Guest Commentary: Parcel Shipping Outlook for 2014

As we enter the busy peak season for shipping, it’s amazing to think of the changes and trends that started taking hold in 2013. The buzzword of the year was “omni-channel fulfillment, as retailers attempt to create a superior customer shopping experience across multiple channels, including online, mobile devices, brick-and-mortar, direct mail, and catalog.

Retailers are responding to customer demands for better experience, better access, and better choice. Enabling new fulfillment strategies – such as same-day delivery or order online and pickup at store – is a key objective for retailers and their suppliers. But these changes extend far beyond just the retail industry. We already see that in the parcel shipping world, for example, with carriers starting to announce their annual General Rate Increase (GRI). The United States Postal Service (USPS) has announced a 2.4 percent increase on shipping services, and it will be requiring Intelligent Mail Package Barcode (IMPB). FedEx announced express rates will increase an average of 3.9 percent, with the rest of the carriers’ GRI to be announced before the New Year.

With all the changes in strategy this year, many shippers are asking, “What’s in store for 2014?”

I posed that question to industry veteran and consultant Satish Jindal, president of SJ Consulting Group and asked him what the next year will look like for parcel shipping. He focused on some market dynamics that could impact the parcel industry over the next twelve months.

Parcel carriers will pay more attention to B-to-C shipping: “Amazon has created some real hype around same-day shipping and Sunday delivery. Research has shown that consumers value free shipping over fast shipping, and are even willing to wait up to 7 days if there is no shipping charge. So why is Amazon experimenting with these more expedited services? Creating confusion and panic with its competitors is one reason. eBay has acquired Shutl, the UK-based courier marketplace the uses a network of couriers to provide delivery within hours of an order being placed. Wal-Mart is also experimenting with same-day delivery, using its extensive network of brick and mortar stores as distribution centers to extend its reach into the ecommerce space.”

The sustainability of the Same-Day Model: “At $4-$10 a shipment, it’s unlikely that consumers will jump to this service, or even that the model is sustainable for Amazon or any of the other e-tailers and retailers. But it is having an impact on the carriers. Regional carriers, whose business is now 50 percent B-to-C (compared to 10 percent about 5 years ago) will continue to benefit as shippers look for low-cost alternatives. UPS and FedEx will need to adjust their cost structure and pricing for last mile deliveries – expanding drop ship to terminals, rather than just at hubs. SmartPost and SurePost will still have a position, but as Amazon attracts more e-tailers to its online platform, some of these e-tailers (who may have used SmartPost or SurePost) will get converted to the Amazon delivery network, thereby changing the relationship of Amazon with UPS and FedEx to that of a competitor as well as a partner.”

The USPS will gain greater share of parcel shipping: “The recent changes the USPS has made to its shipping services are great. By providing more certainty with date-specific delivery, increasing the number of package scans, and providing free insurance, the USPS is now proving more value at a competitive price. Combine this with the simple “If it fits, it ships” packaging and services, the USPS now has the best solution for smaller shippers. FedEx has responded with its FedEx One Rate; although it simplifies some of the process, there is still a weight limit with the provided packaging, and the rate is zone dependent.”

Technology will become more important to help manage the process: “The quantity of information that is available from shippers, carriers and consignees is staggering, but is critical to the overall customer experience. Employing technology to manage the communication between the shipper and receiver will be key to remaining competitive.”

Satish’s comments rang true, as evidenced by a recent survey Pitney Bowes commissioned on shipping preferences and expectations. Seventy-seven percent (77%) of respondents said that free shipping is more important than fast shipping (19%), and more than 80% of consumers who purchased online last year said they tracked a package.

So, what’s in store for 2014? Continued innovation and change for shippers, carriers, and everyone in the parcel shipping ecosystem.

Karen D’Andrea is the Director of Marketing, Logistics Solutions and Services for Pitney Bowes. Karen has been with Pitney Bowes for 16 years in various product management and product marketing roles. She is currently responsible for the SendSuite™ portfolio of outbound shipping management and inbound tracking solutions, including SendSuite Live™ Global Logistics Management.

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