Marketing Content Specialist at Extensiv
How to Address Shipping Rate Volatility During Peak Season: Expert Advice from BUKU Ship and Pitney Bowes
In 2021, due to low unemployment rates, a robust stock market, and government stimulus measures, many people were able to spend big during the Black Friday/Cyber Monday time period. How big? According to data from NRF, in 2021, 88 million buyers made an online purchase during peak season. Additionally, online holiday sales across November and December rose 5% year over year worldwide to $1.14 trillion and 9% in the U.S. to $257 billion.
Normally, brands can analyze their historical data from previous years and use those insights when demand planning for the current peak season, but a lot has changed since last year.
This year, thanks to the highest rate of inflation since 1981, businesses could be facing a situation where sales are lower and shipping rates are higher, hardly an equation with a solution that leads to success. After all, one of the first rules of business is to stay in business.
Finding ways for brands to sell less inventory, pay more for shipping, and still make a profit is challenging to say the least. How can businesses strut their stuff when customers are tightening their belts?
If brands want to turn a profit this peak season, the last thing they should do is wing it or base their strategies on obsolete data. We asked two industry-leading shippers for their thoughts on this year’s peak season fulfillment challenges and how businesses can save money even with rising shipping rates.
Meet Our Experts
BUKU Ship is the world’s most complete artificial intelligence (AI) solution for all shipping needs. Their Software-as-a-Service (SaaS) platform is built from the ground up delivering real-time intelligence and predictive analytics throughout the entire shipping process making shipping smarter, cheaper, faster, and more reliable. BUKU enables customers to focus on business instead of shipping.
Pitney Bowes Inc.
Pitney Bowes Inc. is a global shipping and mailing company that provides technology, logistics, and financial services to more than 90 percent of the Fortune 500. Small business, retail, enterprise, and government clients around the world rely on Pitney Bowes to remove the complexity of sending mail and parcels.
What is your outlook for this holiday shipping season and what are the major problems/concerns you see affecting companies this year?
Our outlook overall is generally positive—peak season is an exciting time for the online retail market and drives eCommerce conversion through the roof.
That said, we do have some concerns:
Currently, many U.S. shops are experiencing a slower summer, likely due to high inflation. However, the international markets are bringing strong, excited buyers, and we heavily encourage businesses to look at offering international shipping to increase their top line revenue.
Supply Chain and Labor Shortages
The pandemic has made more people comfortable purchasing online and now, many even prefer to purchase online rather than deal with crowded retail shops. However, we are still seeing some post-pandemic delayed effects that continue to slow down the supply chain. To avoid these issues, businesses should work with a fulfillment center using software solutions like Extensiv 3PL Warehouse Manager to cut down on pick and pack times.
Higher Cost of Labor/Transport
Given consumers’ increased focus on free shipping (exacerbated by rising inflation decreasing their purchasing power), businesses need to figure out how fast their delivery needs to be and still be cost saving.
Since some carriers are still challenged with performance issues, brands need to mitigate their risks.
With increasing shipping costs, what are your recommendations for how companies can save money?
Define “Fast Delivery” by Product Category
Companies should keep in mind that free shipping options don't have to be “fast”—“acceptable” is also fine. In fact, when we asked consumers about the slowest shipping time they would find acceptable before abandoning a purchase, the average answer (for all products in general) exceeded eight days, with Gen Z tolerating almost 10 days.
Fulfill Highest Velocity SKUS from Multiple Locations
Businesses can save on shipping costs by positioning their inventory to be closer to consumers. This does bring additional complexity to inventory management, so brands should focus on their highest velocity SKUs first. Several carriers (including Pitney) offer regional delivery models that allow businesses to “carve out” certain population corridors to serve at rates lower than standard ground shipping from national carriers.
Avoid the Avoidable Returns
Explore offering your customers resale or donation options for returns—according to our BOXpoll surveys, nearly 50% of consumers say that having an option to regift their online purchase to someone in need would make them more likely to regift instead of returning their purchases. The same number of shoppers believe regifting is better for the environment, with strongest support from Millennials (53%) and Gen Z (51%).
