Undoubtedly, e-commerce has been the biggest growth driver recently for shipping giants UPS and Fedex. Once shoppers experienced the ease of ordering online, the inevitable subsequent challenge was to put the products into their hands quickly enough to encourage continued use of e-commerce for making purchases. Because of this, the business analytics of retailers and shipping companies have had to incorporate the role of e-commerce within the world marketplace.
The competition for consumers embracing e-commerce has led to retailers meeting the challenge of providing speedy delivery, relying on companies such as UPS and Fedex to do so, and making shipping systems more efficient. As online shopping has gradually led to a change in business strategies, shipping companies and businesses selling online have also needed to change their relationships with one another. The evolution of those relationships has contributed to faster shipping times for the shoppers purchasing online.
Players Big and Small
Big sellers have been major forces behind speedier shipping times. Free two-day shipping for Amazon Prime subscription customers, for example, has contributed to faster delivery expectations, and it has contributed to the growing popularity of deals that include free shipping. Smaller retailers have learned ways to compete with these expectations and to price their products and shipping rates strategically. With bigger businesses paving the way, smaller companies have increasingly more options for faster shipping that is still affordable.
Seller and Shipper Reciprocal Relationships
Both Fedex and UPS rely on Internet commerce to fill the gaps and provide growth despite sluggishness in other areas. Revenue declines in pricier express options, for instance, have been offset by tremendous growth in the ground shipping that is currently driven by e-commerce. The Fedex SmartPost shipping product and the similar UPS SurePost product give retailers very low cost shipping options. The retailers will often use these affordable options to turn around and offer free shipping to customers. This is an example of how e-commerce has created incentives for retailers and shippers to develop reciprocally beneficial relationships. The shippers can be accommodating to sellers on delivery prices, and retailers can afford to give the shippers more business, allowing the business-to-consumer shipping market to aid in growth.
Trending: Free Shipping on Returns
Some e-commerce trends, however, will benefit the shipping companies more so than the retailers. Many retailers are having to ride the trend of offering free shipping on returns. It is a necessary competitive strategy, but it is one that benefits the shipping companies tremendously. Holidays are especially bountiful for UPS and Fedex because of the many incidents of incorrect sizes and gifts that are either the wrong item or unwanted by the recipient.
Despite the previous trends in reduced shipping prices, it is a good idea for consumers and merchants to be prepared for changes. Recognizing an opportunity to pull more profit from packages that are light but bulky and large, both Fedex and UPS will soon impose changes to pricing calculations based on dimensional weight. When an item is light but awkwardly shaped, for instance, the package might be bigger and consume more shipping space than other items of that weight.
Minimum pricing for these lightweight packages is based on a standard dimensional factor, using the dimensions of the package. The shipping companies would typically charge whichever is higher, pricing calculated by the actual weight or the dimensional weight. The current calculation structures are such that with either method, bulky but lightweight package prices are very low compared to the space they require for shipping. Fedex was the first to announce changes to calculations for dimensional weight, and those rule changes are slated to go into effect in 2015.
UPS dimensional weight requirements will also be changed for shipments beginning in 2015. Negotiation and a reliance on existing relationships should soften the cost difference for many retailers and still provide for increased revenues for the shipping companies. Thanks to the expansion of the shipping networks operated by the delivery companies, consumers should still expect speedy delivery of their purchases even if their shipping costs increase somewhat.