For 2020, Black Friday, the day after Thanksgiving, will lose its position as the traditional start of the holiday shopping season. This year, Amazon Prime Day is the new Black Friday that will kick off a dramatically different peak season and usher in peak season surcharges and tighten small parcel and truckload capacity.
Amazon started Prime Day in 2015 for special deals on popular items for holders of an Amazon Prime account that offers fast, free shipping, free access to streaming TV shows and movies, and other perks. Prime Day 2020 was initially scheduled for July 15 but was postponed as Amazon, and the rest of the country, dealt with the disruption from COVID-19.
Prime Day has been rescheduled for Oct. 13-14, a two-day extravaganza of clicking and shipping. Last year, Amazon sold more than 175 million items worth more than $5 billion, five times the average daily sale of the entire quarter. Overall, Amazon has 150 million prime account holders, as of January 2020.
To compete, other major retailers, including Walmart and Target, have announced their own promotions to coincide with Prime Day. They’re also expanding holiday specials beyond Black Friday to help space out consumer demand, reduce stress on the supply chain, and avoid peak season surcharges.
Amazon Prime Day Will Impact Small Parcel Capacity For Shippers
Amazon Prime Day comes when a variety of trends are converging that may pose challenges for shippers, whether they sell via Amazon or not: surging e-commerce orders, tight truckload capacity, small parcel backlogs, and peak season surcharges.
While Amazon has its own fleet, it also routinely contracts additional capacity from carriers. Amazon has doubled its fleet in the past year to 20,000 trucks to support its new one-day delivery standard for Prime shipments. It’s investing in heavy-duty tractors to pull its fleet of trailers that had been hauled by contract carriers. Analysts speculate Amazon will use fewer contract carriers to take more control of its transportation. Carriers will have to compete with Amazon for qualified truck drivers. Overall truckload TL capacity has been tight since June and shows no signs of loosening. This has already driven rates up and posed challenges for shippers. Inbound freight has been growing as merchants who sell via Fulfillment by Amazon (FBA) stock shelves in anticipation of the big day(s).
Amazon also delivers packages via the leading small parcel carriers, including UPS and FedEx. The small parcel market has also shown signs of strain already this year, with some analysts estimating that the major parcel carriers will run out of capacity during peak season. Ecommerce is expected to reach 30% of total retail revenue during the peak, severely straining the parcel network. Analysts predict a flood of online buying could exceed capacity for last-mile delivery carriers.
Small Parcel Capacity Will Be More Expensive Due To Peak Season Surcharges
The major parcel carriers have announced their peak season surcharges. Depending on a shipper’s volumes in February 2020 and the shipping dates, UPS will add a surcharge of $1-$3 per package for residential deliveries. FedEx will apply a peak Residential Delivery Charge for high-volume shippers of $1-$2 per package, as well as fees for oversize packages and those that require additional handling. The USPS will also implement its first-ever peak season surcharge through Dec. 27.
The parcel carriers have already started rejecting larger parcels from their networks to deal with the strain, leaving shippers scrambling to find alternate solutions. UPS and FedEx, as well as regional carriers like Spee-Dee and Lone Star, are pushing anything in excess of 51 lbs. and/or oversize parcels out of their system. Any box that’s 50 lbs. or lower and less than 60 inches in combined length can use the majority of the conveyor processes. This trend will continue moving forward with the regional parcel carriers, and rates could escalate in response to overwhelming volumes.
With other retailers also aligning around Prime Day, shippers must plan for disruptions.
How Can Shippers Prepare For A Small Parcel Capacity Crunch And Peak Season Surcharges?
To survive the 2020 peak season, shippers should partner with logistics service providers capable of thinking outside the gift box. Doing things the same old way, but only more intensely, won’t be successful. In a recent interview with DC Velocity, GlobalTranz Chairman and CEO Bob Farrell remarked, “Shipper customers of ours are looking to have as many SKUs as possible as close to their customers as possible, and some of them are even carrying ‘just in case’ inventories because they’re worried about disruptions.” GlobalTranz offers a variety of peak season solutions for shippers:
Doorstep Delivery Programs
GlobalTranz was recently contacted by a longtime customer for whom we execute final mile and white glove delivery services. One of the major parcel carriers had just rejected 30,000 of their parcel shipments due to the size of the parcels.
Leveraging our final mile and white glove delivery network, GlobalTranz developed a “doorstep delivery” program for this customer, which is being implemented now to ensure the timely delivery of orders to their customers through peak season and for as long as needed. The first lesson is to know the carrier’s dimensional requirements and limitations. Second, be willing to pivot to a new solution.
Think like a carrier so you can get the most out of each shipment. Convert single or small groupings of multi-parcel moves to LTL, which can result in significant savings and remove your load from the stressed parcel network.
Accessorial Charge Reductions Through Final Mile Delivery
However, mode conversion from small parcel to LTL won’t work for every shipper, as the added accessorial charges may drive rates up significantly. Instead, shippers can take advantage of GlobalTranz’s final mile solution, which eliminates the accessorial charges while at the same time improving the customer experience through an improved delivery experience. In addition, GlobalTranz has pricing in place with many carriers that includes Pallet pricing and low minimums. Many parcel conversions fall into these categories as they are not full pallet shipments.
Most companies are still using pre-established weight breaks in the 150-lb. range. The bar has dropped significantly due to dramatically increased rates in these categories (as well as penalties), and many shippers have not adjusted the new breaks. Look at your data set of shipment weights compared to the breaks and revise your shipping rules accordingly. In the same DC Velocity interview, Farrell commented, “We leverage data around visibility, like the locations of assets across modes, and we make that visibility available to both customer partners and carrier partners in real time,” Farrell said. “As a technology-driven company, we continue to deepen and widen the amount of data we have, and make it a ‘competitive weapon’ for us to offer services to customers.” If you need assistance, please reach out and our experts can advise you.
Pop-Up Fleet Solutions
Shippers in need of dependable surge capacity can pre-arrange for additional capacity at a contract rate with a pop-up fleet. You won’t have to go to the spot market to scramble for capacity, and you can scale the fleet as needed with dedicated truckload capacity.
Hope For The Best, Prepare For The Worst
Amazon Prime Day could be the leading indicator of how the 2020 peak season will turn out. With e-commerce booming, Black Friday and Cyber Monday could last for weeks. Severe weather events, economic uncertainty, and the global pandemic will undoubtedly play a role in this year’s buying season.
Develop a flexible, adaptable supply chain that uses every option in the book- and maybe invents a few new ones. GlobalTranz offers a range of solutions to help your supply chain adapt to this highly dynamic environment.