Overall, there is slow economic growth across the world and slow GDP growth in the United States at 2.5%. Volumes for air and ocean shipments have slowed from Asia. In addition, customers are choosing low cost shipment alternatives to receive product from overseas (example: FDX growth in its International Economy service). The current situation regarding growth has been described as tepid, muted and anemic resulting in sluggish growth for the parcel carriers.
However, peak season this year should be fair and on par with last year. Ecommerce sales are slated to grow to $61 billion up 15.1% from $53.7 billion according to eMarketer. It is estimated that companies spend about 5% on shipping. This would result in $3.1 billion dollars being spent on shipping services during the holiday season for ecommerce shipments. UPS, FedEx and the US Post Office will receive the lion share of revenue in the United States.
The holiday season is 25 days this year compared to 32 days last year due to a late Thanksgiving holiday. We see shoppers being more value conscious and will look for free shipping offers. In addition, there are no blockbuster products this year that are coming to market. December 2nd is Cyber Monday; last year over $1.46 billion in ecommerce sales were recorded with estimates of $1.67 billion in ecommerce sales for 2014 according to comScore.
There will be two peak seasons again this year with Cyber Monday December 2nd and the traditional Christmas season from December 7th to December 23rd. Some factors that could positively influence peak season are lower gas prices that allow for customers to spend more disposable income on gifts. Parcel carriers could benefit if retailers run out of product and require product imported from Asia (tablets, mobile devices, electronics, etc.) requiring premium freight services.
Parcel rate increases for 2014. Federal Express has already announced a rate increase of 3.9% for its express products effective 1/6/2014. We look for announcement at the end of November for the FedEx Ground rate increase. Last year’s rate increase was 4.9%. We anticipate an increase of 3.9% to 4.9%
UPS is also expected to announce their annual rate increase in mid-November which takes effect December 31, 2013. Last year non-contract ground rates increased 4.9% while air and international increased 4.5%. We anticipate a similar rate increases this year.
Accessorial charges are another area where the fees will increase. Accessorial charges are added on delivery charges. Both FedEx and UPS have over 40 accessorial charges.
What to do:
- Shippers need to do their homework and understand their parcel shipping contracts and shipping patterns to reduce costs.
- Logistics Trends Inc. can help parcel/small package customers with their shipping contracts and shipment spend by providing cost effective alternatives.