Holiday sales were up more than 2% this year, but the growth was partly due to an unsustainable promotional environment that stretched beyond the Black Friday and Cyber Monday deals. And the fierce race to offer last-minute shipping left some customers in the lurch. What lessons do retailers such as Amazon.com (NASDAQ:AMZN)-- and delivery services such as United Parcel Service (NYSE:UPS), and FedEx (NYSE:FDX) -- need to learn before the next holiday rush?
1. Weaker pre-holiday sales mean longer promotions.
Brick-and-mortar retail traffic the week before Christmas dropped more than 21% compared to the prior year's period, according to ShopperTrak. The weakness had grown since the days following Black Friday weekend sales, which had shown 1% sales growth for in-store retail purchases.
The sales dropoff right before the holiday means that stores have extra inventory that needs to move off the shelves. NPD Group analyst Marshal Cohen explained how weaker sales before the holiday would lead to higher markdowns afterward as a means of moving inventory. "It is the difference between a post-holiday half-off sale, and something more like a 75 percent off sale to clear out inventory -- we will be seeing the latter," wrote Cohen.
But while brick-and-mortar sales struggled into steep promotions, online shopping's growth led to some other problems.
2. Online shopping is growing in popularity.
The National Retail Federation's survey of Black Friday weekend shoppers found that more than 42% -- or 59 million shoppers -- conducted at least part of their shopping online. And those shoppers spent 3% more on online purchase than in the prior year.
But online shopping for the entire holiday-shopping season, which stretches from the first of November to the start of Christmas week, was a bit below expectations, according to comScore. Online holiday shoppers using desktop computers spent 10% more in 2013 than in the previous year. The analytics firm had expected 14% growth. But comScore's data doesn't include shoppers using tablets or smartphones, which means that the actual number of online holiday shoppers was higher.
And those last-minute shoppers who didn't go into brick-and-mortar stores instead flocked online for last-minute shipping deals that left delivery services with a package problem.
3. Delivery services struggle with last-minute order flux.
Amazon had promised that Prime subscribers could order through Sunday night for delivery before the holiday. The online warehouse wasn't the only retailer offering shipping deals for last-minute shoppers. But the major package-delivery services weren't able to keep up with the demand.
UPS and FedEx had to apologize for a small percentage of delivery delays attributed to a last-minute spike in orders and poor weather conditions, according to the Associated Press. Packages weren't delivered on Christmas Day, but drivers were hitting the road in force on Thursday to catch up. And Amazon offered $20 gift cards for those who ordered within the company's delivery deadline but didn't receive their package on time.
Yet as the publicly traded delivery services struggled, the United States Post Office was able to stay on schedule, suggesting that Amazon made a smart move in partnering with the USPS for its Sunday package-delivery program. And, as Bloomberg suggested, the USPS' performance could lead to companies attempting to offer more ground-shipment options during the next holiday-shopping season.
Foolish final thoughts
What can retailers -- and package-delivery companies -- learn for the next holiday season? Retailers need to carefully manage inventory or offer better deals earlier in the season to avoid bargain-basement slashes after the holiday. And online megastores such as Amazon may need to consider more ground-delivery options, since the USPS outperformed FedEx and UPS. The other delivery services will need to go back to the planning board to make sure 2013's snafu isn't repeated.
Fool contributor Brandy Betz has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, FedEx, and United Parcel Service. The Motley Fool owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.