As we ponder what’s in store for logistics in 2021, it’s important to consider the current economic, political, and social climate. This year, we’ll see further distribution of the COVID-19 vaccine, a new U.S. president in office, and life begin to piece itself back together with events like the 2021 Olympics (well, we’re keeping our fingers crossed at least). What do these events mean for e-commerce and shipping, and what can online merchants do to prepare?
2021 is poised to bring its own unique uncertainties and challenges as we find our new post-pandemic normal. This is what we predict you can expect this year, and how your business can be successful.
Retail’s Digital Revolution Outlasts the COVID-19 Pandemic
The COVID-19 pandemic accelerated the adoption of e-commerce. In fact, in the first three months of the COVID-19 stay-at-home orders, Shippo customers experienced roughly the same growth they achieved in the five years prior.
Shippo estimates based on proprietary data.
This spike in e-commerce reflects new consumer habits: 57.6 percent of shoppers said their online shopping habits have slightly or significantly increased since the start of the pandemic.
Our Prediction: While the distribution of the COVID-19 vaccine is, thankfully, underway, many medical professionals are predicting that widespread availability won’t be reached until the summer. In short, this can only deepen consumer reliance on digital commerce.
For many consumers, however, the pandemic was the proverbial push that got the e-commerce ball rolling, and it won’t stop with the vaccine. Online retail is only going to get bigger.
What This Means For Your Business: Many businesses rushed to pivot to online selling at the beginning of the pandemic. Now that the dust is settling, make sure your operations are prepared for the long haul. That might be revisiting your shipping or returns process, or creating a seamless offline-to-online customer experience.
Home Deliveries Take the Spotlight
The pandemic has pushed UPS and FedEx to adjust their delivery mixes to further embrace online retail. Specifically, these carriers are adapting to a world where home delivery is widespread. Last year, UPS saw a 65 percent increase in shipments to homes. And FedEx Ground—the business unit most focused on residential deliveries—saw a 31 percent increase in package volume.
Our Prediction: As we look ahead, we expect the logistics industry will continue investing in programs geared toward online merchants that ship to residential addresses.
In late 2019, UPS launched its Digital Access Program (DAP) to make its services and rates more broadly available, especially for the SMB segment. (Editor’s note: Shippo collaborates with UPS to offer discounted shipping rates to the small and medium-sized merchants that use our platform.) Fast forward to 2021, UPS and FedEx will continue to make small business and home delivery solutions and accessibility a priority.
What This Means for Your Business: Ultimately, this means merchants can provide customers with a great shipping experience as accessibility and technology continue to improve. And, it’s never been easier for merchants to leverage multiple carriers to provide the best customer experience.
With Shippo, you can access the best USPS, FedEx, UPS, and DHL Express rates upon sign up. What’s more, with technologies like Shippo in your stack, you can be confident in your shipping process and start to see shipping as the growth driver it is.
Transit Times Get Faster and More Reliable
UPS and FedEx
Despite strained networks due to the COVID-19 pandemic, the carriers were able to maintain a seamless delivery experience: the UPS decreased transit times for its Ground service, dropping a majority of transit times by one business day.
Maintaining a positive experience has been possible, in part, by the efforts FedEx and UPS made to expand their consumer-facing offerings:
- In 2019, both UPS and FedEx announced they will deliver to residential addresses every day of the week.
- UPS expanded its UPS My Choice® offerings, giving consumers greater security and control over their delivery experience.
- FedEx Ground opened six new regional sortation centers across the country.
Last year, the U.S. Postal Service was under scrutiny for rumored delays during the summer; however, our data revealed the delays were small—taking just an extra day or so for longer-haul shipments and even less for shorter ones.
What’s more, the USPS continued to offer reliable service as other carriers put volume caps on select high-volume shippers during peak season.
The USPS was able to support these volume increases, in part, thanks to the fortifications it made to its network in advance of the 2020 holiday season:
- Hired 60,000 seasonal workers to help with spikes in volume.
- Opened more than 150 additional facilities to support peak season sorting and processing.
While USPS transit times slowed during the biggest peaks of the holiday season, it is committed to providing a fast, reliable service, and will continue to optimize its network for increased volume in 2021.
