While a historic drop in April’s sales numbers revealed pain experienced across the retail sector, record parcel volumes indicate that “essential” businesses are still sending an overwhelming volume of shipments through the parcel networks. So much that FedEx implemented limitations on the number of items that dozens of U.S. retailers can ship.
Bound for a stay-at-home society quarantined under COVID-19 guidelines, a whipsaw in residential delivery volume is a burden on small package carriers like FedEx and UPS which are accustomed to commercial service driving operational revenue.
In response to the dynamics of the current norm, service providers across the e-commerce supply chain are taking unprecedented steps to control their own financial performance while still delivering a satisfying shopping and delivery experience.
Effects of the COVID-19 disruption are still emerging, even as organizations work to pivot their processes to meet the needs of a post-pandemic supply chain. Shippers that understand how shifts in consumer demands manifest across small package networks can pivot their supply chain strategy to control costs, avoid risk and capitalize on opportunity.
Retail Sales Plunge During April
U.S. retail sales dropped 16.4 percent during April, the largest drop of its kind since 1992. The April decline doubled the previous record for one-month tumble in the sales indicator – set just a month prior during March’s 8.3 percent record drop.
While the U.S. Department of Commerce reports the sharpest dips for clothing, electronics and furniture stores, society’s continued migration toward the online sales platform accelerates.
Month over month, the online segment posted 8.4 percent growth in April as Americans shopped from home for an expanding diversity of products, from groceries to office supplies. Compared to last year, the changes in consumer behavior accelerated by COVID-19 has increased e-commerce sales 21.6 percent.
DHL, which provides local e-commerce delivery in major U.S. markets, reported volume increases of 36 percent compared to February numbers. Increase is sharpest in the Northeast, according to a release that also stated that an increase in e-commerce orders over the past five weeks has pushed DHL's parcel volume to peak season levels.
As U.S. businesses begin reopening their doors, monitoring the evolution of consumer buying habits after COVID-19 will be an important piece in maintaining an optimal parcel shipping strategy. Will the U.S. embrace on-site shopping again, particularly in malls and other brick-and-mortar establishments? How much of your retail sales will continue to come through the e-commerce channel?
Whether your organization is an e-commerce legacy or you’re seizing new market share, serving online customers requires an expert understanding of the service implications on transportation costs. In the hurry to serve peaking customer demand, it is easy to lose sight of profitability at the order and item-level. Lacking that visibility could prevent you from capitalizing in growth areas emerging in the same environment as broader economic changes.
FedEx Limits Parcel Shipments for Kohl’s and Others
FedEx limited the number of items that about two dozen other retailers can ship from certain locations. Applied in certain geographies where volume is heaviest, the move comes as retailers across the nation have increasingly begin using closed storefronts to fulfill online orders.
For retailers, this alternative fulfillment strategy facilitates sales even when other conditions pre-empt an on-site purchase. When fulfillment alternatives are included in supply chain contingency planning, retailers can quickly pivot their network to serve emerging customer segments or specific geographies, and still maintain optimal transportation cost.
“These customers have seen significant volume growth since the spread of Covid-19,” FedEx said last week in a notice to its Ground workers reviewed by The Wall Street Journal. “In a time of already high volume growth, capping the number of packages to be picked up at these locations will limit any negative impacts to the FedEx Ground network.”
While retailers are able to keep inventory moving off shelves though online fulfillment, the volume increases in certain parts of the country have challenged FedEx facilities that were not prepared to handle a rapid increase. This is most prevalent along the East Coast and West Coast, particularly the Pacific Northwest, where the COVID-19 impacted has persisted the longest.
Customers initially affected by FedEx shipping limitations included: Kohl’s, Belk Inc., Neiman Marcus Group Inc. and Nordstrom Inc., retailers like Abercrombie & Fitch Co., Bed Bath & Beyond Inc., Hobby Lobby Stores Inc. and Eddie Bauer, and other sellers like Groupon Inc. and Young Living Essential Oils LLC. The limits varied at each location.
In an environment when parcel carriers are limiting volumes, shippers can improve critical business decision making through on-demand access to dashboards that reveal real-time access to your order volume, historical transportation transactions, carrier volume requirements and accessorial trends. Increased visibility to these and other Key Performance Indicators can deliver improved cost management and increased awareness of cost-service trade-offs.
Supply Chain Master Can Map, Mitigate Risk
Organizations that are re-calibrating their supply networks to address the weaknesses and opportunities emerging during COVID-19 can benefit significantly from the support of a supply chain expert.
Our unrivalled expertise gained across thousands of supply chains allows us to offer guidance when the way forward is unclear. We’re currently helping hundreds of clients assess their small package program to make sure they have the network in place to meet e-commerce delivery demand today and tomorrow. Deploying a best-in-class technology platform to gather, manage and analyze your parcel data, we provide evidence to support your go-forward strategies.
Leveraging this technology alongside deep parcel industry knowledge and multi-modal expertise, shippers can effectively identify any existing supply chain gaps impact performance and cost management.
To learn more about how we can map your strategies for e-commerce success in the face of supply chain disruption, talk to an expert today.
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