Brands shouldn't assume that all returned items will make the trek back to their warehouse. There are plenty of options to process returns at lower cost. Our Designed Returns approach provides multiple solutions for customer returns and gives businesses options when configuring their returns processing and transportation priorities.
Monetizing shipping is practically unheard of so taking this route provides a chance for brands to really save some money without compromising service.
BUKU’s IntelliRate app can help brands using Shopify to save money on shipping and also turn their shipping into a profit center with dynamic rate shopping and customized monetization. IntelliRate dynamically shops the rates of multiple carriers for each shipping lane and has added features to account for surcharges we often see in peak season, so this is a great chance to add a margin into the shipping for their business.
Because the shipping rate has been dynamically shopped, businesses save their customers money—even with the added margin—while also providing a new income source for their brand.
What are your five top tips for brands/3PLs as they prepare for peak shipping season?
- Expand their carriers before peak season so they can connect to as many carriers as possible.
- Save time with high-volume printing.
- Evaluate their SKUs—do they have SKUs that are not selling? Instead of doing a full restock, brands should focus on restocking their most popular, in demand SKUs to ensure they have enough inventory to meet peak demand.
- Plan a creative collaboration—peak season is the time for new people to discover your brand! We encourage companies to leave their traditional comfort zone of marketing. BUKU helps brands with fun and enticing marketing around shipping thresholds and holiday discount codes to increase cart value.
- Offer expedited shipping lanes—sometimes, consumers forget that they are buying during the high-volume holiday season. We frequently see a spike in expedited lane usage in Q4, so offering expedited shipping lanes is key during peak season.
- Diversify their carrier base—it’s not just about lowest cost; look at reliability, value-added services, and strong account management as critical factors to help reduce risk this peak season.
- Regionalize their (most popular) inventory to save on shipping costs and improve speed. Partnering with a regional carrier can help them find the optimum balance between cost and reliability.
- Get smarter about parcel forecasting—businesses should look at their historical forecast accuracy and figure out where they might be consistently over- or under-estimating. Carriers are looking to secure capacity ASAP ahead of this peak season and many are structuring peak surcharges around forecast accuracy and volume consistency.
- Don’t forget about returns—the returns peak starts December 26th and it’s not just about cost reduction in transportation or processing. Businesses should think about how their returns options drive specific behaviors in their customers. Home pickup is great to offer (and free if using a postal returns provider) to create a sense of convenience and optionality for the consumer.
- Think seriously about their Canada strategy—if they can find the right partner, it’s the easiest market to expand into. As a resource, check out The Cross-Border Maturity Model, where we cover the mindsets and challenges online retailers experience at each stage of international growth.
What are your thoughts on major carriers eliminating direct relationships with the many shippers out there?
The ecommerce logistics landscape is getting more complex, so brands need to find carriers that understand their business and are flexible enough to design services around their specific needs and abilities. This is hard to do through an intermediary platform. We pride ourselves on our BIC AM and consultative approach, so in many ways we feel validated that we are maintaining our direct relationships
To combat carriers eliminating direct shipping relationships, BUKU is directly integrated into dozens of carriers and can help 3PLs and self-fulfilled brands access the carriers with ease. It’s also important for companies to use a WMS system that provides access to a wide range of carriers.
There is a lot of uncertainty ahead as brands plan for peak season. But at least one thing is certain—businesses that offer various shipping options during peak season have the potential to save more money than those that don’t. It's also an opportunity to build a loyal, satisfied customer base. When the going gets tough, just remember that happy customers tell their friends—unhappy customers tell the world.
Visit Extensiv’s Market Insights for weekly updates on order volume trends that matter to brands.
Looking for more advice on peak season fulfillment, check out Optimizing Your Demand Planning Strategies for the Holiday Season and Optimizing Your Tech Stack Ahead of Black Friday.
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