Online shipping costs are expected to continue to rise in the pandemic

Delivery costs have risen across the country and are expected to continue as the pandemic continues, creating a serious windfall for retailers, according to a Jefferies report.

“The recent rise in shipping costs has been fueled by increased e-commerce penetration, which has created a significant imbalance between supply and demand and left carrier capacity limited,” said Jeffries analyst Janine Stichter in the report, which is based on a call with Dean Maciuba, a former FedEx executive who is currently North America’s leading partner at consulting firm Last Mile Experts.

Consumers expect fast and free shipping, but this is a growing burden for many retailers, especially those who have been injured by prolonged shutdowns during the Covid-19 pandemic. Medium-sized retailers are particularly at risk, as many do not have the capacity to implement a sufficiently robust and efficient delivery strategy to keep up with the demand for fast deliveries.

This pressure comes largely from companies like Amazon, which is famous for its two-day Prime delivery options, one-day and same-day delivery options. This made consumers expect fast, free shipping, even if some may not want or need it, Stichter said.

Online shopping during the holiday season last year did not reach the maximum level expected, according to Maciuba. He suspects that shipping carriers are looking to make up for the financial losses because they have invested in building the infrastructure to prepare for increased demand that has never materialized. On the other hand, retailers could benefit from lower transport costs than expected.

However, the holiday fees that shipping carriers such as FedEx and UPS have implemented to prepare for the flow of orders will not go away. These surcharges are likely to become the new normal movement, in addition to the usual 5% -6% annual increases, Maciuba predicted.

FedEx recently announced new peak surcharges for Express and domestic home deliveries for those customers who had a weekly volume of over 30,000 packages. The additional 30-cent package fee went into effect Monday.

Maciuba told Jefferies that the best solution for freight carriers to combat pandemic and holiday losses is to adopt alternative delivery methods, such as shopping online, picking up in-store services, picking up on board and using apps. delivery from third parties, such as Doordash or Shipt.