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Prepare for a Shipping Capacity Strain this Holiday Season

According to a fresh report from Salesforce, businesses relying on parcel shipping should prepare for a potential capacity crunch this holiday season. Though the holidays are considered “peak season” for parcel shipping every year, unprecedented increases in e-commerce look to bring a new level of intensity in the weeks to come.

COVID-19 Is Transforming the Holiday Retail Landscape

Although the COVID-19 pandemic has hit retail hard, not all retailers are struggling. Stores deemed essential — such as grocers, Wal-Mart, and Target — are thriving.  In addition, retailers able to market and sell in the omnichannel have fared well.  While digital sales and online shopping were on a steadily increasing trajectory before the pandemic, in 2020, online retailers (and physical ones with a significant online presence) saw massive increases in sales as consumers sought to avoid unnecessary trips out in public.  Now, as we hurtle toward the holiday season with no end to the pandemic in sight, industry watchers like Salesforce anticipate a deluge of online orders that eclipses anything the industry has seen to date.

Increased Online Orders Mean More Parcel Shipping

This increase in online orders will lead to a significant increase in parcel shipping. During this peak season, there will be more packages headed to consumers’ doorsteps than ever before — a lot more. Every part of the shipping chain will be stressed, and that last-mile, box-to-doorstep part of the journey will be stretched the most.  In its new report, Salesforce estimates peak season demand for parcel shipping will be approximately five percent higher than total shipping capacity, which means as many as 700 million parcel deliveries could be delayed if this prediction proves accurate.

Capacity Issues Lead to Surcharges as Well as Delays

Not only is there a great likelihood of shipping delays this holiday season, but businesses must also contend with peak delivery surcharges. While carrier surcharges are nothing new, and international shipments have been subjected to pandemic-related surcharges for much of the year already, this peak season will add unprecedented expenses to shippers’ transportation budgets.

UPS and FedEx have already announced significant peak season surcharges that run as high as five dollars per parcel for some customers. And for the first time in its history, the United States Postal Service is also implementing peak season surcharges on its biggest clients (Amazon, UPS, and others that rely on USPS for the last leg of delivery).

In total, Salesforce expects approximately $40 billion — yes, billion with a — in peak surcharges will be leveled this holiday peak season. That’s a significant amount of capital above and beyond the normal costs of doing business.

Despite Online Surge, Overall Sales Still Down

The economic effects of the pandemic loom large over a significant percentage of consumers. Despite the surge in online orders, industry watchers agree, overall sales will be a bit lower than in previous years. The increase in online orders will not completely offset the drop in physical retail.

Physical Stores Remain an Important Strategy

Provided the United States doesn’t enter a second lockdown period, physical retail stores remain an important piece of the retail strategy. Though foot traffic and sales are down, physical stores remain vital for consumers without reliable internet connectivity and older consumers who don’t buy as much online. But this isn’t the only reason physical stores remain crucial.

Given the expected capacity problems and delays in parcel shipping (and specifically, last-mile shipping) this holiday season, businesses with an existing retail footprint should rely on those physical locations to ease shipping delays. By enabling buy online, pick up in store (BOPIS), retailers can cut out the box-to-doorstep component of the shipping process for some customers.

BOPIS can be a real opportunity for improving brand recognition and loyalty, as well. Both of these metrics have suffered during the pandemic, as consumers turned to whatever brand could deliver. By setting up a better BOPIS experience, brands can regain some of this lost loyalty.

These experiences could involve touchless pickup, car-side service, or delivery. Even conventional BOPIS, where the customer enters the physical store, will greatly increase customer satisfaction over last-mile shipping delays.

Some Consumers Buying Early

Another trend noted by Salesforce is a trend to buy early. The pandemic has disrupted supply chains and created economic uncertainty. In the spring, many consumers found themselves working from home and waiting a month or more for a new chair or printer. And let’s not talk about toilet paper! As a result, consumers may buy much earlier in the holiday season in an attempt to avoid the delays that happened earlier in the year.  In addition, those who are doing well financially may buy early if they’re worried about what could happen in the coming months.

Better Tools Bring Better Success

The capacity strain is going to be a challenge for retailers and shippers alike. But retailers that implement state-of-the-art logistics and shipping tools will be better positioned for success, despite the strain. The Logistyx Parcel TMS streamlines your processes and optimizes your shipments, from parcel shipping execution to carrier invoice reconciliation.

If your business needs to simplify its multi-carrier shipping, Logistyx can help. Reach out today to learn what we can do for you.