2019 is on track to demonstrate record-breaking growth in the parcel shipping market, and this will occur in tandem with the surge of e-commerce. According to the Journal of Commerce, the U.S. parcel shipping market handled more than 12.7 billion shipments in 2017, and the majority of these packages weighed less than five pounds. Preliminary reports suggest the parcel market for 2019 will be even higher, and data and statistics are not yet available regarding the number of packages shipped at the end of 2018 to reflect the holiday shopping season. Therefore, shippers need to understand the driving forces of growth in the parcel shipping market and how it will impact their operations.
A Healthy Economy Will Lead to More Consumer Spending
Although the economy suffered a slight slip at the end of 2018, national indices and the stock market allude to the continued expansion of the economy. A healthy economic state inherently leads to more consumer spending. As consumer confidence increases, they are more likely to make often-overlooked purchases for themselves and others. This will increase e-commerce demand too, but it comes with a caveat. Uncertainty about the economy remains, and the government shutdown at the end of 2018 resulted in tremors in the economy. Only time will tell if the growth of the economy can continue and promote a higher demand in the parcel shipping market, but even staying at levels before the holiday shopping season of 2018, 2019 will see growth in the industry.
Amazon’s Services and Products Will Continue to Expand
The growth of Amazon represents one of the biggest challenges for shippers in 2019. As Amazon develops its private fleet, Amazon Air and other capabilities, it will be more competitive with parcel carriers, reports Henry Carmichael via FreightWaves. Owning their own logistics network will effectively undercut the profitability of third-party companies, so shippers will need to re-evaluate their supply chains and logistics processes to offer Amazon-like pricing and shipping options comparable, if not better than, Amazon.
Getting The Most Out of Shipping In 2019
How Effective Operations Management & Technology will Enhance Shipping
More Companies Will Turn to USPS to Handle Last-Mile Parcels
Another change to watch for in the 2019 parcel shipping market will be the increased use of the United States Parcel Service (USPS) to handle last mile parcels. Many companies, including FedEx, UPS, and DHL, routinely outsource parcel shipping to USPS, and this is the result of USPS maintaining some of the lowest parcel shipping costs in the industry. However, USPS announced rate increases at the beginning of 2019, and such increases are likely to force shippers and carriers to reconsider the use of USPS shipping. At the same time, the capacity crunch and driver shortage will likely lead to more outsourcing of the last-mile parcel shipping journey throughout the coming year.
Same-Day Delivery of Parcels Becomes a Reality
Consumer expectations for rapid delivery are increasing. Delivery is essential to staying competitive with Amazon, and consumers are willing to pay a premium for faster delivery, reports Deena M. Amato-McCoy of Chain Store Age. Consumers willing to pay a premium in the parcel shipping market will push more carriers and shippers to offer same-day delivery at premium prices. Meanwhile, the Amazon business model will continue to drive some customers back toward the e-commerce giant over those charging a premium for rapid delivery. Ultimately, shippers need to be vigilant of where Amazon stands and maintain quality assurance and analytics to determine if the existing parcel delivery options are fast enough to drive profitability throughout the year.
New Parcel Delivery Applications Will Take Root in the Parcel Shipping Market
New parcel delivery applications will also become evident in the 2019 parcel shipping market. Outsourcing of last mile delivery services for parcel is already well underway in bigger cities, including Chicago and Los Angeles. This is the Uberization of trucking in the parcel world. Companies are turning to third-party drivers to augment last mile delivery services. The most straightforward reason for this goes back to the sheer size of small packages. With the overwhelming majority of small packages weighing less than 5 pounds, it represents a menial task to drivers, and anyone with a valid driver’s license could deliver last-mile parcels. They might even deliver 100 parcels in an afternoon. Outsourcing effectively eliminates the hiring costs of drivers and the cost of offering benefits. This is the value of outsourcing, and it will rise throughout 2019.
Expansion of E-Commerce Will Add to the Strain on LTL and FT, Resulting in Less Capacity
As e-commerce expands, it will place an added strain on LTL and full truckload shipments, tightening capacity. Even though parcels are limited at 150 pounds, some items weighing more than 50 pounds may be cheaper to ship via LTL or FT due to the volume. Unfortunately, tight capacity within LTL and full truckload will leave shippers faced with paying additional charges for a high-volume of shipments that are considered parcels. As a result, larger, bulkier products that fall under the maximum weight limit for parcel will increase. Meanwhile, the expansion of e-commerce capability to products requiring LTL and full truckload service will result in less LTL and FT service available, which will inherently push more pressure on parcel carriers through fewer drivers and resources.
For example, CarMax is expected to give consumers greater e-commerce buying and selling power, explains Dan Caplinger. Although this will increase the company’s profitability, it will likely add to the strain of domestic logistics markets. Demand will skyrocket for LTL and FT, and although cars would never be considered parcels, it does still allude to a problem. Fewer drivers in total mean fewer drivers will be available for parcel shipments.
The Emergence of Asia-Pacific Markets Will Stimulate Evolution of the Global Parcel Shipping Market
The development of new markets will have a tremendous impact on global logistics, and with the Asia-Pacific region already constituting the largest share of global logistics, the growth of parcel shipping must continue to ensure enough resources available to handle surging e-commerce growth.
Plan for Better Use of Parcel Shipping Resources Today
Shippers should begin the process of planning for how parcel shipping growth will affect their operations now. Failure to consider the growth of the industry and demand on parcel will result in higher rates and lost costs-savings opportunities.