioritized and handled with care, and improving communication with the operators are critical in minimizing the risk of failed deliveries. If you get this right, your customers will get their merchandise on time. If not, the customer service lines will be ringing many days after the Hot Sale is over, and the online complaints will skyrocket.

Fourth, as mentioned above, peak events are the ultimate test of fulfillment performance, and this is especially true regarding the coordination of activities inside a distribution center. During strained operations, psychology and risk management play a central role. If you cannot keep your cool under pressure, it is easier to make mistakes. If huge mistakes are made during strained operations, the consequences are catastrophic and hardest to solve. Thus, it is important to have continuous monitoring and coordination of the core fulfillment processes: inbound, sorting, picking, packing, transportation and customer service. If any of those processes fails, your entire supply chain fails.

Finally, in modern e-commerce, technology is just as central as marketing and operations. Having a safe and scalable digital infrastructure will avoid catastrophic system failures at checkout or during fulfillment. Having the right software (warehouse management, order management and transportation management systems) that handles transactions, prioritizes activities, and integrates into the sales platform is a must. If you get this right, the traceability of your orders will be seamless. If not, your business will face a tremendous risk, both on the sales and fulfillment sides.

Hot Sale and peak events in general are great e-commerce parties. And when the parties are over, someone has to clean up the mess. By following these five steps, we have found that we can minimize the risks of failing during peak events, and reap the benefits of e-commerce growth.