Just like that, the holiday season is upon us. Around this time last year, shoppers were flocking to retail stores in preparation for Thanksgiving and Christmas. They would exit stores with bags and boxes filled with goods waiting to be wrapped and gifted to their loved ones.
This year though, shops — and shopping — look a little bit different. Many establishments remain empty or closed because of a pandemic that has disrupted almost all industries. Consumer behavior has also quickly changed, with many moving most if not all of their shopping online. In fact, the latest findings from IBM’s U.S. Retail Index indicate that the e-commerce industry is expected to grow by an estimated 20% in 2020. Meanwhile, the numbers aren’t looking too good for brick-and-mortar shopping centers. Department stores already reported a 25% decline in sales during the first quarter of the year, which grew to a 75% decline in sales over the next quarter.
The pandemic has forced retailers to act fast by deploying their respective e-commerce platforms. But when there are goods to be bought remotely, there are goods to be delivered from the retailer’s address to the recipient’s address. That’s where shipping and logistics businesses come in. Delivery services are overworked because of the sudden and drastic increase in their workloads during the pandemic. Consumers are filling their carts with essentials and non-essentials alike out of convenience and safety, but unfortunately, the industry isn’t prepared for the sheer volume of orders it receives daily.
As major shipping companies get overwhelmed with the sudden surge in demand, entrepreneurs might be wondering if it’s a good idea to start their own shipping and logistics companies. The short answer is: maybe. The window of opportunity to take advantage of the e-commerce boom is wide open. But whether you will succeed or not is a different question altogether — one you might answer by considering these factors:
What kind of shipping and logistics provider do you want to be?
There are different types and sizes of shipping and logistics businesses. Freight and cargo companies and carriers are the big ones and operate internationally. The assumption here is that you want to start a small shipping business. For example, you can look into starting a third-party logistic company that offers courier or parcel services.
Regardless of the size and scope of your operations, you need to choose the right business entity right away for legal purposes. A limited liability company (LLC) is a viable business structure for domestic shipping providers due to its benefits over default business structures. Much like corporations, LLC owners are spared business liabilities while having the flexibility of general partnerships or proprietorships. It’s worth noting that customers have a lot of demands when it comes to their deliveries — they want convenience, reliability, and safety, among other things, from their courier service. If those needs aren’t met, customers have the right to sue or at the very least demand some form of compensation from the business. Thus, having the right business structure in place is one way of protecting the business and its owners.
Do you have the right resources, financial and otherwise?
This question raises another question: Have you studied the competition? Even though you might not be aiming to shake up the likes of FedEx or DHL, that doesn’t mean you don’t have competition to worry about. Competitive pricing can drive shipping services out of business because customers can look elsewhere for more amenable rates. The problem is, underpricing your services can eat away at your revenue. Building a shipping and logistics business from scratch doesn’t come cheap either. The costs alone to buy transport vehicles can be monumental if you want to operate outside of your own state. You also need to consider the costs of having regular staff as well as storage for inventory, among other recurring costs.
Starting your own shipping and logistics company is a huge undertaking. Even with the high demand in e-commerce right now and, thus, delivery services, especially with Christmas coming up, you can’t guarantee profits if you don’t have experience in the industry. So before you get started, make sure you understand the market, the competition, and industry practices well enough to not only turn a profit, but also fill a growing consumer need successfully.