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June 01, 2011

Low-Cost Residential Delivery Options

Multichannel Merchant - article excerpt:

Consumers and carriers are squeezing catalogers and etailers. Customers today expect free shipping. Parcel carriers keep raising prices.

Consider on the one hand that UPS and FedEx pricing has risen approximately 20% during the past three years. Many surcharges, such as residential add-on fees and delivery area surcharges, are up 20% to 30% since 2009. Fuel surcharges alone have doubled since this time last year!

On the other hand, online shoppers insist on free shipping. According to a recent National Retail Federation study, the number-one purchase incentive is free shipping.

Some direct merchants offer free shipping and are forced to dilute margins or artificially inflate product costs to make up costs. But competition within many markets is too fierce to mark up product pricing. Shipping is a loss leader for many.

Compounding the financial problem is the fact that a growing number of online orders are delivered to residences. In fact, residential deliveries have doubled from 20% of the overall parcel market to 40% in less than a decade.

Shipping to residences vs. businesses poses several challenges, namely that delivering packages to a residence is more costly than delivering to a business address. Driver and fuel costs are higher outside of high-density commercial routes...

To read the article in its entirety, visit Multichannel Merchant.