Coronavirus Trickle-Down Effect on Shipping

by LJM Group

“Unprecedented” is a word that we’re hearing a lot during this coronavirus crisis. But a word that retailers are also frequently using is “unpredictable.” Though retailers are seeing record-setting online order volume, they are dealing with low inventory and struggling to meet demands.

According to new data from Adobe’s Digital Economy Index, U.S. e-commerce jumped 49% in April, compared to the baseline period in early March before shelter-in-place restrictions went into effect. Online grocery helped drive the increase in sales, with a 110% boost in daily sales between March and April.1

Luckily, during this pandemic, online shopping has easily enabled consumers to have essential and non-essential items delivered to their door. But this service that we’ve come to expect as the norm, may not be as easily implemented during times of crisis. The sudden need for online retailers to replace brick-and-mortar shops has highlighted some limitations of e-commerce. It has become clear that when one aspect of a supply chain breaks, the entire process is affected, and the result is fulfillment delays.

The stay-at-home orders have caused many challenges in fulfillment, starting with lack of staffing. With employee layoffs, sick employees and retailers implementing social distancing regulations in warehouses, efficiency is at its lowest.

Amazon Under Pressure

Consumers have been quick to point the finger at Amazon for items being out-of-stock, delayed deliveries and higher prices. But Amazon and the sellers that supply the products to Amazon are used to taking on millions of packages per day. Yes, they are overwhelmed and faced staffing obstacles before hiring an additional 175,000 employees, but the problem goes beyond fulfillment.

As part of the challenges being faced, Amazon is contending with bottlenecks in its logistics network. Typical shipping methods normally relied upon are strained, and as a result, inventory transfers to and from fulfillment centers are not as seamless as they once were. Additionally, Amazon’s last-mile delivery partners are struggling to handle demands. Every minute lost in this shipping process delays both fulfillment and delivery, creating another unhappy shopper.

FedEx Imposes Shipping Caps

The shift to online shopping dominating consumer behavior and sales has taken its toll on FedEx’s delivery network. To combat the negative impact this deluge of volume has on the company, FedEx has temporarily limited the number of items that retailers can ship from certain locations. These latest steps will affect approximately two dozen of the largest retailers, including Kohl’s, Nordstrom, Bed Bath & Beyond, Abercrombie & Fitch Co and Groupon. With some of these retailers having closed their doors, their stores have been converted into makeshift warehouses to help fulfill orders. FedEx has hired more people in certain markets and is delivering more packages on Sundays, but capping the number of packages FedEx picks up at some locations will not directly limit the already mounting adverse effects on the FedEx Ground network.

As online orders continue to outpace shipping capacity, retailers are doing their part to work with FedEx to help manage shipping volume. A Kohl’s spokeswoman said the company has “levers to work with,” like different delivery windows, to manage online shipping volume during this time. Abercrombie & Fitch’s response to FedEx restrictions is to reallocate packages, leveraging other Carrier partners for package delivery. FedEx is also asking some of its customers to bring their packages directly to the FedEx Ground facility closest to the customer, so that they can bypass the sortation process.

With the emerging re-opening of the economy still under careful consideration, there is no prediction when we will get back to “normal” business. However, when we do return to business, the new normal will look quite different and consumer expectations may change. If so, how will this affect your shipping? Costs may rise and delivery lead times may change, but if you’re smart, you won’t pay the price.

1. April Digital Economy Index: How COVID-19 Continues to Shift E-Commerce Trends, May 12, 2020

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