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June Wrap-Up

DesktopShipper
Posted by DesktopShipper on Jul 6, 2022 8:00:00 AM

What time is it? Summertime! The weather is heating up, and so is the e-commerce industry. As travel begins to pick up again, families and young adults are among those eager to explore and spend time outdoors. Although this trend would normally mean more business for outdoor activity retailers, inflation increases are making consumers reconsider their purchasing decisions. With Q3 now underway, we're looking back on the e-commerce trends that have made a splash in the last month. 

 

Inflation Affects Consumer Behavior 

The cost of living for American consumers has reached a record high. In light of rising gas prices, rising rent, and a backed-up supply chain, consumers are second-guessing their purchase needs, including subscriptions. It is imperative that companies ensure their products and services provide value to consumers even at increased price points. As consumers take longer between purchases, reminding them of additional benefits or sustainable practices can be an effective way of convincing them to make a purchase. For example, it is clear that customers expect free, fast, and reliable delivery. Despite the fact that there really is no such thing as free shipping, customers should be aware, that in light of inflation, the purchase prices are likely to increase in order to keep up with the cost of materials and shipping. The customer experience is crucial. Therefore, as long as consumers receive their purchases and their shopping experience is satisfactory, the increased price will be justified and (somewhat) accepted. 

 

Easy Returns Come at a Cost

E-commerce has always faced the challenge of reverse logistics. A company's success depends on how successful it is in managing returns. Returns are both costly and logistically complicated. 92% of consumers surveyed by Invesp reported that they will buy again from a company if a returns process is easy. In June, competing return provider companies, Shopify's "Loop", and PayPal’s "Happy Returns" announced a partnership that allows Loop users to offer box and label-free returns at Happy Returns’ locations. Brands are reconceptualizing the returns process to better the experience for businesses and consumers alike.  Several apparel retailers are also striving to innovate the reverse logistics process, even if it is at the cost of free returns. Zara, recently announced that it is working to modify its return policies to allow European customers to return online purchases to third-party drop-off points for an additional return fee. (In-store returns will remain complimentary). Charging a fee for returns isn't a new practice, especially for electronics, but retailers have to balance customer demand and competitor action. If more and more retailers have higher return rates and thinner margins, then charging for returns might soon become the norm. 

 

Amazon Set to Take Lead

Amazon is on pace to pass UPS and FedEx to become the largest delivery service in the US. Currently, Amazon sits behind UPS but remains UPS’s largest customer and competitor. Earlier this year, Amazon announced its new service, Buy with Prime, which allows third-party merchants to use Amazon’s shipping and logistics network to fulfill orders on their own sites.

In 2021, Amazon delivered more than 5 billion packages in the US to UPS’s 5.5 billion packages. As Amazon is its own fulfillment network, it ships products for the millions of businesses selling on Amazon, with revenue that is five times that of UPS. Amazon promotes free and fast two-day or next-day delivery by suggesting to e-commerce businesses to increase product prices to cover the cost of shipping. It is only a matter of time before Amazon overtakes the other carriers and within five years, has a logistic network large enough that it won’t need to rely on UPS or the USPS anymore. 

 

By the Numbers

According to one of our partners, Pitney Bowes, parcel volume in the US increased to 21.5 billion shipments last year. This translates to around 700 parcel orders every second. By 2027, US parcel volume could reach up to 40 billion pieces yearly. The big four carriers, USPS, UPS, FedEx, and Amazon, controlled 98% of parcel traffic last year, yet smaller carriers continue to help with a significant amount of last-mile delivery, and their collective volume increased by 94%. Shippers will continue diversifying their carrier base as smaller carriers gain more momentum.

 

Google Enters the Chat

Google is making moves into the e-commerce marketplace space. However, Google will need to put its best foot forward to compete with the Amazonian giant. Google is letting e-commerce businesses run shopping ads for free, which has resulted in a 43% increase in search revenue in 2021. More than Amazon, consumers are using Google to research products and price shop. Although Google is retailer-friendly, acquiring new customers from their searchers is still in the works.

 

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Topics: Ecommerce News

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