Navigating Holiday Shipping

By Stefan Alexiev

While shipping is always top of mind for CPG brands, holiday season is one of the most critical times to ensure timely delivery. This year, labor shortages, supply chain challenges, and inflation will add additional financial and logistical difficulties to holiday shipping. We invited Stefan Alexiev, CEO of VNDR.com, to explain potential holiday shipping delays and excess costs, and how to mitigate them.

CAUSES OF SHIPPING DELAYS + MITIGATION

Unreliable service due to labor shortages combined with the effects of COVID on the supply chains have caused major shipping delays. We have also seen more cases of severe weather than we have in a very long time. For the first time in the history of the company, UPS had to shut down their Louisville Worldport hub because of a winter storm. According to most experts, these weather trends are likely to worsen in the future and possibly this coming season.

The only way for brands to minimize delays is to switch to the most reliable carrier at this moment and pay for the fastest delivery time feasible. Currently, UPS is trending as the highest on-time delivery carrier at 95.6%. Personally, as a UPS customer, I have been seeing 97%+ on-time delivery. They have been the most reliable, especially for perishable shipments throughout the pandemic. USPS is also trending high at 95.1% while FedEx is having major issues, bringing their average down to 87%. On top of their slipping averages FedEx just announced that they will be suspending their on-time delivery guarantees, making recourse for late/ spoiled packages unavailable. All that being said, using Air and Express services brings your chances of a successful on-time delivery much higher than Ground and should be applied when needed.

RESPONDING TO INCREASED CARRIER RATES

Carriers are making big rate hikes to keep up with inflation and rising labor costs including FedEx and USPS. UPS also just announced general rate increases set to take effect on December 26. Across the board, these carriers are presenting an average of a 5.9% rate increase into the new year. Brands should bite the bullet now, and raise their shipping and/or product prices accordingly because, unfortunately, things are not going to get any cheaper. This is not a “weather the storm” situation, this is a permanent shift in the market and there will be no low-priced pots of gold on the other end. Raising your shipping fees by 10% now will help you maintain your margin as all carriers continue to raise costs. Adjusting your pricing to keep up with these costs is the best way to avoid getting squeezed out of your margin. The only good news here is that this applies to everyone, so your competition will have to do the same. Carrier rates are mostly based on volume, so finding a group or another company to piggyback on is another sort of underground way to lower costs immediately as you scale.

HOLIDAY SHIPPING BEST PRACTICES

» Look for a new carrier. If you are with FedEx, switch to UPS or vice versa. Pin the carriers against each other to negotiate better pricing.

»Find a buying group with volume discounts. If you are a startup, you will run into the same chicken-egg problem everyone does when they first open their e-comm business: “You need more volume to get better rates but you need better rates to get more volume.” These groups can help you get started with little to no volume until you start scaling.

There are many resources out there you can find through CPG communities like Startup CPG. For example,VNDR is a shipping platform for perishable food brands. We offer state-of-the-art shipping software featuring heavily discounted shipping rates earned through the collective volume of our 600+ brand partners.

»Sign up for package insurance such as Route to ensure your package makes it in one piece. With delays on the horizon, providing transparent tracking and peace of mind for your customer (and yourself) is a must-have.

»Find ways to ship with less transit time. In the Amazon-driven world we live in, customers expect things immediately. Offer top-notch shipping service although it may cost more and save yourself the headache of tracking late packages for unhappy customers. This may mean you work with strategically located 3PLs or you are shipping Express/Air nationwide. Whatever it takes, be sure to not get left behind as the customer expectations only get greater in our fast-moving society.