E-Commerce Logistics Strategies: The State of E-Commerce Logistics Heading Into Peak Season

Successful e-commerce strategies for managing the demands of peak season revolve around how well an organization understands the state of e-commerce itself and its implications for capacity. As the months passed within the COVID-19 pandemic, the trucking industry appeared to make up for its startling declines. Unfortunately, the state of e-commerce itself is presenting a new challenge and opportunity to secure additional revenue and market share going into the 2020 peak season. This is entirely different from both peak season 2018 and 2019. As a result, supply chain executives need to understand how this stimulation of e-commerce logistics strategies works and what is necessary to thrive through this and future disruptions regardless of peak season.

Bringing Omnichannel to the Forefront of E-Commerce

COVID-19 Stimulated Unprecedented Growth in E-Commerce in 2020 Q1

The growth of e-commerce throughout the peak season is largely reliant on consumer shopping behaviors. According to eMarketer, an original February 2020 forecast projected modest growth of 2.8% in total retail sales through 2020. However, e-commerce growth rates remain near growth rates of prior years despite the pandemic. According to John Koetsier via Forbes, an Adobe study found total e-commerce sales in May 2020 jumped $52 billion, and mobile share of e-commerce grew 10% since January. However, the most surprising fines are those involving buying online and picking up in-store, which grew hundred and 95% in May alone. Moreover, total online spending has risen 77% year-over-year for May 2020. And while this report reflects some degree of uncertainty, the demand for more e-commerce purchases and options as customers remain skeptical of returning to traditional purchasing habits is likely to increase.

The Double-Edged Sword of the Pandemic—Limited Supply Chain Resources

The massive run on necessities and goods across brick-and-mortar and online supply chains created an unusual circumstance for the industry. According to William B Cassidy of JOC.com, US truck freight prices have generally declined throughout the pandemic. However, expectations for a possible recovery in the fall, particularly if Congress does pass a second stimulus act, this uncertainty will fade from the peak season discussion. The need for more capacity resources is reflected in the changing bidding habits of companies, noted Cassidy:

“Some shippers and trucking companies are exploring short-term micro- or mini-bids, a trend that tends to rise when the direction of markets become uncertain. I think shippers and carriers want something more dynamic. I’m seeing more companies build in a mini-bid every month or even biweekly, as they move toward continuous procurement.

That is likely a sign the market is in flux, and uncertain. When shippers have ample capacity and pricing power, there is little incentive for short-term bids. When capacity is tight and prices are rising, trucking companies have less incentive to agree to short-term contracts. But both sides could benefit by smoothing cyclical peaks and valleys to the extent possible.”

The clear indicators mean that as the capacity tightens, creating flexible e-commerce logistics strategies will be of top priority to source more carriers, LSPs, and supply chain partners. 

E-Commerce Growth Appears to Be Strengthening Despite Economic Instability

The economic instability created by the pandemic creates some confusion over how to approach e-commerce logistics strategies for peak season. Even as industry executives worked to reallocate resources and improve access to online ordering and delivery services, the industry remains susceptible to possible changes within legislation and the pandemic itself. 

According to a study referenced by Koetsier, the year-over-year growth rate for the 2019 holiday peak season was 13%. However, the 77% year-over-year growth from May, combined with expectations for a jump to ~18% from eMarketer, mean the industry is already well above the peak levels originally expected for e-commerce in the 2020 peak season. As a result, it is a safe assumption that actual e-commerce demands on the industry will grow past current levels until the development of a vaccine becomes reality.

Even big carriers are gearing up in anticipation of this change. UPS announced that it would enact peak season surcharges to the tune of $3 per package for ground shipments and up to $4 per package on air freight cargo. Those fees may not seem like major change. But consider this. The peak season surcharges for 2019’s peak season were $0.28 and $0.99, respectively. 

So, that’s a 400% to 1200% increase in these surcharges. Meanwhile, FedEx has not yet released its holiday surcharge schedule of fees, but they have indeed already implemented a coronavirus surcharge to all packages. It’s clearly a rapid change, and since e-commerce isn’t based strictly on brick-and-mortar locations for pickup, these fees will play a huge role in the total costs for shipping e-commerce orders this year. 

The Takeaway: Integrated Supply Chain Systems and Collaboration Are Crucial to Successful E-Commerce Logistics Strategies That Work in 2020 Peak Season

There’s only one solution to building successful e-commerce logistics strategies. Companies need to integrate their systems via SaaS-based platforms and capture efficiencies where-ever possible. Even if the industry does indeed take a hit in the form of retraction, the improvements made in anticipation of strong growth for the upcoming season will still add value. They will still allow for more efficient supply chain management and an opportunity to future proof operations.