Parcel-shipping delays during the holiday season are a common headache for online retailers. The pain could be less this year than in the past two. But, if current trends continue, on-time package delivery is unlikely to improve to match those of pre-pandemic 2019.
Josh Brazil, vice president of supply chain insights at project44, a supply chain visibility platform, says last-mile delivery service has dramatically improved since the worst of the pandemic — when 20% or more packages arrived later than promised. But persistent labor shortages have kept delays above pre-pandemic levels during 2022. That’s likely to continue for the rest of the holiday period, Brazil says.
“Labor is an issue across all supply chains,” Brazil says. During the pandemic, numerous workers in all parts of the supply chain left the industry. And those departures — and a generally tight labor market — have put stress on last-mile delivery, he says.
The “last mile” refers to the final leg of a product’s journey. That’s when it moves from a transportation hub to its destination, generally via a common carrier like FedEx Corp., United Parcel Service Inc. (UPS), or the United States Postal Service (USPS).
A good sign for shippers is that average weekly parcel transit times during the second half of 2022 has improved since peaking at 3.01 days at the end of June, according to project44 data. For the week ending Sept. 28, transit time was down to 2.07 days.
Retailer and consumer expectations for parcel delivery
During the 2021 holiday season, consumers found themselves frustrated by out-of-stock inventory. This year, many retailers have too much stock. But merchants expect consumers to take nothing for granted.
According to a Digital Commerce 360 survey of 70 retailers, conducted in July-September 2022, half said they expected shoppers to buy earlier this holiday season to avoid finding inventory out of stock. And 36% of retailers said they expected consumers to demand faster shipping than in years past.
A survey of 1,088 consumers conducted by Digital Commerce 360 and Bizrate Insights in September 2022 confirms that consumers remain worried about inventory levels. 57% of those surveyed said they planned to check product availability before placing an order for delivery.
Delivery speed and in-stock are important
The Digital Commerce 360/Bizrate survey also found that 32% of consumers ranked speed of delivery among the most important factors when choosing an online retailer. More than a quarter (27%) selected “product in stock and ready to ship” as an important factor.
Having orders arrive late is always a problem, says Calvin Kim, CEO of Coverland, an online retailer of vehicle covers and other automotive, motorcycle and boat accessories. But, when delivery is slow everywhere, customers can be forgiving.
“Having my customers experience delays is indeed a major issue,” Kim says. “However, I don’t find the delay during the holiday season to be a major issue since the reason behind this delay is something justifiable and expected, and all retailers are suffering.”
“Of course we are expecting delays in shipping during the holidays; it is the same case every year, as it is a busy season,” Kim adds. “However, we expect the delay to be within the reasonable period of time and we make sure that our customers are informed about the maximum delay that could occur so we don’t shake their trust in us.”
But this year, consumers are confident and don’t expect retailers to suffer from slow shipping by parcel carriers, according to a project44 survey of 1,603 consumers in the United States, United Kingdom, France and Germany.
The project44 survey, conducted in August 2022, found 71% of consumers expect holiday gifts to arrive on time in 2022. Also, 64% of consumers polled said they still wouldn’t pay higher prices to guarantee their purchases arrive in time for the holidays.
Upgrading and diversifying parcel delivery
During the 2021 holiday season and the period before Valentine’s Day in 2022, Moriarty’s Gem Art received “a ton” of customer complaints about late parcel deliveries, said Jeff Moriarty, marketing manager of the family-run jewelry merchant. The retailer, which had always used USPS as its primary domestic carrier, decided to switch to offering free USPS express delivery on all orders, which solved the problem.
Moriarty said the switch raised the price of shipping orders to about $30 per parcel from about $10. But, because Moriarty Gem Art has an average order value of about $2,500, it was easy to cover the extra shipping costs by slightly raising prices.
“The good news is that it hasn’t affected sales, and customers are thrilled to get their packages so quickly. Almost every shipment arrives in one to two days (guaranteed) instead of five to seven. We don’t expect to see any issues this holiday season,” Moriarty said.
The retailer offers FedEx service to domestic customers who want to pay extra for it, Moriarty said. For non-U.S. orders, it uses FedEx exclusively.
Moriarty’s Gem Art sells online at MoreGems.com and operates a physical retail store in Crown Point, Indiana.
But not all retailers can upgrade their shipping services and simply work that extra cost into product prices. On average, companies that ship parcels — including e-retailers — are working with more last-mile carriers than in the past.
According to project44, the average shipper worked with four carriers in September 2019. That number grew to 5.7 in September 2022, a 42.5% increase. From August to September 2022 alone, carrier diversity grew 9.6%, up from an average of 5.2.
“This could be a sign that retailers are bulking up their carrier networks proactively in preparation for peak season starting in November,” according to a project44 report.
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