By Andrew Greissman
In a recent article posted by Reuters, attention was drawn to announcements made by the United Parcel Service (UPS) after they reported a less than jolly holiday season in 2014. According to the company, spikes in demand surrounding major shopping days were separated by major lows. Profitability took a hit as extra holiday workers and equipment went idle, something that the company hopes to circumvent through stronger demand forecasting.
Higher costs for shipping may put strain on ecommerce free shipping standard
Along with a renewed focus on demand planning, UPS announced that they will also be rolling out new charges for residential parcel delivery. The company claims that shipping costs to homes can be up to three times as expensive as deliveries made to offices, which is why they will be introducing the new costs in an attempt to recoup lost revenues. Ecommerce businesses will now have to decide whether or not they are willing to eat the costs and continue to provide free shipping, or if they will attempt to pass them on to the end consumer. Both options require strategy to pull off without effecting revenues, but in the majority of cases where businesses are offering free shipping, ending it could come as a major blow to customer satisfaction. Pure plays such as Amazon, who offer free shipping as one of the major draws of their Amazon Prime service, will face the pressure along with medium sized businesses, providing incentives for ecommerce businesses the think strategically about fulfillment in 2015.
- Seek out and compare fulfillment options in order to uncover potential for savings
- Don’t make the same mistakes as UPS- a focus on demand forecasting is essential for inventory management practices that conserve revenues
- Be proactive in budgeting around potential rises in shipping costs. Consumers want free shipping, meaning that companies that retain their free shipping clauses will retain a competitive advantage
Andrew Greissman is a digital content manager for WBR Digital. Andrew’s writing background spans genres and formats from poetry and magazine writing to website copy and press releases. When not writing, Andrew enjoys travel, good food and reading books.
Photo credit: Christian Junker
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