When you take into account how quickly things move in the world of e-commerce, 2010 feels like it was just yesterday. In a blink, the past decade flew by, ushering in a completely new landscape, especially in terms of e-commerce shipping and logistics. E-commerce has grown by 600% over the past decade, and if you were to travel back in time, 2010 would barely be recognizable by today’s standards.
While the notion of having everything you need, right at your fingertips was also an appealing concept back then, the delivery experience was not equipped to see it to fruition. Fast forward to today, and consumer confidence for online shopping has scaled to record heights. Gone are the days of wondering about an item’s total cost with shipping, how long shipping will take, and where it stands in the fulfilment process. While certainty around these elements was once the exception, today it’s the expectation.
With the new year and new decade upon us, more change is inevitable. But, don’t worry, we’re here to help your business navigate the changing landscape. Read on for our predictions on more changes coming in the year ahead—and how you can stay on top of it all.
Shipping Will Become More Fragmented (For a While, Anyway)
With the continued rapid growth of e-commerce comes the inevitable growing pains. Traditional retailers continue to expand their digital presence, new digital-first, direct to consumer companies are challenging incumbents, and thanks to the accessibility of technology, more people are launching SMBs than ever before. With these evolving trends, plus Amazon, which continues to push the boundaries of the delivery experience, 2020 will see e-commerce grow faster than the traditional delivery mechanisms can support.
And while carriers can solve for speed in transit, ultimately, collaboration between merchants, carriers and the technology companies that support them, will be required to bridge the divide and deliver the experiences today’s consumers expect.
Our prediction: Major shipping carriers will continue to evolve and expand their services, leveraging a mix of new technology along with traditional practices to fill the gaps in an ever-expanding landscape. However, that won’t be enough. Opportunities will exist for regional and specialized carriers to offer additional value in areas where traditional carriers either can’t or don’t have capacity. In 2020, we’ll see more major retailers partner with regional carriers to offer same-day delivery by leveraging their established networks for stores.
New methods, such as crowdsourced deliveries, drones, and other autonomous vehicles will also continue to develop, but won’t hit mainstream quite yet. One major example of this already in play is the variety of on-demand and/or last-mile delivery services offered by tech firms such as Shipt, Postmates, Deliv, and Darkstore. Some offer solutions to retailers directly, while others help carriers complete the delivery process.
What This Means For Your Business: For merchants, the challenge continues to be providing the best delivery options that meet the expectations of today’s consumer.
As the service levels, offerings, and prices the carriers feature change periodically, it can be a challenge to identify the best options for your business. Having the right tools that enable multi-carrier optimization and more direct oversight of the end-to-end process will ultimately help you deliver more best-in-class customer experiences.
Carriers & Tech Companies Will Further Bridge the Gap in the SMB Market
With the growth of global e-commerce—which hit about $3.5 trillion in 2019—shipping and logistics will have to evolve quickly to keep pace. While at face value, the continued growth of e-commerce is good news for carriers, optimizations and adaptations will be necessary for carriers to capitalize on raw e-commerce growth.
The biggest single growth driver in the e-commerce space remains Amazon. Prime is now in over 50% of US households and Amazon accounts for an estimated 38% of US e-commerce. The challenge for carriers, however, is that their piece of the Amazon pie will continue to shrink as Amazon increases its investment in first-party delivery (more on this later). With Amazon closing more doors to carriers, there will be a need to look to the rest of the market for growth.
The good news is that independent merchants, SMBs, and DTC brands in aggregate, are growing just as fast and make up a bigger opportunity for carriers. The challenge for the major parcel carriers will be to adapt their operations to better reach and serve emerging brands. Although traditionally more focused on larger, enterprise merchants, the major parcel carriers will put a greater emphasis on reaching emerging SMBs in 2020.
Our Prediction: With the imminent growth of e-commerce, and moreover, the need for fast and accurate e-commerce shipping, traditional parcel carriers will increase investment in supporting SMBs. Ultimately, the major parcel carrier who can crack the code on successfully servicing the new wave of emerging, digital-first merchants in the new decade, will come out on top. We’ve already seen investments in more accessible technology, better incentives and rates, and deeper partnerships with the technology companies that power today’s growing sector of e-commerce merchants.
What This Means for Your Business: The TLDR here is that this is good news. Carriers are adapting to become better partners to your business. You can expect to see more competitive rates, better access points—such as integrations with Shippo—and more convenient pick-up and drop-off options.
Amazon Becoming a First-Party Fulfillment Provider
This is certainly no secret. And, it’s a safe bet that some in the traditional carrier set may be a touch nervous about it. Figures vary slightly, but Amazon snagged roughly 38 percent of the entire U.S. e-commerce market in 2019, so it makes perfect sense that it would develop its own shipping solutions to be able to own the process from end-to-end, and in turn, cut costs and drive its own customer experience.
By mid 2019, Amazon became its own top carrier, reportedly shipping 48 percent of its packages, compared to USPS at 33 percent, UPS at about 17 percent and FedEx at below 2 percent.
We believe this will only continue to grow in 2020, with Amazon closing the loop and becoming an all-encompassing e-commerce mega-machine, with the ability to handle a much higher percentage of its logistics.
There are several key reasons for this:
- The Customer Experience. In the current model, Amazon uses multiple carriers to fulfill its last-mile shipping (the process of actually delivering the package to the customer). By bringing the majority of it in-house, it can create a more seamless flow across the entire purchase process.
- The Politics of Shipping. The Trump administration has been critical of Amazon’s shipping practices, especially in conjunction with the rates it pays USPS, stating in 2018 that it’s “costing the United States Post Office massive amounts of money for being their Delivery Boy.” By shipping in-house, Amazon could bypass a lot of this criticism.
