Bracing for the Holiday Season

The substantial shift from in-store shopping to online platforms led to a record-breaking holiday season for the shipping industry last year. According to the major carriers, more than three billion parcels were delivered during this time. Although carriers increased their prices last year to curb the surge from major retailers, the rise in cost did not deter demand. The shipping industry is preparing for impact once again as we head into the fall season.

eMarketer projects retail sales will grow another 2.7 percent this year—an estimated $1.1 billion in sales—largely due to online sales. The market research company also predicts online sales will grow by 11.3 percent.

Guaranteed Service Refunds (GSR) have not been offered over the past year since carriers are having so much trouble meeting demand. Now that the carrier has relinquished responsibility for on-time delivery, that leaves you, the seller, burdened with finding creative ways to keep demanding customers happy when they want their products right away.

Amazon responded to the explosion of its business by modifying its free shipping terms, offering the free shipping option to customers willing to wait longer. By continuing this trend throughout the year, Amazon mitigated late delivery times caused by labor shortages. Through the company’s hiring of local drivers, Amazon Prime members continued to receive rapid delivery. Amazon plans to meet rising storage demands by building ten additional warehouses.

A spokesperson for UPS predicts the carrier will exceed capacity by over five million packages per day through the holidays. These estimates are based on conversations with their top customers. Both UPS and FedEx have already announced surcharge increases in anticipation of the surge in demand.

To prosper in this environment, businesses need to do the following:

• Plan for shipping delays and rising costs
• Adjust pricing structures
• Modify delivery times
• Update policies
• Add regional carriers

To keep customer expectations in line with your anticipated delivery capability, review your current shipping and returns policies. Informing customers early of last-ship dates can spur last-minute shoppers to place their orders sooner. Quell delivery expectations by following Amazon’s example: reward customers who are willing to wait longer with lower shipping fees.

If you are a retailer with a large shipping volume, this may be a good time to renegotiate contracts with your shipping carriers to obtain better rates. You can do this any time of year, even if a contract is not expiring. Adding regional carriers to your shipping options gives you more choices and can help to alleviate the backup the major carriers will experience. More options give your business greater flexibility—and that is precisely what you need to ride the wave.