The COVID-19 pandemic resulted in a worldwide spike in online sales. To adhere to stay-at-home orders and other local restrictions, many consumers took their shopping online, culminating in a jump to $26.7 trillion spent in global eCommerce sales in 2020, up 4 percent from the previous year.
However, not only did eCommerce sales grow, but digital transformation propelled most industries forward at a breakneck pace, and the retail industry was no exception. Now, customers are accustomed to the conveniences of online shopping, and as a result, more people are shopping online than ever before.
In fact, 5 percent of consumers aged 65 and old reported making an online purchase for the first time ever during the month of March—and one-third of the people polled in this age group shared that they planned to increase their online spending because of the COVID-19 coronavirus. Younger generations like millennials and those in generations X-Z were already regularly making purchases online, adding to a fully saturated eCommerce market.
And truthfully? This eCommerce shipping trend isn’t going to stall anytime soon, especially for direct-to-consumer (DTC) brands. Online retailers who ship directly to their customers without the aid of a brick-and-mortar store are expected to grow between 18 and 23 percent in 2021, amassing somewhere between $1.09 trillion and $1.13 trillion this year as consumers ramp up their online shopping habits.
It’s akin to seeing 5 to 10 years of DTC progress crammed into just a few short months, which means direct-to-consumer brands must find new strategies to keep up with this soaring demand, juggling carrier capacity constraints, higher order volumes, and inventory shortages.
2021 is proving to present some of the same challenges. Online sales are through the roof. And last-mile carriers can be an important tool for DTC brands looking to keep up with these difficulties—if they know how to leverage them properly.
Competing Against Giants
One of the biggest problems that online retailers face today is the need to compete with eCommerce giants like Amazon, Walmart, and Target. While these large brands have the flexibility to offer two-day shipping, this can be a lot harder for smaller brands that have fewer resources and smaller profit margins.
While it would be great to think that exceptional products and smart marketing strategies are enough for DTC brands to drive conversions, shipping times can also play a critical role in a consumer’s decision to purchase or not. One survey reported that 28.6 percent of shoppers were more likely to place an order if they know it will arrive within a week, and that two-day shipping was an important deciding factor for 79.3 percent of survey respondents.
What does this mean? It demonstrates that even if DTC brands aren’t actually competing against retailers like Amazon, consumers think they are and that they expect the same kinds of shipping times. As it stands, 98.3 percent of these same consumers also want notifications if their package is delayed; they want visibility of their orders and they want to receive them quickly.
Key components of last-mile success are sharing this kind of accurate, transparent shipping information and keeping up with one- and two-day shipping rates. DTC retailers must be equipped with the kind of technology solutions and capable carriers to meet these demands and integrate full visibility of their last-mile services with their current tech stack.
The New Last Mile
The COVID-19 pandemic forced many eCommerce retailers and DTC brands to find last-mile carriers to keep pace with customer expectations. Why is this? Carriers were charged with delivering more packages than ever before and quickly ran into capacity constraints. Even regional carriers struggled to keep up.
These carrier capacity constraints didn’t ease after 2020 ended. For example, UPS reported that they are projecting that during the 2021 holiday season, they will receive 5 million more packages per day than they can handle. Many large national and regional carriers are already sharing that they plan to instate carrier capacity limits for retailers shipping large volumes during the holiday season, and some are also instating surcharges—often per package—to offset the stresses to their operations.
For eCommerce brands, this is a recipe for disaster when faced with consumer expectations for two-day and fast shipping. To counteract these struggles, they are employing new and varied distribution strategies, including working with smaller regional and last-mile carriers.
Micro-Fulfillment Centers: A (Tiny) Solution
One way that DTC brands can solve the issue of carrier capacity limitations and carrier surcharges is by working with micro-fulfillment centers and small regional last-mile carriers. These micro-fulfillment centers are based on the concept of fulfilling orders closer to the end customers. However? They can at times be costly and inefficient. It’s a solution that has a lot of promise but hasn’t been entirely successful as a single solution just yet.
DTC brands that choose to employ micro-fulfillment centers really need to be able to rely on the data they collect from their customers to know which products to send to each fulfillment center and forecast inventory quantities that will keep up with demand—while also not taking up too much space in a smaller facility. This is one way that retailers can compete with larger retailers who have many fulfillment centers scattered across the country, allowing them to offer fast shipping to drive conversion, boost customer satisfaction, and nurture repeat business.
Challenges with Hybrid Last-Mile Solutions
Some retailers choose to turn to traditional carriers such as FedEx, UPS, and the US Postal Service (USPS), while others are finding that hybrid carriers like UPS’s SurePost, FedEx’s SmartPost, and the USPS’s Parcel Select are more aligned with their needs. These hybrid carriers connect their vast network of carrier capabilities with the reliability and extended service of the USPS, which assumes the responsibility for the final delivery.
Like other carriers, many last-mile solutions are also rising in price, compounding the shipping cost increases that DTC brands are already experiencing. What’s more? Last-mile services are costly and inefficient to start.
In fact, last-mile delivery services typically account for 53 percent of the total shipping costs per package. Even with hybrid last-mile solutions, packages have to go through pickup and package sortation, then change carriers to the USPS, send the package to the sorting facility, then onto the person in charge of making the delivery, who has frequent stops and many packages to deliver in one day. Like micro-fulfillment centers and small regional carriers, this is also not a perfect solution.
Integrating Solutions and Diversifying Carriers
Truthfully? None of these solutions are perfect when used on their own. Even so, DTC brands may find their “shipping sweet spot” by finding a combination of multiple carriers to meet various needs.
Working with just one carrier means that brands are subjected to capacity constraints and surcharges with no way around it. When they diversify their carriers, they can avoid these constraints and fees by spreading their total number of packages out amongst multiple carriers, assigning packages to certain carriers based on their strengths, including location, shipping rates, and delivery times.
Finding a carrier shouldn’t be a one-size-fits-all solution, and not every carrier can suit every need for a DTC brand. Diversifying carriers is one way to keep costs low while still providing customers with speedy shipping and great service.
Leveraging Technology to Optimize Last-Mile Delivery
Employing multi-carrier shipping solutions is a smart way for DTC brands to relieve some of the financial burdens and time constraints that they are incurring from their current carriers. However? These solutions are only helpful if retailers have complete visibility of what is happening with each carrier at any given moment in real-time. By having this information, they can answer customer questions about shipping and review data to continue to optimize their shipping solutions
Online brands can find success in last-mile delivery if they have a strong order management system; one with features like inventory forecasting and order tracking. Plus? Gathering large pools of data to analyze and optimize processes doesn’t hurt either. Rather than juggle multiple systems in many different locations, DTC brands can make several last-mile solutions work if they unify these solutions in one, easy-to-use, fully-integrated tech stack.
OceanX understands the pressures that DTC brands are facing all too well. As a third-party logistics provider for those in the beauty and wellness industries, the OceanX team is committed to helping online brands optimize their entire fulfillment processes.
To do this, OceanX has created the Bridge Platform and Portal. Together, these tools not only unify carriers, marketplaces, and fulfillment centers into one complete, at-a-glance solution with full visibility of the fulfillment process, but they also collect and store data to help brands continue to refine their fulfillment processes to save time and money and offer exceptional customer service. To learn more about how OceanX can help you hone and tighten your last-mile solution, connect with our team today.