2020 means new trends for small-parcel shippers — and new ways they should operate. Shipping pro Sarah Sears has been working with shippers in diverse logistics environments for more than 5 years, helping them solve complex issues and better communicate with their carriers. In this interview, she sheds some light on what to expect for the rest of 2020.
What might it mean for shippers who typically ship small parcels if FedEx and UPS are moving away from USPS last-mile delivery? How will it impact cost and time in transit?
Last-mile delivery services are cheaper than ground or express shipping. FedEx and UPS moving away from these services will mean faster deliveries, but probably higher costs to use the carriers’ services instead of USPS.
How will same-day delivery and on-demand package delivery services impact the market?
Same-day delivery means new costs for carriers, which usually trickle down to consumers, but I’m not sure how well these Uber-like, on-demand package delivery services will actually compete at a large scale.
Same-day delivery means infrastructure changes and service-type changes for the big players so that they can compete. This week alone I’ve talked to three clients using the FedEx SameDay City program. Shippers love choices and they’ll try out price points and delivery times to find a fit.
It will be interesting to see if new players can compete with the duopoly. Regional carriers have been around for a long time, but they haven’t been a big drain on UPS or FedEx revenue. On-demand delivery services may be a popular service today with small brick-and-mortar stores that are having to pivot with COVID-19, but I think of them as being similar to spot shipments in the LTL world. They don’t replace contracts with the main carriers. Big shippers like consistency and guarantees and familiarity. We will see.
What other options could come about for last-mile delivery?
We’ve been speculating about how FedEx and UPS will deal with last-mile deliveries as they’re pushed into more residential shipping for years. We know they’re working on their networks and trying to innovate service offerings. We’ve all heard about some future where all of our packages are delivered by drones to our door. One option is pickups for rural deliveries at businesses or storage lockers. It will probably amount to a lot more choices for clients, and some of those choices will have a premium price tag.
What is the best way for shippers to deal with customers on shipping and how can you best communicate with them before, during and after purchase?
Best practices for shippers communicating with their clients is to be transparent with your policies. Whether you’re baking the cost of shipping into the price or adding it separately at checkout, once the package leaves your door, there is a lot that you can’t control: late deliveries, damage, etc. With COVID 19, no one can guarantee arrival dates or times. Communicate that.
Know what is happening in your market, especially with time in transit, to understand what you need to offer. Clients demanding fast and free shipping in some markets mean shippers have to figure out free shipping levels. Knowing your true Cost of Goods Sold will be vital to figuring out how low you can make the prices for your clients and whether you can process free returns.
Should shippers alter their shipping policies in light of carrier shifts in service?
Whether and when you should alter shipping service types or policies usually comes down to cost and customer demands.
Stay up to date with market trends. Continuously benchmark your rates and understand your current Cost of Goods Sold. That will tell you whether your contracts are still working for you the same way they were six months ago. If you can afford to offer better service, will it help you beat out competitors? That question can’t be answered until you understand whether you can afford to offer better service.
What’s your top recommendation for a small-parcel shipper?
Don’t be content negotiating a better contract this year than last year. If you’re comparing just against yourself, you could be moving the needle from a C- contract to a C+. It’s like comps in housing. You would never buy a house without knowing what the rest of the neighborhood paid. Find a way to benchmark your rates against similar shippers so you can make the right deal. It’s the only way to know if your negotiation deserves a pat on the back or if there’s room to move the needle.
Invoices looking higher these days? Surcharges add up fast, especially with all the recent changes in the industry. Our new eBook gives you a quick look at the top budget-busting surcharges and how to get them under control.