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The State of “Fast and Free” Delivery: What Retailers and Parcel Carriers Should Know

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The State of “Fast and Free” Delivery: What Retailers and Parcel Carriers Should Know

Thanks primarily to Amazon (and the explosive growth of Amazon Prime), consumers in 2020 are conditioned to expect that virtually anything bought online can be shipped for free. That’s true for small orders like prescriptions and batteries, and for huge items like appliances and tires. If it means a shopper has to buy an annual subscription, or spend a little more to meet a free-shipping minimum, most people would consider that a low bar to meet.

But as every retailer and ecommerce seller knows, shipping is never free. Today’s multi-billion-dollar parcel carriers are getting paid. They moved nearly a billion parcels this past peak season. That shipping cost is being ultimately absorbed by sellers and is reflected in the price buyers are paying for products.

And parcel volume growth isn’t slowing down – it’s accelerating. According to the Pitney Bowes Parcel Shipping Index, global parcel shipping volume grew 70% from 2014 to 2017, to 74.4 billion parcels. The index projects global parcel volume to rise at a rate of 17% to 28% from 2018 to 2020, surpassing 100 billion parcels this year.

Handling increasing parcel volume isn’t just about figuring out how to do more of the same. The process of getting things where they need to go is under a transformation. In a recent report, Gartner found that transportation is the largest portion of delivery costs, due to a shift from carriers handling bulk freight to small parcels.

[Parcel and last-mile delivery will] continue to be the fastest-growing shipment segments due to increases in multichannel retail, eCommerce in B2B and same-day delivery offerings.

Gartner also observed what many companies are feeling. As volume continues to grow, companies only have time to react instead of plan. That means many are missing opportunities to revolutionize parcel logistics with innovation and alternative delivery models.

How fast does “fast” need to be?

According to research from Freightwaves, consumers unsurprisingly still have an appetite for fast delivery, with 60% of shoppers saying they’ve abandoned an online purchase because of slow delivery times. With record volumes to handle – and so much at stake with consumer expectations – efficiency, on-time consistency, and flexibility are key for parcel delivery services, whether it’s same-day, next-day or deferred.

This year’s U.S. peak shipping season saw about a billion package deliveries (up 4.5% from 2018). Retailers are offering more same-day options, which increases demand and the need for trucks, local delivery vehicles, drivers, warehouses and warehouse workers.

This year, the challenge was also complicated by a shorter selling season (the holiday season was six days shorter in 2019 than is typical), new restrictions on driver hours of service, and the December 16 implementation of new rules for Electronic Logging Devices in commercial trucks. All of these factors impact capacity and the ability of networks to deliver fast and on time.

Emerging shift in consumer behaviors

On the flip side of the “freer and faster” coin is Gartner research analyst Tom Enright. He’s counseled retailers on their supply chain and fulfillment strategies for more than a decade.

In a groundbreaking report published in November 2019, he detected an emerging shift in consumer behavior: “Consumers are starting to express increased concern about the environmental impact of retailer’s shipping practices, and are seeking slower, more sustainable options.”

Consumers are now defining convenience as order fulfillment on their terms, and they’re expressing more and more concerns about the environmental impact of fast, one-off deliveries.

It’s a conflict between three consumer choices:

-The desire for instant gratification

-The price reduction they can get for waiting longer for a delivery

-The impact fulfillment speed has on transportation, packaging and other environmental issues.

According to Enright, for retailers, these shifting demands are driving the emergence of two new requirements that are somewhat at odds with current models:

-Retailers must be more environmentally sustainable in order fulfillment operations.

-Retailers must offer a wide range of shipping speeds and prices, especially if incentives or other benefits are included in the offering.

Considerations for retailers and parcel carriers

That means retailers – and their parcel delivery partners – need to consider more flexible fulfillment options. These will need to be able to satisfy a consumer who wants a totally different delivery than currently exists. Companies will need to consolidate multiple online purchases from different retailers, have them combined using less packaging and have it delivered as one shipment a week from Tuesday. That’s instead of three separate shipments expedited for delivery tomorrow – or even same-day.

Major retailers like Amazon, Walmart, Target, and The Home Depot are doubling down on offering same-day delivery options. And for parcel delivery providers, it remains a highly fluid and exciting market. New network models are not only welcome, but will be required to meet the ever-evolving demands of shippers.

The explosive growth of package volumes, and consumers’ desire for next-day and, increasingly, same-day delivery, aren’t likely to wane anytime soon. And retailers and parcel carriers will need to pursue creative, innovative ways to keep up with those expectations and meet that demand.

