Economists at Jefferies predict that the pandemic-driven increase in online shipping costs will persist as long as the pandemic does -- and that will continue to burden many retailers who can’t promise shipping speeds as fast as e-commerce giants like Amazon.
The report, which was based on a call with a former FedEx executive who is currently the North America managing partner at consulting firm Last Mile Experts, said mid-sized retailers are feeling even more pressure from companies like Amazon during the pandemic.
“The recent growth in shipping costs has been fueled by the surge in e-commerce penetration, which has created a significant supply/demand imbalance and left carriers capacity constrained,” Jeffries’ analyst Janine Stichter said in the report, according to CNBC.
Consumers scramble for fast and free shipping
Companies that were forced to shut down for an extended period of time during the pandemic have been hit especially hard by consumers’ growing demand for fast and free shipping, the report said.
In the battle for consumers’ dollars, mid-sized retailers -- who often don’t have the capacity to establish a shipping strategy in line with the boom in demand for fast deliveries -- are falling behind. Stichter noted that Amazon’s rapid shipping speeds have made consumers expect fast and free shipping, even though some may not even want or need it.
Maciuba told Jefferies that he predicts that holiday surcharges implemented by carriers like FedEx and UPS won’t go away anytime soon.
For retailers, he believes the best course of action to mitigate pandemic and holiday-related losses may be to adopt alternative delivery methods. He suggested that retailers could offset losses by giving consumers the option to buy online, pick up in store, use curbside pickup, or use a third-party delivery app like Doordash or Shipt.