Online's Popularity Fuels Shipping Delays
It's too late to hope for delivery by Thursday. Could a change in shipping zone rate structures solve the problem?
The last-minute Christmas shopper is a species whose number just can't be reduced, no matter how hard retailers try. “Many retailers started their holiday promotions in October or earlier to get the attention of shoppers and avoid...shipping issues,” says Scot Wingo, executive chairman of ChannelAdvisor, a software supplier to third-party sellers online.
The shipping issues Wingo refers to were manifested last Friday when online marketplace Jet.com announced it would be unable to guarantee delivery by Christmas for items purchased that day. “This year's holiday gift rush has led to nationwide shipping delays that have affected many of our fulfillment partners,” said a message to customers on the Jet.com site. And it's not been bad weather causing delays as it did in 2013; it's consumers' growing preference to do their holiday shopping online.
Last week the National Retail Federation (NRF) reported that November—the month including all-important Thanksgiving and Black Friday shopping events—turned in a measly 0.5% sales rise over October for brick-and-mortar stores. NRF pegged the year-over-year gain at 3% and First Data put it at 2% from November through December 14. Online sales for that same period grew 4.6%, First Data reported, noting that e-commerce sites kept on selling while physical stores slept. At 5 a.m. on Thanksgiving Day, online sales were 44% higher than last year at that time, while brick-and-mortar sales rose just 8%.
“Consumers are moving toward online sites in droves. This is increasing the pressure on online retailers to deliver more orders than they may have expected,” says Tom Caporaso, CEO of FreeShipping.com.
But a change in the way packages get delivered during the holidays could sidestep delays, maintains one expert.The cheapest shipping zone rate from the U.S. Postal Service is Zone 1, a local rate for deliveries within 50 miles of origin. Zone 1 packages don't have be taken to hubs and resorted. But UPS chooses not to offer a Zone 1 rate because it would cannibalize its Zone 2 business, according to Robert Persuit, director of business development at ShipMatrix.
“Retailers with online and physical stores could get merchandise delivered this week if fulfilled from local stores, but the shipping cost is prohibitive because the company already invested in having it delivered to the store and then would have to pay Zone 2 pricing to use UPS,” he explains. “If they could offer a Zone 1 rate, I would expect a consumer would even pay an extra $5 to get a package the next day.”