The Impact of Steadily Declining Retail Sales on Shipper Operations
With unprecedented disruptions in the supply chain, a lingering pandemic that threatens to make yet another resurgence, the Russian invasion of Ukraine, and now an impending recession, the transition into the ‘20s has been a rough start. Beneath the surface events, however, there has been an interesting trend emerging, which has been a very large transition in consumers’ shopping habits.
It’s no surprise that traditional retail has been on the outs for some time now. Between ‘17 and ‘19, there was a growing fear that ecommerce would completely phase out brick and mortar and consumers would shift to purely digital forms of shopping. These fears were compounded when household brands such as Sears, Kodak, and Toys R’ Us all began to fail and shut their doors for good, leaving many to wonder if the same would happen to other retailers.
Whatever doomsaying took place before 2020 seems to be largely, though not entirely, unfounded. The pandemic did indeed increase the popularity of ecommerce. While digital retail sales have fluctuated to a varying degree over the past few years, the most notable being around 20 percent during the height of the pandemic, ecommerce sales have more or less stabilized to pre-pandemic levels at 14.2 percent.
Even with the drop-off in ecommerce sales, the legacy of traditional retail sales is beginning to fade as a new era is ushered in by consumer choice.
Competing with Titans
Of course, it’s impossible to mention a shift in retail sales and ecommerce without paying homage to the digital retail titan that is Amazon. Amazon is currently dominating the market with 40 percent overall sales and even higher in some categories like books. Amazon’s wild success and steep learning curve have been the downfall of many brick-and-mortar retailers that were unable or unwilling to change with the times. Despite the impressive numbers and the more notable mentions above, however, there has been quite a lot of success from the non-Amazon retail sector, which can be broken down into three specific measures:
- Embracing Omnichannel and Digital Strategies: This has been one of the most successful strategies for retailers and has been embraced by the industry heavy-hitters like Walmart and Target. Walmart, in particular, has been pushing its digital sales capabilities to another level and truly embracing omnichannel strategies. Target has also taken a more digital approach with its consumers, and now almost a fifth of their total sales are conducted online.
- Amazon Alternatives are Hitting the Field: While Amazon was a pioneer of the digital frontier, they’re no longer the only game in town. Many other digital-only alternatives to Amazon have begun to gain popularity. Companies like Etsy, which connects consumers to specialty crafts, and Instacart, which specializes in grocery deliveries, have been very successful since their inception.
- Taking Control of Distribution: Lastly, some companies, like Nike, have stopped selling directly to Amazon and have instead been developing their own customer sales apps and platforms. Since Nike took control of its distribution, digital sales have risen by two-thirds making up 20 percent of Nike’s total sales.
How will this Impact Shippers?
With brick and mortar stores increasing their digital presence and modifying their marketing strategies, shippers and ecommerce retailers will have tighter competition for available resources, including warehouse space and trucking capacity. Unfortunately, these are two very distinct issues that can and will cause considerable difficulties for unprepared shippers.
In terms of warehouse space, what little is available is either inconveniently located for distribution or is so outrageously priced that it has become cost-prohibitive. Due to the global supply chain congestion, many companies are buying up warehouse space as a means of increasing inventory to protect themselves from further disruption. It has reached such a crisis point that companies are leasing warehouse spaces that aren’t even built yet.
As for trucking capacity, the United States has been dealing with a truck driver shortage for some years, and the problem isn’t likely to go away anytime soon. With the median age of truck drivers approaching retirement and fewer young and able replacements, many trucking companies are having a hard time finding bodies to take up the wheel. As the pool of drivers continues to dry up, capacity will continue to shrink as well.
The bottom line for shippers is inefficiencies will serve as an anchor, dragging them down to the bottom of the pool. Customers aren’t just happy with a product anymore. They want an experience. Everything from what they buy to how they buy it and how it is delivered is all under tighter scrutiny than ever before. This means that shippers and ecommerce sellers need to look at how they can make their business more efficient as a whole. As retailers continue to shift over to digital strategies, the situation will continue to compound, making it that much harder in the future.
ShipWorks has been at the forefront of ecommerce shipping since 2000—twice as long as our nearest competitor.
We provide shipping software, technology, service, and support for high-volume, multicarrier shippers, selling on multiple platforms. ShipWorks productivity tools automate tasks for order processing and printing labels faster than cloud-based solutions.
Two decades later, our purpose remains the same – to enable our customers to focus on their business growth and success by providing them a worry-free shipping solution that ‘Just Works.’
Learn more about how ShipWorks can help optimize your business today!