Booming eCommerce sales, the COVID-19 surge, and now the holiday shipping rush, are all contributing to carrier capacity woes. This means higher shipping costs with peak season surcharges and impending carrier general rate increases (GRI).
Despite rising costs for shippers, many customers still expect to see free or low-cost shipping and return policies when making a purchase decision. All these factors are having a direct impact on shippers’ bottom lines. Here are some of the trends they consider:
High customer expectations
A recent Convey survey showed that while some customers are willing to give retailers some extra time to make deliveries, they still want fast and cheap shipping. According to the survey, 44 percent of shoppers said free shipping was the most critical delivery service, followed by free shipping on returns, at 18 percent, and the ability to track packages, at 14 percent. Additionally, those surveyed said they expect delivery that they had paid for to go as planned or to be compensated for it.
A Ware2Go survey revealed that fast shipping has a significant impact on sales with 65 percent of merchants reporting an increase in eCommerce cart conversions of up to 25 percent when they offer a one-to-two-day delivery promise. This is true even if they charged for it, with 71 percent saying that customers will pay for faster delivery.
No end in sight
According to a Deloitte survey reported by Digital Commerce 360, U.S. consumers spent $21.7 billion online the first 10 days of the 2020 holiday shopping season—a 21 percent year-over-year jump, mirroring the overall growth during the pandemic. Shopping online has been bolstered by stay-at-home orders and social distancing the past nine months, and that isn’t expected to slow down during the busy holiday season.
And that behavior is bound to continue as a new normal takes hold of consumer shopping behavior. Even Baby Boomers, who have long lagged behind digital natives in online purchasing, have embraced online shopping during the pandemic. In fact, 47 percent of Baby Boomers plan to increase their online shopping after the pandemic, the study showed.
However, shipping is a two-way process for many. Consumers often consider a retailer’s returns policy and costs in their purchasing decision, especially as they buy products online that they may not have before the COVID-19 pandemic.
According to a report in Logistics Management, Los Angeles-based industrial real estate firm CBRE said that eCommerce returns, estimated at an industry average of 30 percent, could take a bite out of retailers’ margins.
Home office shipping
Of course, parcel shipping is not just for retailers and e-tailers. As more companies continue to utilize a remote workforce model in the face of the pandemic—and others saying they will continue the model beyond the need brought about by COVID-19—shipping to and from home offices is becoming the norm.
As employees adjust to working from home thanks to technological advancements, they plan to stay home. An Accenture study showed that 30 percent of respondents plan to work from home more in the future, including nearly half of those who’ve never worked from home previously. Add to that, companies such as Twitter planning on remote work as the norm going forward, there will be far more deliveries made to homes than ever before.
In all, that’s a lot of parcels and other small items shipped to home offices, which costs companies more than shipping pallets to stores—especially as carriers add peak surcharges to help them compensate for less profitable home deliveries.
2021 GRI by the numbers
With that in mind, here are the average General Rate Increases (GRI) that eCommerce merchants, retailers, remote companies, and others will have to factor into their costs as they move forward:
- DHL Express announced a 4.9 percent GRI on shipments moving to and from the U.S., effective Jan. 1, 2021.
- FedEx: Effective Jan. 4, 2021, FedEx Express, (domestic, U.S. export, and U.S. import), FedEx Ground, and FedEx Home Delivery shipping rates will increase by an average of 4.9 percent, while FedEx Freight will increase rates between 4.9 percent and 5.9 percent, depending on service choice.
- UPS: Effective Dec. 27, 2020, UPS ground, air, and international rates will increase by an average of 4.9 percent.
- USPS [Proposed to go into effect Jan. 24, 2021]: Priority Mail Express will increase 1.2 percent, Priority Mail will increase 3.5 percent, Parcel Select will increase 8.9 percent, USPS Retail Ground will increase 3.0 percent, First-class Package Service will increase 6.2 percent, and Parcel Return Service will increase 4.9 percent.
While many shippers from various industries are working to adapt their operations to the new normal, growing costs can cut into profits. An enterprise-level, multi-carrier parcel management solution can help reduce shipping costs, save time, and improve customer delivery experience.