Shipping costs may continue to increase! How should sellers respond?

According to CNBC, Jefferies, headquartered in New York, USA, recently released a report stating that delivery costs have been rising across the country, and as the epidemic continues, delivery costs are expected to continue to rise.

Midsize retailers are at risk from competition such as Amazon Prime's fast delivery service, as many are ill-equipped to meet growing demand for deliveries, while holiday surcharges imposed by shipping lines are not expected to be lifted anytime soon.

Transportation costs may continue to increase

“Recent growth in shipping costs has been driven by e-commerce penetration, which has created significant supply-demand imbalances and constrained carrier capacity,” Jefferies analyst Janine Stichter said in the report, which was based on a call with Dean Maciuba, a former FedEx executive and current North America managing partner at consultancy Last Mile Experts.

Consumers expect fast and free shipping, but this is a growing burden for many retailers, especially those hurt by prolonged closures during the pandemic. Mid-sized retailers are particularly at risk because many do not have the ability to implement robust and efficient shipping strategies to keep up with demand for fast deliveries.

Much of that pressure comes from companies like Amazon, which is known for its premium two-day, one-day and same-day delivery services, which Stichter said has made consumers expect fast and free delivery.

And holiday surcharges that carriers like FedEx and UPS impose to handle the high volume of orders aren’t going away. Maciuba predicts those surcharges may become the new normal going forward, in addition to the typical 5% to 6% annual increases.

FedEx recently announced new peak surcharges for express and domestic residential ground shipping for customers who deliver more than 30,000 packages per week , with a 30-cent surcharge per package taking effect Monday.

Use other delivery methods

The increase in transportation costs affects the profitability of retailers. Therefore, how to effectively reduce transportation costs has become a key issue.

Maciuba told Jefferies that the best solution to deal with the pandemic and holiday losses is to adopt alternative delivery methods, such as online shopping and store pickup, curbside pickup, and using third-party delivery apps such as Doordash or Shipt.

In addition, sellers should also fully consider various aspects when choosing a logistics company and optimizing product packaging.

1. Optimize packaging and reduce package weight

Undoubtedly, larger and heavier packages will have higher shipping costs and are more likely to be damaged during transportation. Therefore, sellers should further optimize product packaging based on product attributes, reduce package size, and reduce package weight, which is of great significance to reducing transportation costs.

2. Reduce the costs of other links

Sellers can reduce transportation costs by reducing costs in other links, such as labor costs, warehousing costs, operating costs, etc.

3. Choose the right logistics service provider and reasonably match logistics channels

As we all know, different logistics service providers have different advantages and characteristics. Sellers should compare the relevant costs of various logistics service providers according to the characteristics and needs of their own products and choose logistics companies with greater price advantages. In addition, sellers should make full use of the advantages of various logistics channels (sea transportation, air transportation, etc.) and reasonably match logistics channels and logistics methods to reduce corresponding costs.

Shipping costs

logistics

Cross-border e-commerce