To say the least, 2020 was a wild ride for parcel shippers. Not only was the industry overburdened with an enormous growth in E-Commerce sales (growth of the industry accelerated five years faster than pre-pandemic estimations), but so were parcel carriers. And though many brands saw record sales, they also faced volatile carrier capacity and surcharges with limited contract negotiation opportunities and an urgent need for carrier diversification. That’s what we generally know about the parcel industry in 2020, but there’s more to learn from the annual GMT Parcel Benchmark Report, which asks shipper directly about their greatest challenges, opportunities, and most successful strategies.
Today, we’re highlighting five important lessons learned by shippers from the report, though the full GMT Benchmark Report has a multitude of takeaways to offer.
1. Shippers sped up delivery, including Curbside.
The overall service mix for shippers (Ground, Air, Postal/Postal Insertion) in 2020 was relatively in line with 2019; however, 75% of respondents utilized Economy or Express delivery in 2020, while also increasing Same-Day utilization and decreasing Deferred. Additionally, it’s no secret that businesses rolled up their sleeves and got creative in their efforts to meet their customers and deliver fast, like newfound emphasis and implementation of Curbside and Buy Online Pickup In Store (BOPIS) strategies. When it came to E-Commerce orders, respondents nearly doubled their utilization of brick-and-mortar stores (growing from 7% to 13%). Also notable, the number of respondents that could ship from some or all brick-and-mortar store locations to fulfill orders doubled to nearly 70%. Curbside and Buy Online Pickup In Store (BOPIS) strategies are popular with both shippers and customers (each party is able to avoid shipping costs and proximity health risks) and overall is a fulfillment trend that GMT anticipates will continue beyond 2021.
2. FedEx surpassed UPS in volume share by 14%. Regionals also saw volume growth.
In 2020, FedEx and UPS held the lion’s share of respondent shipper volume – 47% and 33% respectively, representing a 14% volume YOY increase for FedEx. While there are a number of factors to consider when evaluating this data, FedEx has made a particular effort to target both E-Commerce and small-medium sized businesses via their partnerships with Adobe Commerce and Shoprunner. Respondent data also indicated growth for both regional carriers and the USPS, each (at or near) doubling to 10% volume share.
3. Which reminds us, nearly half of respondent shippers were subject to unexpected surcharges and/or volume caps.
In line with regional carrier and USPS growth, 40% of respondents said they were subject to unexpected surcharges and/or volume caps related to the pandemic/peak season. Additionally, 20% of respondents saw their carrier rates increase mid-contract in 2020. How or why? Both FedEx and UPS saw small parcel shipment volume increase by well over 10% in 2020, an enormous growth made more complicated by varying federal and state health regulations (e.g. social distancing) that bottlenecked and shut-down parts of their nationwide transportation networks. In short, true to the old supply-and-demand principle, carrier networks slowed down and increased prices as demand continued to grow. Unfortunately, this also lessened shippers ability to rely on the familiar contract negotiation reproach, as volume was no longer a bargaining chip.
4. Shippers expect 2021 cost inflation to be the same, or higher.
But what about existing contracts? Much the same. As carriers faced an intense volume increase, putting unprecedented pressure on their networks, parcel carriers unexpectedly raised rates mid-contract for over 20% of respondents. Additionally, nearly half reported being subject to unexpected peak season surcharges or volume caps. Will we see the same throughout the rest of 2021? It’s very likely, many of the pandemic surcharges are still in place with no official expiration, leaving 95% of respondents expecting parcel cost inflation in 2021 to be equal to or faster than 2020. On the upside, this also means these shippers anticipate continued demand, hinting that their expectations for customers is for e-commerce growth to not decline.
5. Carrier diversification is the name of the game.
So, it’s not difficult to see why – for the first time in the Benchmark Report’s history – the primary strategy focus for shippers during 2020 was (and likely still is) carrier diversification, more important than price competition, order fulfillment, and ominchannel implementation. While not new to the industry, carrier diversification through means like regional carriers have not always been a priority for parcel shippers. The 2020 pandemic, however, highlighted the need for a Plan B, or Plan C. And maybe a Plan D. Alternative volume channels offer shippers increased flexibility, as well as some means of crisis management when the industry is plagued by an unforeseen or unplanned issue. Like Curbside and BOPIS Pickup, GMT expects that shippers will continue to prioritize carrier diversification beyond 2021 as a means to fortify their networks and ensure faster order fulfillment for their customers. Yet, there’s a lot more to the strategy than it may seem – shippers may need to invest in technology, systems may need adjustments to recognize or track volume between new carriers, and the ROI between carriers is not equal. This places new value on working with a Parcel Spend Management partner to help guide carrier diversification through spend analysis, identifying which regional carriers are the best fit, as well as the percent volume applicable to new carriers.
To see the entirety of GMT’s annual Benchmark Report, or to simply learn more about its respondents or how the survey is conduct, visit: greenmountaintechnology.com/benchmark/
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