It could be a coincidence, but industry experts say consumers are opting for cheaper, slower shipping options just as retailers stock up early for peak season. It seems both sides of the equation may be looking not only to cut costs, but make sure they will have what they want in time.
Certainly, there’s an intriguing confluence of two factors. Peak season appears to have come early this year, with the ports of Los Angeles and Long Beach, which account for roughly a third of all U.S. container imports, reporting their third-strongest month ever in July, at a time of year that retailers are traditionally reducing their inventories in preparation for a later surge in time for the end-of-year holidays. Trucking got a boost, too, with a 30% year-over-year increase in trucking visits to North American distribution centers for the top five retailers in June, according to Motive, which collects data from its fleet management software. As early as late May, the chief executive of Hapag-Lloyd AG attributed a spike in cargo volume to the Red Sea capacity issues and “really strong demand” that supports the case for an early peak season and inventory restocking. Port of Los Angeles executive director Gene Seroka in August referred to an “early peak season.”
In any case, the mad dash to make everything in transportation and fulfilment go faster seems to be slowing. UPS has experienced a downward trend in the use of expedited shipping, with shippers opting for budget-friendly alternatives over faster air transport, according to B2B software services provider e2Open, which gathers large amounts of data on shipping. Meanwhile, the U.S. Postal Service saw a 40.7% drop in Priority Mail volume for Q3 FY 2024, while USPS Ground Advantage increased by 2.7%, indicating consumers are accepting slower order delivery times.
It’s possible shippers are simply anticipating the possibility of delays brought on by looming strikes by dockworkers at East and Gulf Coast ports in the fall (and the still-tentative agreement covering West coast ports). Or that they’re worried by other, ongoing disruptions, such as those in the Red Sea-Suez Canal shipping lane. But it’s also likely they don’t want to spend money on expedited transportation services, decided to make the most of low freight rates while they last, and are willing to bear the inventory-carrying costs in order to be sure their goods are in stock.
That would seem especially fortunate, in light of the fact that a trend towards cheaper, slower shipping options means consumers are ordering products earlier. Furthermore, “peak” shopping and buying has already been elongated past its reliable, pre-pandemic stretch from Black Friday in late November to just before Christmas. Huge promotional pushes earlier in the year, such as Amazon Prime Day (happening for the first time twice this year, in July and October), along with “Black Friday” discounts that can go on for weeks, have been spreading out the consumer spend, and therefore the demand for shipping.
It’s hard to tell yet exactly what’s moving the needle, but it is unquestionably moving, for now, at least. “Maybe some brands saw peak coming early, others saw lower rates and took advantage of them,” says Pawan Joshi, EVP of products & strategy at e2open. “That’s one thing. But the other thing is that peak has been moving earlier and flattening for a while. It’s not just moving earlier but flattening.”
“People during pandemic weren’t getting their holiday gifts in time, so they’re buying earlier, and the retailer is selling earlier to make sure everyone has what they need for the holidays,” says Helaine Rich, vice president of strategic sales and administration at ePostGlobal, which consolidates international parcel shipments. “The pandemic changed people’s behaviors completely, coupled with the fact that the supply chain changed, too.” Rich says she’s seeing retailers’ “last shipping dates” for Christmas get moved further and further back, even into late October. “They want to manage the customer service department, so they won’t get bombarded with where’s-my-stuff queries. So, they’re managing the expectations of the consumer, but that’s coupled with supply chain changes and with considerations of the cost.”
With the price being right, consumers seem to be in line. “They’re more price sensitive,” says Joshi. “If I don’t need it overnight, I’m not going to pay extra for that.”
Joshi says there’s another factor in play, too. The traditional way of delivering products to home consumers was that retailers would bring products to a DC and, if they were not going to a physical store, they got shipped from the DC via parcel to the consumer. That meant fulfillment to people’s homes could take longer, or would necessitate expedited delivery. “But, during the pandemic, we saw a massive adoption of some of the newer ways of delivering stuff, especially with the gig economy, and Uber and DoorDash.” Brands now have the option of delivering from a store — even in a two-hour window — in an affordable way. “Now, brands can put more on the truck and ship from the store. That’s the dynamic backdrop to the peak, and it’s how companies are reacting to the flattening of the peak,” Joshi says.
