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From Prime Day to 3PLs, the e-commerce industry has been hit by inflation just like many. How will the rest of 2022 shape up?
This year has flown by! We’re officially past the halfway point of 2022. With heatwaves keeping everyone inside hiding from the sun, summer sales kept everyone busy. Let’s review the latest industry news of the past month. From Prime Day to 3PLs, the e-commerce industry has been hit by inflation just like many. How will the rest of 2022 shape up?
Amazon Prime Day
Prime Day kicked off back-to-school shopping for many in the US early in July. With deals on home items, technology, and lifestyle, Amazon shoppers bought more than 300 million items this year, making it the biggest Prime Day event to date. However, this year was strongly impacted by inflation, with 83% of Prime day shoppers reporting that inflation and rising prices impacted their Amazon purchases, reports Numerator. In years past, Prime Day has served as a time to get deals on electronics, and while that was not lost, this year trended towards more necessities over indulgences as prices increased. Household essentials became the most purchased category as consumers stock up.
Cost of Shipping
It has been a crazy few years, with the cost of shipping off the charts. High demand and a limited amount of ships that can ferry goods have led to an exponential price in shipping. This causes bogs in the supply chain. But in recent months, the cost of shipping has receded as the demand for goods has gone down in America. Consumers are shifting their spending from goods to services. The cost of shipping containers is down 62% from last September but remains three times the average pre-pandemic cost. Inflation also worries consumers as prices go up both for products and for shipping rates to offset gas prices and labor shortages.
Demand for 3PL has skyrocketed in the last year. High performance and elevated rates from ongoing supply chain issues left companies with record profits. The US 3PL market gross revenues grew 50.3% to $347.9 billion last year. More and more companies are making use of 3PLs for major transportation and logistics services. Mergers and acquisitions are expected to continue and larger 3PL establishments are expanding their value-added services and geographic reach. It's clear that 3PLs are not slowing down anytime soon.
For frequent online shoppers, delivery speed is now as important as shipping cost. A new State of Shipping report by X Delivery revealed that 62% of shoppers expect orders to arrive in less than 3 business days when choosing free shipping. 56% of abandoned carts are blamed on delivery concerns. While consumers want free shipping, they are not opposed to paying for faster shipping, so long as it does not cost more than $7. Consumers expect that shipping will be fast and free, which isn’t always doable. If retailers want to lower the number of abandoned carts, they must consider how to approach a streamlined, expedited shipping experience for their customers.
FedEx Scale Back
In 2020, FedEx rolled out Sunday service to help manage the increase in deliveries to residential areas. Now, it is reported that FedEx plans to scale back Sunday delivery in low-density, rural markets. With rising costs, small companies that deliver packages for the ground unit have been losing money. Lower volume on Sunday meant that FedEx was losing as much as $500 million a year. Compared to FedEx, UPS relies mostly on the US Postal Service for its Sunday deliveries.
Consumers are eager to travel and socialize again after two years of pandemic restrictions. But with rising costs and inflation, budgets are a bit tighter. 62% of consumers plan on taking as many as four trips throughout 2022. Compared to last year, many more consumers are planning to resume in-person activities in the coming months including hotel and airplane travel, while also becoming more deliberate about spending due to inflation. Shopping trends on Amazon point to the trend of travel excitement, with revenues in the luggage category up 183%.
Reduce, Reuse, Recycle E-commerce
E-commerce transportation accounts for 3% of global greenhouse gas emissions but is on track to become 17% by 2050. The increased use of delivery trucks and the environmental impact of packaging heavily contributes to this rising number. The shipping and logistics industry as a whole needs to work on reducing carbon emissions and changes to the climate as it will incur further costs down the road. Our partner, Sendle, is a leader in the industry with their 100% carbon-neutral delivery. Reducing emissions is a huge task for the industry and all its players.
Q3 is starting to heat up! Summer sales saw consumers spending money, but inflation shifted wants and needs for purchases. At the same time, consumers expect shipping to be fast and cheap, even as the cost of shipping remains high. 3PLs continue to expand their reach, but some carriers are scaling back their delivery frequency. Investing in technology that can handle these hot changes will be a key point in the remainder of the quarter. Consider a shipping solution to help with shipping!