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Valerie Metzker is the Head of Business Development at Roadie, a crowdsourced delivery service that works with consumers, small businesses and national companies across virtually every industry to provide a faster, cheaper, more scalable solution for scheduled, same-day and urgent delivery. With over 150,000 verified drivers, Roadie covers 89% of U.S. households — the largest local same-day delivery footprint in the nation.

Understanding Fulfillment By Amazon in Canada

The ubiquity of Amazon.com and its various international marketplaces is undeniable.

The online retail giant now represents half of all e-commerce in the United States. Last year, Amazon’s product sales amounted to just shy of US$142 billion. But what’s often missed in discussions about the growth trajectory of Amazon is the contribution of third-party sellers to Amazon’s overall sales figures.

In 2018, third-party sellers generated US$42.75 billion, representing 52% of paid units in Q4. That’s almost double the percentage of 2007 when third-party sellers represented only 26% of paid units.

The reason for the sharp upward trajectory in the participation of third-party vendors is simple – Amazon provides unparalleled access to a massive marketplace of consumers. Fulfillment By Amazon (FBA), which is the process through which third-party vendors reach consumers, has seen particularly acute growth amongst smaller vendors looking to leverage Amazon’s reach and exposure.

More recently, U.S. businesses have been looking beyond America’s borders, with hopes of taking advantage of Amazon’s international marketplaces, which offer attractive growth potential for those willing to take the plunge into global commerce.

Perhaps one of the most sought-after Amazon marketplaces is Canada’s Amazon.ca. America’s northern neighbor offers a range of opportunities and benefits for third-party sellers looking to enhance their sales potential. There is, of course, geographic proximity, but Canada also boasts one of the highest e-commerce adoption rates globally. In fact, by 2020 e-commerce sales in Canada are expected to reach C$55.78 billion. By 2021, there will be an estimated 23.7 million e-commerce users in Canada, representing two-thirds of Canada’s total population.

Canadians’ attraction to e-commerce is clearly evident in 2018 Amazon Prime sales, which more than doubled in volume from the previous year, demonstrating a growing appetite for the e-commerce giant’s member-based, expedited delivery service.

Still, many U.S.-based third-party Amazon sellers tend to shy away from international markets, fearing the complexity of going global will be overwhelming and/or eat into their profitability.

While it’s true that selling into Canada through Amazon does come with additional layers of complexity, most international-trade considerations can be easily overcome with careful planning and attention.

Tax Implications

U.S. businesses shipping into Amazon’s Canadian fulfillment centers to sell to Canadian consumers are considered Non-Resident Importers (NRIs). By virtue of holding inventory in Canada (through Amazon) a third-party Amazon vendor and Canadian NRI must register and file federal taxes with the Canada Revenue Agency, but does not have to file taxes to the province in which Amazon’s fulfillment center is located.

Customs Documentation

These businesses will also have to ensure they obtain the necessary permits, as well as complete and provide the required customs documentation. Canada’s customs agency carefully scrutinizes products coming into Canada to ensure compliance with regulatory standards and trade agreements, but also for duties or tariffs that may need to be paid.

Customs documentation that is incomplete can result in the import being refused into the Commerce of Canada, leading to delays at the border and, in turn, delays in arrival at Amazon’s fulfillment centre.

Most U.S. businesses use a Canadian customs broker to facilitate the customs transaction with the Canada Border Services Agency (CBSA) and to ensure the documentation is complete and sent to the CBSA in advance for seamless clearance at the border.

Customs Classification

As part of the customs process, products will also need to be properly classified. Canada uses different classification codes than the U.S. and ensuring the right codes are being applied to products being sent to Canada is critical to avoid potential customs infractions. Misclassified goods could lead to expensive and time-consuming audits. Should those audits reveal chronic misclassification, businesses may be required to pay retroactive duties, taxes and interest, and possibly significant penalties.

Labelling Requirements

Canada is an officially bilingual nation. That means certain products must be labelled in both English and French to comply with Canada’s language laws, while others may not require bilingual labelling. This is true for every province, not just in Quebec. Failing to comply with language laws could result in significant penalties and potential loss of distribution rights.

These requirements may seem daunting at first, but most of them are easily addressed and over time will become a natural and integral part of the business process. For most businesses, understanding the requirements in advance and putting in place the information and processes necessary to fulfill them will usually result in a seamless import process and minimal burden over the long term.

