It’s easy to feel like parcel shipping is getting more challenging every day. Customers continue to demand more service faster. Rates continue to rise. Holiday surcharges, which debuted this year, aren’t going anywhere. And, of course, disruptions continue to arise: Amazon is considering its own delivery service, and legacy carriers are testing delivery by bike and pick-up locations.
It’s a challenging landscape, and one that can only be managed by understanding how changes will affect your supply chain and strategic decision-making. As you review 2017’s changes and explore what’s on the horizon in 2018, keep your own shipping profile in mind.
Parcel Industry Highlights From 2017
- For your carrier: Holiday surcharges appeared — and appear to be here to stay. Both UPS and FedEx tacked additional fees on to packages shipped between Thanksgiving and Christmas in 2017. They took slightly different approaches, with UPS varying rates from week to week and FedEx charging more for larger and heavier packages. Both stayed the course in their announcements of 2018 rates, suggesting that shippers should incorporate higher holiday prices into their budgets from now on.
- For your customers: Shoppers expect fast shipping, but when pushed to choose, most prefer free shipping. In Deloitte’s 32nd Annual Holiday Survey of consumer trends, conducted in 2017, 88% of customers told questioners they’d rather have packages shipped for free than as fast as possible. However, shoppers are defining “fast” more stringently every year. In 2015, 63% of shoppers considered 3-4 day shipping “fast.” In 2016, that dropped to 42%, and in this year’s survey, to 35%. More than half of those surveyed — 54% — told Deloitte that two-day shipping was “fast.”
- For the industry: Amazon is taking steps toward a delivery service of its own. In 2017, the company began piloting its Amazon Seller Flex service on the west coast. The program sends Amazon-owned trucks to pick up packages from third-party merchants and deliver them to customers — a role traditionally fulfilled by legacy carriers like FedEx and UPS. Amazon Seller Flex has been operating in India for two years, and in 2018, the company says it plans to expand it across the U.S.
What We Expect From the Parcel Industry in 2018
- For your carrier: We got a peek at carriers’ plans when UPS and FedEx announced 2018 rates this fall. Both carriers’ rate increases were in line with those of previous years. But dimensional divisors now match across the board, at their lowest number — meaning highest prices — in years, and both carriers hit shippers hard with big surcharges on large and heavy packages. As end-line customers continue to expand the breadth of what they order online, shippers may need to consider modifying their strategies to favor smaller packages — or negotiating contracts more favorable to what they ship.
- For your customers: Again, there’s every reason to believe current trends will continue. For the better part of a decade, as e-commerce has expanded and Amazon has risen to dominate the industry, customers have expected faster, cheaper shipping every year. Annual orders jumped from 10 per household in 2012 to 15 per household in 2016, according to an AlixPartners LLP survey; over the same period, the percentage of customers demanding two-day shipping shot from 4% to 18%.
- For the industry: There are a number of disruptions on the horizon. From UPS experimenting with delivery bikes in Pittsburgh to FedEx using Walgreens locations as pick-up centers to Amazon piloting drone delivery — several programs that are experimental now will likely be made permanent and expanded in 2018. Companies that rely on legacy carriers must stay up-to-date with these changes. First, retailers need to explain new delivery options clearly to their customers. And second, as carriers create new efficiencies, shippers should negotiate to ensure that some of carriers’ savings are passed on to them.
Are you positioned to manage your shipping spend as these changes reach your business? Companies who know their shipping profiles intimately — what they ship, how much it weighs, how frequently it’s ordered and where it goes — can best understand how these changes will affect them.
Helping companies understand this data is Reveel’s foundational purpose. Reveel can help you track your shipping data in real time to understand where your inefficiencies are and where they may develop in the future. Our expert consultants can help your executives prepare to negotiate for contracts that target those inefficiencies. And our other services, like invoice auditing, can help you recover every penny you’re owed.
It’s nearly time to make New Year’s resolutions — so if you feel like you don’t know your company’s shipping data as well as you’d like to, resolve to grow that knowledge in 2018.