Commentary

"Amazonification" Of Customer Shipping Challenges Small Retailers

According to a recent study conducted for Pitney Bowes by The Colography Group, a technical research, publishing and consulting firm specializing in the expedited transportation market, the challenges posed by increasing customer expectations around shipping for small and midsize retailers can be managed with a shipping strategy that includes automation, a mix of carriers including the USPS, as well as the added benefits of working with a trusted shipping partner.

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Mark Schoeman, CEO, The Colography Group, says “No single company has had as great an impact in the marketplace as Amazon. It has changed the behavior of both buyers and sellers and also how shipping and logistics providers deliver.”

Retailers of all sizes are finding themselves needing to compete on the same turf to meet customer expectations, creating challenges for smaller retailers in matching the delivery speed and price options provided by the larger retailers, while managing their own costs, says the report.

The U.S. domestic e-commerce marketplace is dominated by Amazon and large retailers, all setting the tone and pace of customer shipping expectations by offering expedited delivery options at low or no cost to the customer. Small and midsize merchants are being squeezed by the costs of shipping, lacking the negotiating power that could net meaningful discounts with commercial carriers.

Michael Griffiths, vice president of global marketing and communications for retail and ecommerce at Pitney Bowes, says that “… competing for customer loyalty has taken on a critical new dimension for small and medium-sized businesses… next-day, and even same-day free shipping are becoming the norm in retail… speed, efficiency and choice in how items are sent to … now must-have parts of the consumer experience…”

Retailers don’t need to think of matching Amazon in terms of technology spend, but the e-commerce giant has raised the bar and set new delivery expectations that must be addressed. In order to meet these increased customer expectations, retailers rely heavily upon commercial carriers such as UPS and FedEx, which together handle approximately 65% of all parcel volume, according to the Colography survey.

Customer expectations and shipping volumes rise exponentially during the holiday season, when many e-commerce retailers do the bulk of their business. To meet the demands, some commercial carriers add extra fees—this includes UPS, which announced recently it would begin assessing a 27-cent surcharge on all ground packages sent to a residential address during the upcoming holiday season. The costs are higher for air services. Understanding when these accessorial charges may be levied and how to avoid them is one important step toward optimizing shipping.

Knowing when and how to avoid these charges is difficult, and even if a shipper understands how to avoid them, they may be locked into a contract or parcel shipping system that prohibits them from doing so. Single-carrier shipping systems account for approximately 85% of all parcel shipping systems, according to Colography’s study.

None of this is to imply the commercial carriers aren’t good at what they do, or a useful, required part of any efficient shipping strategy for retailers of all sizes, because they are, says the report. However, with cost pressures increasing and the bulk of midsize retailers, (91%, according to the survey), relying on the same parcel shipping system they’ve used for more than four years, the fact is many of these businesses are leaving money on the table by failing to turn the strength of using multiple carriers to their advantage, says the report.

Since 1993, The Colography Group has conducted an annual national survey of 700,000-plus businesses to learn about shipping habits and track trends. The company was contracted by Pitney Bowes to conduct separate research, the Shipping System and Parcel Volume Survey, to learn about the parcel shipping systems that businesses are using. Key findings show that:

KEY FINDINGS:

  • 65% of domestic parcel volumes are handled by commercial carriers
  • 85% of respondents use carrier- provided, single-carrier shipping systems (even though they may actually use more than one carrier and/or more than one system)
  • 91% of midsize retailers (60 to 1,999 shipments a month) have used their current parcel shipping system for four years or more
  • 39% of parcels are shipped more than 350 miles, where the USPS offers very competitive rates and transit times compared with commercial carriers

Retailers may be leaving money on the table by failing to review their parcel shipping systems regularly and instead locking into carrier-specific systems, says the report. These systems may offer volume discounts but ultimately may not be cost-efficient when compared with a multicarrier strategy that takes advantage of the USPS, especially for shipments greater than 350 miles from a fulfillment center.

SHIPPING AS A STRATEGIC INVESTMENT

Merchants can incorporate a range of solutions into their shipping optimization strategy to help meet customer demands, but the cornerstone should be a multicarrier option that incorporates the USPS. A few key considerations from the report:

  • An automated multicarrier strategy to take advantage of the differing strengths and skills of each carrier is one way to take the pain out of that equation
  • Retailers should make use of a variety of carriers to take advantage of their respective strengths and cost efficiencies, whether UPS, FedEx, the USPS, regional carriers such as OnTrac or Lone Star that service specific states, or expedited and same-day services such as Delivery or UberRUSH
  • The process should be automated as much as possible, from click to deliver, says the report, using software that can dynamically choose the best carrier and delivery method to get a parcel to its destination within the delivery window required
  • E-commerce retailers need a better understanding of how to optimize packaging, dimensions, weight, and when to use free at-rate packaging, for example, to keep costs low

Regardless of how a partner is accessed, there are some key benefits that retailers should look for when selecting a partner:

  • Priority mail guarantee
  • Presort capability
  • Flexible payment terms
  • Inbound/outbound international

Overall key strategic takeaways:

  • Create a multicarrier strategy
  • Use the USPS
  • Have a plan for peak periods
  • Automate the process
  • Identify shipping partners
  • Know your products, and know your options

 

For significant details included in the complete report, please visit here.

 

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