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Why Ecommerce Retailers Need an Open Relationship with Their Shippers this Holiday Season

Let’s face it — a monogamous relationship with a national shipping company ain’t cutting it anymore. The performance of each of the three main national carriers — FedEx, UPS and USPS — has steadily declined due to structural issues, including poor earnings, wage pressures and constrained labor. If you are a retailer stuck in a single-carrier relationship, it’s time to open it up, especially with holiday shopping underway.

For ecommerce retailers, the thing that matters most is the confirmation of what we have all intuitively felt: The delivery experience for consumers has not been good enough, and that is only exacerbated during the annual holiday season boom.

The notion of poor performance has been so strong that many smart retailers have been focused on the warning signs of poor delivery performance during this peak season since last year. Diversifying carriers into a multi-carrier strategy is the most urgent initiative we have seen this year. It’s no longer wise to rely on a single relationship with one of the national carriers. Instead, to do so has become one of the most crippling bottlenecks in an operating stack.

A Single Point of Failure is More Common Than You Think

Not enough retailers are taking it seriously. When FedEx’s quarterly report is paired with Q4 projections based on last year’s performance, the holiday season looks bleak for those retailers that haven’t yet diversified.

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We indexed the top 750 ecommerce retailers by annual online revenue based on industry data from EcommerceDB.com. For each website, we investigated their online shipping policies (examples here and here) and went through the buying process to view shipping options available at checkout. Combined, we could cross-reference whether or not a given retailer used a single carrier.

We found 22%, or 165 retailers, explicitly stated or demonstrated that they used a single carrier. An additional 17%, or 127 retailers, used two carriers, but the format was primarily relying on either FedEx or UPS, then using the U.S. Postal Service for P.O. boxes only, or a similar arrangement, which by our estimate still puts them within the realm of operating with a single point of failure for most national domestic deliveries. Combined that is 39%, or 292 of the top 750 online retailers, that are set up for a miserable peak season.

The story gets worse the smaller the retailer gets. A large majority of emergent, mid-market ecommerce retailers or brands hovering between $10 million to $50 million per year in annual online revenue, which we estimate to be about 1,500 companies via EcommerceDB, anchor on a single carrier. They tend to do that for understandable reasons. Their volume of shipments is small enough (typically between 10,000 to 50,000 per month) that they can’t get favorable rates across multiple carriers, so they negotiate with a single carrier that will give the best discount via volume thresholds where — surprise! — the trigger is close to 100% of their estimated volumes. These smaller companies don’t have the internal personnel or resources to negotiate with multiple carriers, then further manage those relationships to monitor weekly updates; they are focused on other issues.

As a result, it is rare to see smaller retailers value a multi-carrier strategy. Unfortunately, customers of those retailers will be the ones experiencing the most discomfort during peak season. This will impact happiness and loyalty for these brands going into 2022.

How to Get Ready for Peak Shipping

Retailers must leverage multiple carriers during peak season to avoid frustrating customer experiences that harm revenue growth and loyalty. That’s no easy task. Fixing this problem in time for peak requires both a business solution and a technology solution working in partnership.

The business solution stems from the idea that it’s best to own a direct relationship with a carrier. It’s generally smarter to secure a direct contract between you and the carrier that is specified to your shipping profile than it is to go through a third-party reseller. Going from one carrier to many carriers means negotiating and securing contracts. There are several ways to approach it.

Volumes matter for this approach, however. If you ship less than 10,000 orders per month, it might be difficult to secure favorable rates — or even get a contract. Similarly, if you are small enough and still use a 3PL for outsourced order fulfillment instead of your own warehouses, much of the carrier contract management and outbound shipping decision-making will fall to your 3PL partner. But if you are large enough, go get additional contracts as soon as possible.

The technical solution relies on the idea that order-level shipping decisions can be automated through a technology provider. Now that you have multiple carriers, how do you decide which carrier is the best for any given order? Should you go with fast shipping methods or cheap ones? Is there a target date to hit? Many more operational questions arise that must be answered order-by-order.

The ease of leveraging multiple carriers will be dependent upon the type of technology you have in place. Older legacy systems might require cumbersome integrations just to turn on a new carrier in your network. I’ve seen a transportation management system (TMS) provider quote 15 weeks for the inclusion of an additional carrier, which definitely won’t get the job done in time for peak! On the other end of the spectrum are more basic, newer technologies that might make carrier integration easy, but do not provide the logic or advanced rule sets to intelligently pick between the carriers, meaning costs might balloon and delivery speeds might not be as fast as you expect.

Remember that solving this problem is about your customers’ needs first and foremost, which means your strategy and technology solutions need to fit the peculiarities of your business. It’s time to break up with the single-point-of-failure of a single national carrier and diversify. Those of the 39% still in this situation that are unable to do so this peak season are in a precarious situation and should make it priority number one next year.


Jason Murray is the Co-founder and CEO of ecommerce supply chain platform Shipium. Prior to founding Shipium, he spent 19 years at Amazon in roles such as VP of Retail Systems and VP of Forecasting and Supply Chain, overseeing the software and operations that power Prime, Subscribe & Save and Pricing.

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