Small parcel, big problems – the peak season shipping challenge?

Despite continued uncertainty as new COVID-19 variants threaten another phase of lockdowns, U.S. customers have expressed optimism for in-store retail shopping ahead of the holiday season. 

Consumer spending expected to surge

Individual spending is anticipated to reach record levels during this critical period for retailers, as consumers report significant growth in their holiday spending plans. AlixPartners forecasts US holiday sales will be +10-13% over last year; with 88% of consumers planning to spend the same or more this holiday than last year. Consumers expect will continue with a multi-year trend of making holiday purchases earlier this year – with 53% of consumers starting their holiday shopping before Halloween.

Recent retail industry statistics back up these reports. In September, bank analysts reported a 27% increase in weekly apparel spending as compared to the same period last year. For that same timeframe, department stores sales rose over 20%. The Commerce Department also reported a slight increase in retail sales in August. These gains exceeded economists’ expectations as spending increased on home goods, furniture, electronics, and clothing. After a 1.8% decrease in July, sales increased 0.7%, likely boosted by school reopenings and an increased need for  materials like musical instruments and sporting goods.

Travel restrictions in 2020 significantly impacted consumer spending in this area, but this year it is anticipated to be added back into a significant portion of consumer budgets and is only expected to increase as consumers prepare to travel during the holiday season, with an increase in airline ticket sales and hotel bookings.

Are suppliers confident in staying ahead of the curve?

On the suppliers' side, companies are showing confidence in their e-commerce strategies as they prepare for the 2021 peak season shipping. Traditionally, this season starts in September and ends in December. 

Despite the current pandemic-related economic disruptions, companies feel more prepared to meet the demands of customers this holiday season. Surveys show that about 76% of companies' decision makers believe their revenue for this year's peak season will be higher than last year. 94% of these decision makers responded that partnering with logistics and supply chain companies is essential to successfully navigating the peak season. To take full advantage of the holiday shopping surge that seems likely to unfold, businesses have set up new strategies for supply chain and established partnerships with logistics providers to enable them to not only manage consumers' purchases, but make the most of the season.

What does this mean for you?

The parcel capacity crunch will surely be at the forefront of the holiday shipping season, but challenges in securing capacity requirements will stretch into 2022. In order to mitigate this challenge, shippers should diversify their parcel carrier network. Emerging carriers offer an alternative to FedEx and UPS, offering supplemental capacity in regional footprints and in specific service requirements.

In addition to rethinking capacity strategy, it is critical that shippers drive close collaboration between commercial and logistics teams. Now more than ever, communication on volume forecasts, service level segmentation, and specific capacity challenges can ensure the teams are proactive in protecting the customer experience and balancing service and capacity.