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Updated: 18 hours ago
Inevitably, massive shake-ups in the world economy create new demands in some markets, while making them disappear in others. In competitive markets, people naturally rush to fill voids and satisfy consumers' constantly changing needs and wants.
For years, much of the developed world has been greatly influenced by the internet revolution. Naturally, change takes time and trends slowly unfold as the market adjusts. Events like a global pandemic can quickly accelerate things and stretch the limits of existing firms, thus requiring more from them to step up. Due to the COVID-19 pandemic, nationwide lockdowns starting in early March of 2020 sent the demand for e-commerce soaring to incredible heights. Global monthly visits to online retail sites reached an all-time high of 21.96 billion in June 2020. This incredible number already surpasses the 20.08 billion online retail visits in December 2019–smack in the middle of the holiday season. Despite the economic hardships caused by the pandemic, online retail traffic and sales remain strong. United States (US) e-commerce sales increased by 30% between Quarter (Q) 1 and Q2 of 2020.
Of course, increased sales result in larger volumes of products making their way from businesses to consumers. Major shipping companies like UPS and FedEx have their work cut out for them. Keep in mind, the typical holiday season puts a serious strain on their infrastructures and capabilities. The recent surge from COVID-19, being anything but typical, comes with costs and benefits for the shipping giants. UPS Q2 revenue per package declined by about 4.4% year over year. Their operating margins also are suffering and aren’t expected to get better any time soon. Total operating expenses increased by 14.7% over a year. Operating profit for US domestic packages declined 2.2% year over year. UPS continues to pay more in order to meet the huge increase in demand for their services.
Interestingly, UPS introduced higher shipping rates for various packages and locations throughout 2020. As of September 2020, their SurePost®️ rate increased by about $0.24. SurePost involves the UPS network handling a package before USPS usually takes over for the final delivery. Being a low-cost alternative to standard ground shipping, it’s demand has grown substantially as more people take advantage of shipping services. As these rates continue to rise, people will naturally look elsewhere for shipping companies to provide the cheapest and quickest domestic shipping options available.
The market desires more and more shipping services because they want their goods as quickly as possible. Excess demand and rising prices present a golden opportunity for smaller firms to steal market share from the current market leaders. A 2019 survey conducted by American Express and Forrester showed 57% of US online shoppers between 23 and 27 would be more loyal to a brand if they offer same-day delivery. Imagine how that number has changed over the past year. Amazon Prime, UPS, and a host of major e-commerce players have all made an effort to get products into customers’ hands as quickly as possible. Other shipping firms now employ various strategies and networks to take advantage of the race for the best service.
Crowdsourcing continues to grow in popularity as a way to improve both delivery time and lower costs. Crowdsourcing refers to employing a network of individuals to perform necessary tasks to achieve a set goal. This practice has already become popular with firms like Uber and Instacart. It was only a matter of time before a growing majority of goods were delivered in this way. PiggyBee is one firm striving to improve last-mile delivery through crowdsourcing in a simple yet creative way. Users are categorized as either “travelers” or “shippers”. Shippers scan through a host of postings from travelers who say where they are and where they are traveling to. The traveler is either asked to make a purchase at a local store or wait for an item to be delivered to their location. Then, the traveler simply carries the item with them on their trip and connects with the shipper upon arrival. PiggyBee serves both domestic and some international delivery requests and has over 17,000 users. This simple system takes advantage of people’s everyday activities to ensure quicker, more personal, and often cheaper delivery of products. It particularly helps small businesses with a limited shipping network and customers seeking to purchase goods directly from a business.
This model is also preferred on a much larger and more formal scale. Deliv, a crowdsourcing delivery firm, sold its technology to Target for an undisclosed price in March. The deal was described as an attempt by Target to compete with Amazon and Walmart. Deliv employed the help of a crowdsourced network of drivers who allowed larger retailers to offer same-day delivery. The platform allows shoppers to get products shipped from local stores, thus allowing stores to become local distribution centers for large retailers. With over 100 national partners before the acquisition, Deliv allows many regional malls to essentially become local distribution centers, which overall increases customer satisfaction. This trend continues to spread throughout the world. Lalamove in the Philippines utilizes the on-demand logistics model to ensure same-day delivery form businesses. Focusing on last-mile delivery, the company boasts a network of over 2 million drivers throughout Southeast Asia.
Here we see the use of third party shipping firms to improve delivery and shipping as well as companies essentially crowdsourcing through their own platforms. Each is an example of new and creative methods for managing shipping demand and improving customer satisfaction. Firms and customers transitioning to online retail now have more options in front of them. Today, businesses engaging in new markets must recognize the growing demand for faster and more frequent delivery of products. Firms looking abroad must consider the best way to ensure products are shipped internationally as quickly as possible and, once abroad, delivered to their customers as quickly as possible. Understanding your options for speedy and efficient delivery in specific markets your customers are in is essential. As businesses expand into new countries and establish domestic shipping networks, paying attention to delivery options is a necessity.
Jameson Ayers is an intern at M74 from New Jersey. He studies Economics at Fordham University in New York City. His interests include financial technology and its effects on behavioral economics.
The views expressed above are those of the author and do not reflect the official position of the M74 Group, which remains neutral on all matters. Publishers assume no liability for content.