An Amazon worker delivers packages amid the outbreak of coronavirus disease (COVID-19) in Denver, Colorado, on April 22, 2020.
Kevin Mohatt | Reuters
According to a Jefferies report, delivery costs have been rising across the country and are expected to continue as the pandemic approaches.
“The recent growth in shipping costs has been fueled by increased e-commerce penetration, which has created a significant imbalance between supply and demand and restricted the capacity of carriers,” the analyst said. of Jeffries, Janine Stichter, in the report, which was based on a Call with Dean Maciuba, a former FedEx executive who is currently the managing partner for North America at consulting firm Last Mile Experts.
Consumers expect fast, free shipping, but this is a growing burden for many retailers, especially those affected by prolonged shutdowns during the Covid-19 pandemic. Medium-sized retailers are especially at risk, as many do not have the capacity to implement a sufficiently solid and efficient shipping strategy to keep up with the demand for fast deliveries.
This pressure comes largely from companies like Amazon, famous for their two-day, one-day, and same-day shipping options. This has made consumers expect fast, free shipping, even though some don’t even want or need it, Stichter said.
Online shopping during last year’s holiday season did not reach the maximum expected, according to Maciuba. He suspects carriers are looking to offset the financial losses as they invested in building infrastructure to prepare for greater demand that never materialized. On the other hand, retailers could benefit from lower-than-expected shipping costs.
However, the holiday surcharges that carriers like FedEx and UPS implemented to prepare for the influx of orders will not go away. These surcharges are likely to become the new normal advance, in addition to the annual increases of 5% to 6% that are commonly seen, Maciuba predicted.
FedEx has recently announced new maximum surcharges on Express and residential land shipments for those customers with a weekly volume of more than 30,000 packages. The 30-cent-per-pack surcharge went into effect Monday.
Maciuba told Jefferies that the best solution for carriers to combat pandemic and holiday losses is to adopt alternative delivery methods such as shopping online, picking up in-store services, picking up on the sidewalk, and using third-party delivery apps. with Doordash or Shipt.