Much has been written about shipping capacity issues on the ocean and on the nation’s truckload lanes, but those capacity issues continue to filter down to the last mile, and that has e-commerce shippers worried.
That is one of the issues that Vince DeAngelis, vice president of carrier partnerships for e-commerce technology provider Shippo, told Modern Shipper is top of mind for retailers in 2021.
“Once those floodgates open it is going to stretch capacity for carriers,” he said. “It’s not going to be what we saw last year, but what we are seeing and what the industry is seeing is that there is going to be more e-commerce shipping compared to 2019, 2020 being an anomaly. We are still seeing growth in e-commerce shipping.
“We see this growth continuing, not at the 2020 rates, but we don’t see it slowing down anytime soon,” he added.
DeAngelis has spent 34 years studying the shipping landscape, including time at the U.S. Postal Service, and is now working with parcel carriers in the U.S. and abroad to help them adapt to ever-changing e-commerce delivery demands.
New research from Shippo unveiled several interesting nuggets of information on e-commerce shipping, including that the average shipping cost was $9.48 per order – that is 12% of the total order. In California, Texas and New York, e-commerce orders comprise 30% of the nation’s total and 50% of all e-commerce orders come from just eight states. Northeastern states place more e-commerce orders per capita than any other region, the report noted.
The capacity issue is a concern as consumers have become accustomed to fast and quick delivery. Recently, FedEx Freight started to trim its customer base to focus on higher-margin customers, but the fallout of that along with continued pressure on the Postal Service to improve parcel margins or de-emphasize package delivery will have a trickle-down effect on the last mile.
“Some of the larger carriers are rethinking how they interact with their customers, even turning away customers,” DeAngelis said. “The capacity issue that was there last year certainly has some of these brands worried this year.”
DeAngelis advised shippers to ensure they have plans in place to address potential bottlenecks and to start planning now for their holiday peak season.
“The brands rely on certain carriers. By now they are all wise enough to know they need to have backups – and backups to backups,” he said. “At the end of the day, the legislation around the Postal Service has a big impact on these brands. If legislation goes through where the Postal Service has to raise their rates, other carriers will raise their rates.”
A large portion of what Shippo does is connect through technology the retailers and shippers to carriers to handle the last mile, but DeAngelis said shippers are still concerned about how that technology can help them navigate changing regulations and capacity issues.
“We facilitate the ability to access the carriers,” DeAngelis said. “What our business really is is making sure we supply a multi-carrier shipping system to the e-commerce ecosystem so the merchants and brands have choices when they need them.”
Dealing with fast shipping and capacity concerns means many brands are turning to more warehouse facilities located throughout the country. DeAngelis said some are learning that three warehouses need to be turned into 10 warehouses to handle the demands. Technology is key to making sure inventory is placed correctly and the proper carrier is available to handle the last mile.
“The technology is going to be the differentiator for all of these companies,” he said. “[The customer] wants fast and free, but the only way for a merchant or brand to offer fast and free is by having the right technology. A company like Shippo, we supply that technology and we have the ability to pivot and meet the ever changing e-commerce [landscape].”
None of these concerns are going away as the nation appears to have fully adopted e-commerce, so DeAngelis advises retailers to think strategically.
“It’s never too early to start planning,” he said. “Start talking to your carriers, understand what the challenges will be, talk to your carriers about the challenges last year and have a backup plan. And evaluate your technology.”