Danny Cipollone is vice president of strategic alliances and e-commerce at Livingston International, a customs broker and trade services firm specializing in freight forwarding, global trade management and trade consulting.

World Distribution Services Announces $6.2 million Warehouse Renovation

Driven by a vision for infrastructure upgrades, technology enhancements, and new machinery, supply chain solutions provider World Distribution Services announced plans to refurbish and build 320,000 square feet of warehousing space at a facility in Virginia Beach. The added space will be solely dedicated to manufacturing and retail goods with 20,000 square feet specifically dedicated to food grade space.

“Our new warehouse will feature a top tier Warehouse Management System (WMS) with RF scanning technology. Our WMS gives our clients 24/7/365 access to their inventory data, and seamlessly integrates with their ERP systems,” said WDS SVP John Morrow. “What this means is that we can easily handle inventory management and order fulfillment services for our clients, and provide them with extremely accurate tracking, tracing, and reporting that fits their needs.”

Artistic rendering of the future World Distribution Services warehouse at 1537 Air Rail Avenue in Virginia Beach. The refurbished warehouse will be 320,000 square feet with 20,000 square feet of dedicated food-grade space.
Credit: World Distribution Services

With an estimated completion date for March 2020 and a prime location within 15 miles of Port of Virginia’s container terminals, the renovation will also bring 35 new jobs to the region.

“This company will be nearly doubling its warehousing space [in Virginia], which speaks to its success and its expectations for the future,” said VBDA Interim Economic Development Director Taylor Adams. The VBDA approved an EDIP grant of $35,000 for WDS based on the number of new jobs it will create.”

“We are very excited to be expanding our warehouse operations into Virginia Beach in 2020.  We wanted to bring high quality facilities close to the Port of Virginia to better serve our customers and to improve the work environment for our employees. Thanks to the Virginia Beach Department of Economic Development, we were able to find a facility that will meet both of those objectives,” said Duncan Wright, President of WDS.

 

Supply Chain Professionals: Boxzooka International Ecommerce & Fulfillment

Located on the east coast, Boxzooka Fulfillment and Global Ecommerce provider takes managing client requests to the next level through a one-of-a-kind tailored approach offering back office operations for online retailers, order fulfilment for both direct consumer and direct B2B wholesale order fulfilment, while providing automated, customized solutions. Through this approach, Boxzooka not only creates and maintains competitive advantage as a leader in managing the flow of goods, the company boasts an impressive volume of loyal clients who don’t have to seek outside sources to get their needs met. By taking the extra step out of the process, Boxzooka provides an all-in-one solution. The company isn’t afraid of investing more into their customer needs, as they look at the long-term impact it has on their customer base. In other words, customers always come first.

“We’ve accomplished building and maintaining a business with near 100 percent client satisfaction rate,” Founder Brendan Heegan said. “Most warehouse 3PL operations have an 80/20 rule where 80 percent of the revenue is coming from 20 percent of the clients – those are the ones that get the VIP treatment, if you will, and the other 80 percent of their clients get scattered support where some days are good, and some days are bad. They get a lot of client complaints and we don’t have that because everybody’s getting an equal amount of support and attention, just what they need and more. We don’t lose clients.”

Boasting their very own technology, the integrated game-changing capabilities built into their platforms provide customers with an unmatched global reach, eliminating the need for assistance from an outside source or 3PL. The company’s custom technology platform serves as a major differentiator among competitors and as a significant driver behind their robust customer base and retention strategy.

“We own our own technology and we developed everything in-house. Our systems are comprised of a warehouse management system that handles inventory management movements, receiving and shipping out orders. We’ve also built-in a transportation management system (TMS) – companies might use ShipStation or Stamps.com, but we have all that built in to our warehouse management system so there’s no need for a secondary system in order to perform that function,” Heegan explained. “The platform also enables retailers to open the doors to the global market with the turnkey solution that we provide. “

Beyond automation, Boxzooka fosters an environment where employees aren’t limited to one silo. By fully integrating the ins and outs of operational processes, the company fully utilizes the talents and abilities of each employee.

“We cross train everybody, all the time, on every function so that all of our people can do anything at our warehouse. They’re constantly being thrown at different things. That probably decreases our efficiency and increases internal costs a little bit, but we look at it through the perspective that if we lose a team member, then that function doesn’t break and it allows us to shift labor around, making us operationally very competitive. We have a great service because everyone can do everything in our warehouse.”