• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Editor's Pick Retailers shift their thinking on delivery as consumer need for speed raises costs
Editor's Pick

Retailers shift their thinking on delivery as consumer need for speed raises costs

by July 24, 2024
by July 24, 2024 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

Consumer need for speed in package delivery, which has reached its apex with same-day shipping, has placed retailers in a tough spot when it comes to managing transportation costs. The result is increased competition among shippers for retail volume in a market dominated by FedEx and UPS, according to a new survey from global consulting firm AlixPartners.

Retail executives surveyed say as more — especially younger — consumers demand same-day delivery, the financial payoff isn’t there.

Roughly three-quarters (76%) of retail executives surveyed by AlixPartners said delivery cost on a per-package basis has increased since last year, and three out of four said home delivery does not add to profitability. An overwhelming majority (85%) said reducing their total cost per order is the No. 1 priority for last-mile delivery.

Shippers are facing their own cost pressures. “Carriers have experienced meaningful inflation in wages, equipment, repair and maintenance, insurance, fuel, tires, real estate, health-care costs, and more,” said Marc Iampieri, global co-leader of logistics & transportation, and partner & managing director of AlixPartners. “Those costs are offset by future rate increases. There is also a macro supply-and-demand equation to consider as e-commerce growth outstrips retail growth.”

Iampieri said the recent UPS-Teamsters contract renewal is a good example of wage inflation. 

To save on delivery costs, retailers are moving away from reliance on single carriers in last-mile delivery. Three out of four executives reported they are using a mix of last-mile options. To date, the shift in shipping strategy has helped FedEx, but hurt UPS. FedEx was the primary last-mile carrier cited by 42% of executives, an increase of 15% year over year. But UPS saw a decrease in retailers using it as a sole last-mile carrier, dropping from 35% in 2023 to 25% in 2024.

UPS reported weaker-than-expected profits for Q2 this week and suffered its worst single-day stock loss on record.

UPS did not respond to a request for comment by press time.

In its earnings commentary on Tuesday, it cited customers “trading down,” moving to more economic options in the most recent quarter, but also indicated this was linked to the “acceleration of new entrants, new e-commerce customers” that were coming into the market, assumed to be a reference to Asian low-cost retailers and Amazon rivals Shein and Temu. UPS also noted that it lost customers year over year due to the Teamsters contract negotiations in 2023 and customers signing long-term contracts elsewhere. 

Some alternative parcel delivery companies identified as benefitting from the move to diversify last-mile delivery include OnTrac, Pandion, and LSO/Lone Star Overnight. Additional delivery companies include Uber Eats and Uber Connect, Postmates, DoorDash, Instacart, and Shipt. 

Free delivery is still the big draw for consumers, with 92% saying that factors into their buying decisions, but the consumer threshold of waiting for product delivery is 3.5 days maximum, or else they say they will shop elsewhere.

“They are addressing this by shifting customer policies with half increasing minimum order spend in the past year,” said Chris Considine, a partner at AlixPartners. “When minimum delivery expectations aren’t met, 25% of shoppers will spend elsewhere.”

Almost two-thirds (64%) of retail executives surveyed said they increased the minimum order value for free shipping; 15% said they are requiring a minimum order value and membership for free shipping. Among consumers, 25% surveyed said they preferred to Buy Online, Pick Up in Store (BOPIS) versus delivery to avoid any shipping costs and to receive the product faster.

“While this trend has traditionally been driven by convenience, continuing shifts in service level improvements, expanding options, assortment, and return to in-person working environments are also playing a role,” Considine said.

Most consumers surveyed (92%) said a delayed order would impact their future purchase decisions and 82% expected compensation, but only 4% of companies surveyed said they would offer a discount on the next purchase for a late delivery.

Considine characterized online buying fundamentals as strong, with e-commerce sales of cleaning products up the most year over year, at 11%, followed by grocery and health/medical supply, both up 10%. Footwear and apparel purchases increased to a lesser extent.

Recent data from Motive, which tracks trucking visits to North American distribution facilities for the top five retailers, shows freight volume was up 30% year-over-year in June.

To cut costs on returns, retailers have also changed free shipping qualifications.

“Retailers are tightening the return policies such as shortening or enforcing the return window of time and eliminating free returns just for convenience and requiring a stated defect or issue with the good/product,” Iampieri said.

When given the option of shipping the return or an in-store return, over 80% of consumers reported they were willing to travel between 15-30 minutes for free in-store returns versus paying a shipping fee.

This post appeared first on NBC NEWS
You Might Also Like
  • East and Gulf coast ports shut down as thousands of workers go on strike
  • Backlash against AI supermodels triggers wider fears in fashion workforce
  • United Airlines expects busiest spring break ever despite travelers’ cost concerns
  • Professionally monitored alarm systems in Europe and North America surpassed the 50 million mark in 2021
Share
0
FacebookTwitterPinterestWhatsapp

previous post
Delta Airlines cancellations and delays continue but worst of IT outage impact is over, CEO says
next post
Inflation and $2,000 camps are creating a summer crisis for working parents

You may also like

Mortgage demand falls to the lowest level since 1995 as...

October 20, 2023

Honda recalls nearly 564,000 CR-Vs sold in 22 cold-weather states...

April 7, 2023

Renewable energy demand could triple as electricity consumption surges

July 25, 2024

Walmart says users of weight loss drugs are buying less...

October 9, 2023

Americans are flocking to Texas: 9 of the 10 fastest-growing...

July 24, 2024

Housing, inflation, interest rates and more: What to expect in...

December 27, 2023

CFPB rule to save Americans $10 billion a year in...

May 10, 2024

As Lionel Messi descends, Miami economy faces another turning point

July 26, 2023

Tesla has downsized by at least 14% this year after...

June 24, 2024

Global IoT market size to grow 19% in 2023

February 9, 2023

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout, pulls outlook

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025
    • The Unpredictable Stock Market: How to Make Sense of It

      May 8, 2025
    • AMD CEO calls China a ‘large opportunity’ and warns against strict U.S. chip controls

      May 7, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,632 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,339 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,320 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,302 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,186 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout,...

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    SEC charges ‘Cash Flow King’ podcaster...

    September 26, 2023

    United Airlines adds Thailand, Vietnam and...

    April 3, 2025

    Potential UAW strike: Where labor talks...

    September 9, 2023
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here