E-commerce… The Growth Engine
Published on October 3, 2012 in Articles
The e-commerce business is becoming the growth engine for the parcel carriers, 3PLs and other modes of transportation. We are moving into an era that we will be shopping from our phones on a regular basis. Here are some retail figures that put this into perspective:
- • $4.8 trillion in total retail sales
- • $230 Billion in e-commerce sales
- • 17% growth rate in e-commerce sales
Many retailers are re-inventing themselves to handle the “shopping mode” shift that is happening today. There are decisions being made on a daily basis as to how to efficiently handle these orders with-in a given supply chain structure or to outsource to a 3PL. Let’s take a look at how this is impacting the parcel carriers.
FedEx Ground & Smartpost are generating more profit than its’ Express Division…who saw that coming. UPS quoted in their last financial press release the following: “The majority of the improvement was driven by large e-commerce customers shipping low weight residential shipments”. FedEx and UPS move over 18 million parcels a day in their ground networks combined. Their reliable and fully transparent networks are creating a new market. The FedEx Smartpost Division saw a 18% growth rate in their last quarter. The USPS plays a critical role in this equation. They handle the “last mile”delivery for FedEx Smartpost and UPS SurePost. The USPS has the most sophisticated residential delivery network in the US. They play as a competitor to the duopoly and serve as a partner with them. This has created a very unique infrastructure in the US. The USPS Priorty Mail product has done quite well too. They offer flat rate programs that are very competitive for small and large shippers. As we enter the end of the year, the carriers are all announcing their price increases. Fed Ex Ground just announced their 5.9% rate increase for express services and will announce their ground increase in the near future. Some of the significant changes that impact the e-commerce world are the following: residential delivery fee: $3.20 (6.7% increase); Residential Destination Area Surcharge: $3.25 (8.3% increase); and Declared Value Minimum $2.55 (6.3%)…pay attention to these changes and how they will impact your total cost. However, on the fulfillment side of the business, many e-tailers are experiencing the following challenges:
- • Long processing time for outbound orders
- • Upholding standards for service
- • System integrations
- • Return Shipments
- • International Shipments
- • Need for customization
- • Increased processing time for receiving
- • Quality requirements
- • EDI Processing
Many 3PLs in the US offer multi-site/multi-client distribution centers which creates more flexibility and reduced inventory cost.
As you sip your great tasting coffee from Starbucks and you are ordering your next item from your phone, please remember what it takes behind the scenes to deliver that package to you in 2 days. The power of e-commerce is creating more jobs and delivering a great experience for all of us.
— Michael J. Ryan
written for October 2012 e-news for parcelindustry.com