Fleetowner Com Sites Fleetowner com Files Uploads 2014 11 Freight Roll
Fleetowner Com Sites Fleetowner com Files Uploads 2014 11 Freight Roll
Fleetowner Com Sites Fleetowner com Files Uploads 2014 11 Freight Roll
Fleetowner Com Sites Fleetowner com Files Uploads 2014 11 Freight Roll
Fleetowner Com Sites Fleetowner com Files Uploads 2014 11 Freight Roll

When free shipping meets the capacity crunch

Nov. 12, 2014
It’s a collision of forces that may be worthy of a “Godzilla” style monster movie: where demand for more and faster free-shipping to support burgeoning e-commerce sales slams into a freight transportation network with little to no capacity left to spare.

It’s a collision of forces that may be worthy of a “Godzilla” style monster movie: where demand for more and faster free-shipping to support burgeoning e-commerce sales slams into a freight transportation network with little to no capacity left to spare.

This “battle,” if you will, appears set to take place over Thanksgiving this year – a holiday that apparently is considered the “peak-season” for e-commerce orders.

Research firm Kurt Salmon recently conducted a survey of 100 retailers and found that most of them plan to cut processing and shipping time frames for multi-item orders by almost two days this holiday season.

On average, the firm said it took retailers eight days to get orders into the hands of shoppers last year, with 3.4 days to process and 4.6 days to ship. This year, retailers are looking to cut down processing time by one day and reduce shipping time by nearly one day as well, to bring the total order fulfillment time down to 6.1 days, Kurt Salmon found.

Yet how are retailers going to do that when freight capacity is near or at 100% utilization already across much of the country? For example, a lack of capacity is creating traffic congestion at the ports of Long Beach and Los Angeles – where 40% of U.S.-bound imports enter the country – that in turn is generating nightmare-level delivery delays.

Yet Steve Osburn, retail strategist at Kurt Salmon, noted that such issues aren’t dissuading retailers from abandoning “full speed ahead” efforts to reduce shipment times for e-commerce orders.

“It’s high stakes during the holidays, and retailers are playing a game of ‘anything you can do, I can do better’ when it comes to fulfillment,” he noted.

“While it’s great for consumers looking for deals and convenience, it’s proving challenging for retailers who are already contending with constrained margins from a heavy promotional environment,” Osburn added. “We’ve seen retailers making progress to improve and enhance fulfillment practices to avoid the issues we saw in 2013, but every retailer can’t be Amazon.”

When Kurt Salmon researchers polled retailers about asked how competitive shipping and fulfillment practices could harm holiday sales, free and faster shipping were their top concerns.

A plurality of retailers (36%) say they are worried about competitors offering free shipping and 18% are worried they’ll lose sales to competitors offering next-day and same-day delivery.

Yet Kurt Salmon noted that “the free shipping war is on” among several big-box stores, with Target recently announcing free shipping for the rest of the season with no minimum purchase, and already 76% of retailers are offering some form of free shipping off peak, compared to 35% last year.

When the firm asked about priority investments to improve peak-season delivery, retailers say that their top focus was on shipping (25%) and technology/information (24%).

Retailers are also investing in free and faster shipping in order to capture more e-commerce sales in a competitive market, Kurt Salmon’s poll found. On the technology side, retailers noted that they were investing in online inventory and shipping management systems, distribution software, and improved forecasting systems, the firm reported.

And that’s amidst a spike in volumes, as Forrester Research is predicting that holiday e-commerce sales will increase 13% to $89 billion this year.

Kurt Salmon also stressed that many retailers free shipping is increasingly expected by online customers, with the big “differentiator” this holiday season potentially coming down to shipping speed.

“After a few years of spending spikes early and late in the season, retailers are making ambitious promises in order to capture last-minute online sales,” Osburn said. “But if you compare average delivery times with last-minute promises, there is a gap that retailers will need to account for.”

That became readily apparent during the Christmas season last year, Kurt Salmon pointed out, when last-minute orders for guaranteed Christmas delivery became “a thorn in the side of many retailers,” the firm noted.

Retailers say that about 15% of orders arrived late in 2013, with 26% of last-minute gift deliveries thwarted by failures to upgrade shipping when items left the distribution center late.

Another 25% said they did not have the inventory in stock , Kurt Salmon reported, while 45% pointing the finger at the shippers or the shipping method and 24% blaming delays on carriers. Another 21% cited issues with a non-guaranteed shipping method such as SmartPost and SurePost.

Yet despite such challenges, Kurt Salmon’s survey found that retailers will be even more aggressive with efforts to capture last-minute e-commerce sales this season, with 26% this year – up from 17% in 2013 – making their “cut-off” for guaranteed Christmas delivery at one to three days before Christmas.

Nearly 50% of retailers in the poll said they will guarantee delivery by Christmas for orders placed by December 20, the firm noted, compared to 37% in 2013.

Overall, retailers plan to push back the last order date for guaranteed Christmas arrival on average from 6.9 days (around December 18) to 5.5 days (between December 19 and 20), said Kurt Salmon, with retailers also aiming to reduce the number of late orders to just 8% this year.

It’ll be interesting to see how this clash of titanic freight forces turns out.

About the Author

Sean Kilcarr 1 | Senior Editor

Sponsored Recommendations

Tackling the Tech Shortage: Lessons in Recruiting Talent and Reducing Turnover

Discover innovative strategies for recruiting and retaining tech talent in the trucking industry at our April 16th webinar, where experts will share insights on competitive pay...

Stop Sweating Temperature Excursions

Advanced chemical indicators give you the peace of mind that comes from reliable insights into your supply chains. Compromised shipments can be identified the moment they arrive...

Stop Sweating Temperature Excursions

Advanced chemical indicators give you the peace of mind that comes from reliable insights into your supply chains. Compromised shipments can be identified the moment they arrive...

How Electric Vehicles Help You Prolong the Life of Your Fleet

Before adopting electric vehicles for commercial/government fleets, prioritize cost inquiries. Maintenance is essential; understand the upkeep of EV fleets. Here’s what you need...

Voice your opinion!

To join the conversation, and become an exclusive member of FleetOwner, create an account today!