While most holiday seasons bring a surge in online shopping, 2020 was setting a new record. Shoppers were seeking new ways to get gifts to their loved ones during this time of social distancing, and online businesses answered the call with free shipping and flexible delivery options. However, this rapid increase in delivery requests is creating new challenges for retailers and carriers.
The Surge Isn’t Surprising
In preparation for the 2020 holiday season, retailers and shippers hired additional workers and planned for weekend fulfillment and deliveries. UPS and FedEx hired 100,000 and 70,000 seasonal workers, respectively. Amazon also added 427,300 employees this year, bringing its global workforce to more than 1.2 million. And still, the impact on UPS, FedEx, and other carriers has been substantial, requiring them to operate at Black Friday and Cyber Monday levels day after day. In response, UPS and FedEx introduced a peak delivery surcharge of 30 to 40 cents per package for large organizations that ship 40,000 parcels a week. For those retailers, this blow came at a difficult time.
Although e-commerce businesses have adapted their infrastructures in an attempt to support the online purchasing surge, the increase in demand is far greater than the carriers ever anticipated when putting their pricing structures in place. Global retailers like Amazon have enjoyed spectacular financial performance over the course of this period, both in terms of stock price and growth. Up until this point, carriers have shouldered the load of fulfilling that growth while maintaining pricing models that weren't likely appropriate for today’s level of demand. In essence, this change in pricing was inevitable.
These new surges are less of a COVID-19 story and more the result of what has become the "new normal." The pandemic is not the sole reason behind the rise in e-commerce. Experts have been predicting it for years, and COVID-19 simply accelerated the trajectory.
The Road Ahead
Rising consumer expectations combined with carrier surcharges make on-time delivery more important than ever. With failed deliveries, retailers are likely to experience delivery correction fees from the carrier, brand damage, and weakened customer relationships, all of which chip away at profits.
The costs of failed deliveries are leading many retailers to implement smart verification tools that ensure customer addresses are accurate and also make it easy for customers to correctly enter their addresses. With type-ahead address lookup, a customer can typically find and enter their complete address with only a few keystrokes. By helping consumers input an accurate address at the point of entry during checkout, retailers affected by these new surcharges can minimize ongoing, extra costs incurred by failed deliveries.
The current climate will also force retailers to consider consolidating items rather than shipping them individually. Not only does this provide some relief to the carriers, it’s more environmentally friendly, and for some retailers, can reduce surcharges.
As the total economic impact of COVID-19 is still unknown, consumer spending habits may be unpredictable in 2021. Retailers must create an experience that is mindful of the financial situations facing online shoppers today. For example, we may have seen more people shopping online in 2020, but many of those consumers have less spending power than in years past. This may lead to consumers buying a higher volume of lower-value items. One way for the carrier industry to keep pace with increased volume beyond the holiday season is to avoid failed deliveries, requiring retailers to ensure that they capture accurate delivery information from customers.
As we look ahead to the new year, capturing accurate delivery information at the point of transaction combined with a strategic approach to fulfillment will give retailers the best chance for organized, on-time delivery operations, resulting in packages that reach the right customers at the right time.
Matthew Furneaux is Global Commercial Director - Loqate, a GBG Solution.
