Holiday Shipping Capacity Strains

Check Your Carrier List and Contract Twice

The holiday shopping season has started earlier than ever. With Amazon Prime Day already behind us, and Black Friday sales now in full swing, the U.S. is expected to see record-high digital sales of $221 billion.1 It’s likely that 30 percent of total retail sales in the U.S. during this holiday shopping season will come from digital commerce.2

This may sound like great news, but the Carriers are consistently warning that they have reached capacity and shippers should seek alternatives for delivering packages to customers in-time for the holidays. Traditional Carriers, such as FedEx, UPS and DHL are expecting volumes to exceed their capacity by 5%, potentially delaying 700 million holiday packages. This leaves shippers pressed for options and rushing for different solutions.

In addition to offering holiday sale prices much earlier this year, online retailers are reminding shoppers to buy early, highlighting shipping cut-off dates in order to help shoppers avoid last-minute purchases and reduce fulfillment strains during the busiest weeks. Ecommerce stores are also looking to overcome fulfillment challenges with other options.

Buy online, pickup in store (BOPIS), not only helps grow digital revenue, it will give consumers more control and confidence in receiving packages. It allows orders to be fulfilled in a matter of hours rather than days. Consumers seem to have become accustomed to this shopping trend with 33% of U.S. consumers reporting that they are more interested in using BOPIS for the holidays this year compared to last.3

Retailers are also crowdsourcing last-mile Carriers through the gig economy to alleviate the strain placed on traditional Carriers. Uber, Lyft and other transportation and delivery platforms have the capacity to support last-mile deliveries. This strategy proved to work well during the peak of the pandemic this spring when essential brick-and-mortar stores formed relationships with these platforms to deliver necessary items the same day. With fewer rides to restaurants and airports this holiday season, this is a prime opportunity to tap into drivers for hire again.

The more digital purchases made, means more returned merchandise. Another tactic that should be used to help alleviate shipping constraints is to focus on reducing return rates.  To reduce return rates, retailers should use store associates to help guide online buyers to the right purchases via communication tools like live chat and digital concierge services. Ecommerce sites should also look to provide comprehensive product descriptions, product reviews, videos, clear and accurate fit guides, inventory availability and expanded shipping options to minimize returns.

Reflecting on the lack of shipping capacity, Carriers began imposing surcharges and raising fees since the beginning of the pandemic. This trend has accelerated with the early holiday shopping season and will continue into 2021. UBS analyst, Thomas Wadewitz, expects domestic package pricing to increase 3% to 4% in 2021. Given the rising shipping costs and shifting of operations in order to meet customer delivery demands, shippers need to rethink their strategy.

How do all the changes affect current Carrier contracts, and should shippers be paying the same for less service? If the Carrier service terms are changing, should your costs reflect that? How so? Now is a critical time to reevaluate contracts and understand negotiation options. The parcel shipping consultants at LJM Group excel at data analysis resulting in optimal negotiation techniques. They have the answers you need to get the most out of your Carrier contract.

 

1, 2 Biggest Digital Holiday Season Ever Will Strain Shipping Capacity According to Salesforce Forecast, Salesforce October 1, 2020

 3 Consumer and Workforce Research Series, Salesforce Research