A new report from Jefferies points out that delivery costs have been rising across the U.S. and are expected to continue to rise as the New Guinea (CCA virus) pandemic spreads, creating serious headwinds for retailers.
Janine Stichter, an analyst at Jefferies, said in the report, “The strong penetration of e-commerce trends has created a huge supply-demand mismatch, causing delivery costs to spike and limiting delivery carriers’ capacity.”
Consumers are expecting fast and free delivery services, but this is becoming increasingly burdensome for many retailers, especially those hit by prolonged downtime during the New crown outbreak. Mid-size retailers are particularly at risk, as many are not able to provide a strong and efficient delivery strategy to meet the demand for fast delivery.
That pressure comes primarily from large companies like Amazon, known for its 2-day, 1-day and same-day delivery options for Prime members. That makes consumers take it for granted that they can get fast and free delivery, even if some people don’t want or need it at all, Stich said.
Former FedEx chief Machuba (Dean Maciuba) said online shopping during the holidays last year did not reach the expected peak. He suspects it was because carriers invested in infrastructure to cope with increased demand that did not occur, so they are looking to make up for financial losses. Retailers, on the other hand, could benefit from lower-than-expected outbound delivery costs.
However, the holiday surcharge regulations implemented by couriers such as FedEx and UPS to prepare for the influx of orders have not been lifted. Machuba predicts that these surcharges may become the new normal, in addition to the routine annual 5-6% increase that would normally occur.
FedEx recently announced a surcharge increase for Express Mail (Express) and domestic residential flat rate delivery for bulk customers with more than 30,000 packages per week. 30 cents per package starting on the 15th.
Machuba pointed out that the best solution for delivery operators to deal with the new crown Epidemic and holiday losses is to use other delivery methods, such as online store pickup, curbside pickup and the use of third-party delivery operators, such as Doordash or Shipt.
Recent Comments