The Impact of Technology Compounded by the Pandemic
In 2019, global parcel volume exceeded 100 billion packages. That number is most likely to more than double and reach 220-262 billion parcels by 2026.1 This drastic jump in volume calls for all hands on deck, especially during peak holiday season. It also poses unforeseen questions. Who will deliver all those packages, and how? There’s no simple answer, but with technology innovation primed to transform the parcel delivery industry fueled by a Carrier-led landscape, the years ahead will experience key historic changes.
Parcel Carriers were facing volume challenges before the pandemic and were approaching solutions for the near-term. Suddenly overnight, the e-commerce surge created a need for parcel Carriers to respond immediately. Online sales became an even larger percent of total retail sales, up 55% in the first seven months of 2020, leading to a record-setting $434.5 billion spent online.2
Now with the holiday season approaching, we are seeing scenarios in which innovation would help substantially and immediately. LJM expects to see a new peak in volumes throughout November and December that will prove challenging for retailers to meet. The large shipping volumes coupled with rate increases and shipping caps from Carriers will make it difficult to continue profitably at the same pace. Additionally, parcel shippers have been told by UPS and FedEx that they have already reached most of their capacity for the holiday season. This means that potentially up to 7 million packages a day, between Thanksgiving and Christmas, could face delivery delays.3
Changes are happening day by day, and the future may be uncertain, but we do know that e-commerce and delivery will never be the same again. Here’s why:
Shift in Buying Habits
The pandemic has profoundly changed shopping behaviors, which are likely going to have long-lasting implications. According to Accenture research in April, it found that consumers who used online channels for less than 25% of purchases prior to the pandemic went from 1 in 20 of their purchases being online to 1 in 6 – a 160% increase in online activity. Not only are shoppers buying more online, but their delivery expectations are high. They want fast, free delivery at no extra cost.
As e-commerce grows by leaps and bounds, supply chain players are making use of brick-and-mortar stores that have closed their doors. They are transforming unused retail spaces into local fulfillment centers and warehouses for e-commerce companies. As working from home has become prevalent, packages are being delivered to individual residential homes rather than in bulk to businesses. Accenture estimates that by the end of the year, 50% of all deliveries will be local. This strategy will help meet the same-day delivery challenge that many retailers are being pressured to offer.
Last-Mile Delivery Turns the Corner
We have already seen the use of drones by Amazon, UPS, FedEx and Walmart. Other innovations for automating last-mile delivery are on their way:
- Short-term: Electric vehicles and the increased presence of unattended delivery technology
- Three to five years: Large, semiautonomous delivery vehicles that follow parcel-delivery staff
- Five to ten years: Unattended semiautonomous delivery vehicles
- Beyond 2030: Robot-assisted delivery
Carriers monitor vehicles and track their routes to increase their productivity. Tracking is also beneficial for customers. Through GPS tracking systems, specific progress at various stages such as shipping, in transit, or delivery can be monitored. As offered by LJM’s Tracking ConciergeSM, real-time updates for critical, time-sensitive packages can be provided on the exact location of the shipment, attainable even on your smartphones.
To help ensure packages reach their destination undamaged, some Carriers use advanced fleet management systems to monitor packages. These systems can detect if the package experienced substantial shaking during transit or if the package exceeded normal temperature ranges. This brings additional security and value for customers, while prompting Carriers to be extra careful. For shippers with odd-sized or heavy packages, LJM’s Rate Shopper platform minimizes parcel costs with the option to compare rates and choose amongst your contracted Carriers, per parcel. Custom software like this can yield incremental savings, otherwise unknown.
Clearly more online sales mean more returns. Retailers are revisiting return policies to cater to customers, while needing to consider shipping volumes. As online sales peak during the holiday season, the length of time it takes for Carriers to deliver returns also lengthens. To accommodate shoppers, Amazon recently announced their extended Holiday Return Policy for 2020. It allows most orders delivered between October 1 and December 31 be returnable through January 31, 2021. This extends the window by one month, where in previous years the holiday policy began on November 1.
So… are you ready for the future? To help reduce costs and realize growth, LJM Group can offset your expected rise in shipping expenses. With a personalized suite of shipping consulting services that LJM offers, you need us now more than ever.
1 Pitney Bowes Parcel Shipping Index
2 Chain Store Age, Online sales surge year-over-year in July, August 11, 2020
3 Total Retail, FedEx, UPS Warn Shippers of Holiday Delays, October 20, 2020