- The Economics of Shipping. Amazon shelled out about $28 billion in shipping costs in 2018. Bringing more of it in-house could cut costs significantly. According to Morgan Stanley, Amazon saves about $2-$4 for each parcel when delivering via its own operations.
Our Prediction: Amazon will continue to increase its in-house shipping output and surpass U.S. shipments by FedEx in 2020. (For context, In 2019, Amazon shipped 2.5 billion packages in the U.S., compared with just under 3 billion by FedEx.)
What this means for your business: The albeit somber, but unsurprising reality is that Amazon will continue to set consumer expectations for delivery speed, cost, and experience. Their investments in first-party delivery will accelerate next-day and same-day Prime. The carry-on effect will be a higher bar for others to live up to. However, it’s not all bad news. The parcel carriers, as a reaction to declining shares of Amazon’s business, will make put greater emphasis on supporting emerging merchants.
Amazon Won’t Be The Only Growth Driver In E-commerce
Per our prediction above, we see major opportunities for SMBs to grow and thrive during these turbulent, but exciting e-commerce times. There are several aspects at play:
- They’ve got access to all the right building blocks. Unlike a decade ago, e-commerce SMBs now have the ability to build out their own end-to-end systems themselves, leveraging providers like Shopify, Stripe, and Shippo. And when coupled with a third-party manufacturer, the possibilities are endless.
- They’re specialized: Specialty SMBs can often provide more relevant, direct expertise as opposed to the one-shop-fits-all situation of many bigger retailers. (Think cosmetics, vinyl records, shaving companies, and trendy socks for a few examples)
- They’re accessible: SMBs are often in the position to be able to be more agile and better able to be there when their customers need them. This can be a big asset when shipping or inventory inquiries pop up.
- They’re in it to win: SMBs epitomize entrepreneurialism in its most natural state. For SMB owners and practitioners, it’s personal. And the pride and gratification that go along with that are hard to match.
Our prediction: With consumer confidence around online purchasing at a high, along with the accessibility of the necessary building blocks for e-commerce business (store hosting, order management, payments, shipping, fulfillment), the SMB segment of the market will continue to grow quickly. In aggregate, SMBs will grow as fast as Amazon. Fueling this will be continued success of existing brands and the largest year yet in terms of new e-commerce businesses getting started.
What This Means for Your Business: Today, SMBs have a lot more control over their own destinies. And no matter what you make, build or sell, being an advocate for your customers will always pay dividends in the end. Making it easy for them to purchase from you and surprising them with stellar service—and shipping—will be key factors.
E-commerce Platforms Will Diversify
Commensurate with the growth of SMB merchants and the demand for simple and accessible tools, e-commerce platforms continue to expand their offerings. As multiple players compete to be the de-facto platform for e-commerce, the key question is no longer what is the best store builder, but rather, which is the best platform to run my business? The long term winner in the space will provide the single dashboard that merchants trust to manage their businesses end-to-end and scale with their growth.
Platforms such as Shopify, Wix, Magento and others will introduce deeper portfolios of services, such as marketing, POS, fulfillment, XMS, and shipping—above and beyond their site-building and hosting services.
The benefits on both sides are many—with hosting services becoming more and more common, the ability to offer a holistic solutions package to SMBs will help these providers diversify and evolve with the changing landscape. In turn, SMBs will appreciate the ability and convenience to do it all in one platform.
Our Prediction: We’ll see the further evolution of end-to-end business solutions offered by leading e-commerce providers, especially in the SMB space. Site building functionalities will be the baseline. Platforms will leverage additional expansions such as payments, marketing tools, POS, returns, and shipping to entice merchants. To achieve this, platforms will forge deeper partnerships with specialized players shipping software providers, 3PLs and more.
What This Means for Your Business: If you’re just getting started, your timing is great. Look at your individual business needs and compare services and solutions that will help you achieve your goals and provide the best experience for your customers. If you’re already an established business, don’t be surprised to see additional partnerships, features, and benefits come your way from your store platform.
E-commerce Will Bring More Physical Stores Into the Omnichannel Age
While it may sound funny to say, BOPIS or in some circles “BOPUS” is quickly becoming the norm these days. The acronym stands for “Buy Online Pick Up In Store” and is projected to become even bigger by 2021, with an estimated 90 percent of physical retailers getting on board by that time.
The premise is simple: consumers purchase the item they want online, even perhaps with a promo code to save some cash, and then pick it up almost instantly at their nearest physical retail store, or have it shipped there from a centralized distribution center. And oftentimes, the shopper will end up buying additional items once they’re inside the store.
Retailers such as the Nordstrom and Macy’s have both dedicated valuable floor space to this service, so customers can quickly zig in and out to garner their goods in an efficient way.
On the flip-side, those retailers (along with the likes of Best Buy, Target, Walmart and others) will also have the benefit of being able to offer a better shipping experience for their customers as well, by virtue of the fact that they can fulfill orders using their store stock at nearby locations.
This allows for less expensive shipping options and a faster turnaround, especially when compared to leveraging more traditional centralized fulfillment centers.
Our Prediction: Physical retail stores will become more omnichannel in nature and leverage their network of store locations more strategically—for both shipping and in-store fulfillment. With this, we predict some purposeful turnarounds in the brick and mortar space, with localized shipping and increased customer satisfaction being the keys.
What This Means for Your Business: Success in these spaces may provide additional insights that you can potentially adapt to your own business. While you may not have the budget or real estate to replicate, observing these operational advancements may stir further thought or drive inspiration. As traditional big box retailers leverage their physical locations for faster delivery and more optimal fulfillment experiences, smaller merchants that sell substitute or competing goods may feel the impact of increased competition and customer expectations.
2020 is sure to bring a myriad of new developments and advancements in the e-commerce shipping landscape, and Shippo will be here to help you navigate them.