If you’re like many Americans, this was a big shopping week for you. For years, we’ve heard about stampedes at retail stores from crowds trying to score a deal on that year’s hot sale items. And perhaps you’ve also taken advantage of online deals on Cyber Monday. But online shopping is not limited to Monday. This Black Friday, digital sales grew 24% year over year according to Demandware. Add in Cyber Monday sales, estimated to top $6 billion, and there’s only one conclusion: The week after Thanksgiving is all about digital sales.
This trend has enormous implications for ocean freight. Of course, the increase in commerce is making serious demands on every step of the supply chain. But there’s a nuance that everyone in freight forwarding needs to understand in order to evolve with the changing e-commerce environment.
Quantity and Shipping Costs
Think about what all those e-commerce vendors are selling: compared with historical brick-and-mortar sales, there is a much higher percentage of small one-off packages. And those smaller freight units have a higher transportation costs per pound, kilogram or cubic meter. Plus, smaller freight often moves at “minimums” or “de minimis” charges, which should mean that an increasing number of smaller shipments should be driving up freight costs, not down.
But that‘s not what’s happening. Because when you have so many small parcels, bulk pricing starts to become more widely available. Minimums are getting lower specifically because the volume of small freight is increasing. It’s almost as if the higher cost of a small parcel is being offset by the aggregate volume of those parcels. As a result all shippers are realizing the benefit of lower unit costs.
As we wrote about extensively in a previous blog post, logistics companies are entering an environment where the number of shipments is going to continuously increase as cross-border e-commerce sales increase: The problem is that this growth is straining the resources...It’s more than a company can handle on a spreadsheet — or even on a dedicated software platform. The entire industry needs to be moving towards powerful algorithmic cloud-based solutions. of logistics companies as the manual processes currently used to process shipments cannot keep up with the growth in transactions.”
Read More: Freight Is Getting Bigger. And Also Smaller
This is generally good news for freight forwarders and the entire logistics industry. And importantly, we have a whole year to prepare for the next Thanksgiving selling season. Implementing new technology infrastructure does take time and investment, so now is the time to begin planning. For guidance about how to think about your tech transition, check out our Whitepaper: Logistics as a Service. And if you’d like more guidance on how to transform your technology, feel free to email us and we’ll help you think through it.
Not everyone will benefit equally from the e-commerce sales trend. It’s up to you whether to begin your technology upgrades now or to let another blockbuster selling season pass you by. The ideas and tools are all there. Now it’s time for you to shop for the right ones!
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