Despite these four setbacks retailers will face, there are a few solutions available to ease the pain
This year we have all grasped for the elusive crystal ball that will give us 20/20 vision for what lies ahead. 2020 has already presented e-tailers with unusual challenges and opportunities, with uncertainty being one of the few certain aspects of the business environment.
As this unprecedented year has progressed, the peak holiday shipping season has loomed on the horizon. Peak 2020 will be upon us in several short weeks. The bad news is that the challenges facing shippers this peak are substantial. The good news is that those challenges are starting to shape up a bit more to give shippers some time to prepare. Crystal ball aside, recent industry headlines concerning the major carriers have shed light on some of the obstacles in the road ahead.
- Carrier surcharges. In a historic move, the big three national carriers have all announced new peak season surcharges for their parcel services. FedEx has announced peak season surcharges for regular residential deliveries for the first time this year. UPS recently announced new surcharges of up to $4 per package for high-volume shippers. And the USPS also plans on temporary price increases on products like Parcel Select and Priority Mail. This one thing is for sure – shipping costs will be on the rise.
- Carrier volume caps. As the carriers struggle to cope with the coronavirus-related surge in demand, they continue to institute maximum volume caps on large accounts and persist to be selective with regard to which accounts they service. This allows the carriers to shift attention from their larger, less profitable accounts to those that carry a higher operating profit, leaving larger carrier accounts or those who ship less desirable volume with distribution concerns and less leverage in negotiating special operating plans.
- Delivery delays. If there is one lesson that the infamous peak season of 2013 (remember that?) reminded us of, it’s that even the best delivery companies are constrained by the limits of time and space. Already in 2020, the carriers have struggled with on-time deliveries and have removed their service guarantees. Some vendors report a 40% increase in delivery times during the pandemic, and on-time delivery rates are falling to 94% for UPS, 91.6% for FedEx, and 91.5% for USPS. Adding the annual surge in peak volume to this will create some tough dynamics.
- USPS woes. The USPS has been a hot topic of conversation lately, with an immediate concern over increased demand for postal services leading up to November due to voting by mail and a long term question over the funding or even the dismantling of the postal service. With so much dependence on the USPS for low-cost delivery options, this raises anxiety for shippers who may be forced to negotiate with the higher-cost carriers and face the above-mentioned issues.
What can you do about these obstacles? Obviously, a thorough review of marketing and operations plans are in order. Below are a few considerations from ProShip’s perspective on how advanced, multi-carrier technology can help navigate these challenges.
- Multi-carrier Shipping. Now is the time to go multi-carrier! You should be in a position to change your carrier mix on demand when faced with pricing, capacity and performance constraints. A multi-carrier capable shipping solution will allow you to easily shift volume across both national and regional carriers. Capabilities to quote accurate rates and rate shop across service levels will allow planning and execution of these moves in a way that protects profitability.
- Carrier Volume Balancing. Choosing the carrier mix that works best for you should always be top of mind. Heading into peak this year, it is crucial to set the right balance that will reduce transportation spend, maximize negotiated discounts and avoid surcharges and capacity limits. Rate shopping and service selection logic should enforce your plan and be easily adjustable as conditions and parameters change.
- Advanced Date Shopping. What you have promised in the cart needs to be enforced by the shipping system. Is the customer expecting delivery in two days? You better select a carrier service that delivers on that promise. This can mean taking into consideration not only the carrier transit time, but your own operations schedule, including when carrier trucks are scheduled to leave your dock. Furthermore, the rules around service selection should be adjustable as the holidays approach and as we get a clearer picture on carrier performance this peak.
Last word. We all want to see an early end to the pandemic; however, the chances are high that life and business will not be back to normal come January. Many of the above issues are expected to remain into the new year. Our advice to retailers is to continue to innovate and refine the systems and strategies you put into place going into 2021. Flexibility will be key to anticipating and reacting to what each day brings.
Unfortunately, we can’t offer a 20/20 “peek” at peak 2020. But as we go into the next several critical weeks and as the situation evolves, now is the time to consult with your trusted partners. Rely on ProShip, with our proven team and technology, to help you face the challenges in peak 2020 and beyond. Stay safe, stay profitable and let’s keep our eyes peeled and move forward into this peak together!
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