The Big 3 carriers aren’t the only ones making moves in shipping. Amazon continues to develop faster ways to ship products and set the bar higher for the delivery experience. It’s suspected that Amazon will continue moving closer to a next-day or same-day model for Prime customers. Amazon has also moved to its own independent carrier model for last-mile delivery. Offering customers even last-mile, minute-by-minute tracking and estimated delivery times.
Our Prediction: Consumers and industry analysts have spoken: on-time delivery is critical to the customer experience. While 2020 was the year nobody expected in terms of volume, 2021 will be the year the carriers solidify their volume capacity for the future.
What This Means for Your Business: A faster, reliable delivery network is good news for all of us. For merchants, it means less time tracking packages and handling customer queries and more time growing your business.
Fulfillment Options, Like Curbside Pickup, Gain Traction
The COVID-19 pandemic fueled major changes in how items are received, since many consumers opted out of in-store experiences.
Shopify has been a major force in driving more fulfillment options and greater overall adoption. In fact, only 2 percent of Shopify’s businesses in English-speaking countries offered in-store or curbside pickup last February. That number jumped to more than 25 percent by July last year.
Our Prediction: Shopify and other SaaS providers will continue to innovate the fulfillment options available to consumers, and adoption will grow alongside them. In 2021, the norm will be that new, digital-first businesses offer a wide-range of fulfillment options to optimize for cost, efficiency, and overall convenience.
What This Means for Your Business: There’s never been a better time to expand the options you offer your customers. If you haven’t already done so, you should consider expanding your offerings to include options for local customers to attract a bigger audience and build deeper relationships.
The SMB Army Will Win the 2021 Battle
While many e-commerce businesses, especially behemoths like Amazon, Walmart, and Target, saw growth in 2020, a clear winner has emerged from the rubble of last year: the SMB army and its SaaS soldiers.
Shopify, for example, increased Q1 2020 revenue by 47 percent and grew new customer storefronts by 62 percent. By contrast, Amazon only grew by 37 percent. And while Shopify has become a media darling, Amazon gets blasted for its strategic decisions, like its mishandling of third-party inventory during the pandemic.
Sure, all of e-commerce will continue to grow in 2021, but SMBs and their underlying tech are starting to pull ahead in terms of overall industry sentiment and adoption.
Our Prediction: As we look to 2021, the small business community will reign supreme. For example, small businesses are primed for the current selling climate.
- SMBs are better able to align their values with their customers—something that 71 percent of consumers prefer.
- SMBs can be nimble, adjusting fulfillment and marketing levers to fit a changing economy. This flexibility is made possible by the robust SaaS offerings available today, like e-commerce platforms, payment processors, shipping software, email and SMS marketing, etc. to build a customized e-commerce solution.
What That Means For Your Business: We understand running a small or medium-sized business is not without its challenges; however, there’s light at the end of 2021. We believe the right software and tools are in place to help merchants go the distance and be successful.
A New U.S. President, a Not-So-New Approach to International Trade
Finally, we can’t end a 2021 forecast without acknowledging the political climate. President Joe Biden was inaugurated this month, which we anticipate may impact things like international trade and supply chains.
Interestingly, pundits predict Biden’s foreign trade policy might not look much different from Trump’s. Biden said the USMCA, the U.S.’s new trade deal with Canada and Mexico, is an improvement from NAFTA. In addition, Biden’s economic agenda includes a $400 billion investment to buy more American-made products and services in an effort to curb American’s reliance on Chinese goods.
The latest? Biden just signed an executive order on January 26 aimed to fulfill his pledge for the U.S. government to “Buy American.”
Our Prediction: Not much will change when it comes to international trade in early 2021, as Biden’s team focuses on other non-trivial current events, like the COVID-19 vaccine, U.S. economy, etc. But, Biden included a 180-day deadline to implement the changes in his executive order, so we expect international trade to be a hot topic later this year.
What This Means for Your Business: If you source your products from China, you’ll want to keep an eye out for any updates from the Biden administration. As the U.S. continues to push American-made products, there may come a time when you choose to move production closer to home.
The e-commerce industry is red hot. While part of the industry’s future is still a mystery, it’s clear that digital shopping will only continue to expand. Merchants, carriers, and software providers alike are laser focused on preparing for what’s next. Happy shipping!