As an online shopper, the world is your oyster. You can pretty much order anything from nearly anywhere in the world for delivery to your home, or in some cases, to wherever you direct the package. And increasingly, consumers are getting these deliveries at a reasonable cost and with plenty of visibility along the way.
However, for delivery companies, the oyster doesn’t always contain a pearl. UPS recently reported earnings below expectations, in part because of the “shift in product mix” with more and more packages going to consumers rather than to business. It costs more to deliver to individual consumers' doorsteps than it does to businesses, which tend to get multiple shipments at the same time to one location.
As CNBC reported, ecommerce has been growing at double-digit rates for years and the 2016 holiday season was no exception: online sales surged 13 percent, according to the National Retail Federation, well above its forecast of 7 to 10 percent growth. Business-to-consumer, or B2C, volumes comprised 55 percent of total volumes — and 63 percent during December alone. Packages were delivered to nearly 2.5 million new addresses, CNBC said.
This growth in B2C, of course, provides huge opportunities for delivery companies, including the U.S. Postal Service, which specializes in delivery to every door. Indeed, UPS and FedEx use the Postal Service for last-mile delivery on some of their ground services. But this B2C growth comes with challenges too. Analysts say delivery companies “must spend more to keep up with demand and ensure shipments are delivered on time.”
UPS says it plans $4 billion in 2017 capital expenditures, up from the $3 billion spent in 2016, with a large portion of the expense going to boosting network capacity to handle ecommerce flows. FedEx is planning similar capacity improvements in its FedEx Ground unit, which handles its ecommerce traffic.
For the Postal Service, growth in packages is most welcome, especially as it continues to lose lettermail volumes. It saw its package revenue increase by more than $700 million, or almost 15 percent, in the 2016 holiday season compared to the previous year. However, with a much larger network and many needs for its capital investment dollars, the Postal Service could find the challenges even more daunting than its competitors.
Have you noticed any changes in delivery of your online purchases? When shopping online, do you try to group several orders together for one shipment? Or do you tend to buy more spontaneously and have individual orders shipped separately?