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05 Feb 2022

Top Parcel Industry Trends of 2022

Just as COVID-19’s impacts on global supply chains begin to subside, the outbreak of war in Ukraine and its ripple effects look set to ensure disruption of the parcel delivery market throughout 2022 and perhaps into the foreseeable future.

As these disruptions, and changing consumer behavior, create a state of flux in the parcel shipping industry, new trends are emerging in the sector—and are likely to gain momentum during the course of this year. By studying these trends, you can fine tune your parcel shipping strategies to reduce expenses and increase profits.

What is Parcel Shipping?

Before we get into a rundown of trends in the parcel shipping industry, it might be a good idea to clarify which aspect of logistics we mean when we talk about parcel shipping. 

Essentially, parcel shipping is the delivery of small and medium-sized boxed items, generally weighing less than 45 kg, usually from a distributor to a customer.

So what about those trends? Well, more than halfway into 2022, we can see the following five notable patterns emerging within the sector. 

1. Carriers are Kings

The surge in demand for home delivery has created a 3PL carrier-led market. Some of the biggest parcel carriers have reached capacity thresholds, opening the way for new players to enter the arena. 

But a global shortage of drivers is compounding the capacity crunch. Carriers with sufficient resources to meet the demand for speedy last-mile delivery are calling the shots—and hiking up prices for new clients.

The effect of this trend is two-fold:

  • Carriers are prioritizing larger, more lucrative partnerships instead of taking on smaller clients

 - Companies are sticking with their existing carriers and devising more efficient shipping strategies instead of opting for multi-courier strategies.

 Seeing a gap, gig economy courier startups are surging in, offering on-demand deliveries of meals and groceries on behalf of restaurants, cafes, supermarkets, and grocery stores.

The demand for 3PL carriers is likely to continue as retailers and etailers join the rush to deliver products from a store or fulfillment center directly to the consumer as quickly as possible.

Establishing an in-house delivery team and vehicle fleet is costly and resource-heavy. Engaging the services of a parcel shipping company saves you from the need to invest in full-time staff. Another benefit is that you need only use a parcel shipping service, or, if your business is large, multi-courier services, during times of peak demand.

2. Shipping Costs are Rising 

In the wake of the pandemic, and driven by the war in Ukraine, soaring inflation in many parts of the world is fueling a rise in purchase prices and shipping costs. The upward trend in prices of goods and services is expected to peak in about 12 months, meaning another year of insidious price hikes.

As a result of these escalating costs, some carriers are adding surcharges to their on-demand and same day delivery rates. They are also beginning to offer cheaper, fewer-frills delivery options such as zero tracking and customer pickups from efulfillment centers.

Merchants, for their part, are re-evaluating their parcel spend and send processes, pulling back on services that are not essential to satisfy their customers’ needs for efficient, satisfactory delivery.

3. ‘Just in Time’ is becoming ‘Just in Case’

During the pandemic, Just in Time (JIT) supply chain management often became ‘out of time’ due to lockdowns, transportation problems, lack of inventory, and shipping bottlenecks. Stung by severe customer dissatisfaction, many businesses are now abandoning the JIT system despite its advantages of lower inventory and higher profits.

Big brands are switching to the ‘just in case’ model instead. Rather than keeping their inventory as lean as possible to hold costs down, they are increasing buffer stock levels as protection against supply chain shocks and production problems.

They are also investing in larger storage and distribution centers to hold the stock. The extra inventory also alleviates the problem of shortages during surges in demand and lapses in supply.

4. The Biggest Challenge: Reverse Logistics

Consumers expect purchasing online to be simple and convenient. At the same time, they expect the same simplicity and convenience in the return of damaged, unwanted, or ill-fitting. In response, smart businesses are implementing and maintaining easy parcel returns methods—but at a cost.

The numbers are staggering. The global reverse logistics market in 2020 reached a whopping $635.6 billion (USD). This figure is expected to balloon to $958.3 billion by 2028.    

Left unchecked, this trend could significantly cut into retailers’ profit margins, so parcel shippers are resorting to some or all the following strategies to manage parcel returns costs while making returns processes quick and easy for customers.

Following the Trend of Amazon

Some shippers are emulating the biggest parcel company in the world, by introducing repair, refurbishment, and repackaging operations to facilitate the resale of used or unwanted items.

Instituting Specialized Warehouse Worker Training Programs

Another popular reverse logistics initiative is to implement training regimens focusing specifically on the cost-cutting strategies of standardized return logistics.

Improving the Quality of Goods and Standard of Delivery

By improving goods quality and delivery standards, retailers are hoping to reduce the frequency at which customers return their purchases. In a global survey of online shoppers, faulty, damaged, or poor-quality goods were cited as the main reasons for returning goods. Another common reason was that the product did not live up to its online hype. 

Simplifying Returns

Businesses wishing to foster good customer relations are making the returns process as simple as possible, for example by including a returns label with delivered goods and accepting returns of goods ordered online in brick-and-mortar stores.

Doing Away with Returns

Some brands prefer to avoid the cost and inconvenience of returns by allowing customers to keep orders that don’t work out. They will also replace the incorrect/unwanted item or offer the customer a refund without expecting the item to be returned. Given the expense and trouble of dealing with reverse logistics, other businesses are likely to start following this trend.

5. Smart Logistics is Becoming Indispensable

Companies and brands caught napping by the pandemic-driven supply chain disruptions are now investing heavily in artificial intelligence-driven data analytics tools.

The need and ability to make the right parcel shipping decisions have become vital—not only to highlight cost-saving areas but also to limit the damage caused by unexpected disruptions.

To maximize their operations, shippers are making use of business intelligence technology to gather data on the following parcel shipping processes: 

  • Pricing structures

 - Shipping zones

 - SKUs

 - Operations across multiple carriers (multi-courier services)

 ## textPower up Your Parcel Shipping in 2022

For ecommerce businesses, 2022 could be the best year yet due to the increasing popularity of online shopping. With an awareness of the current parcel shipping trends, you can fine tune your logistics activities to reduce expenses and increase profits.

But with costs rising amid ongoing supply chain disruptions, your shipping strategy is now more important than ever. As a 3PL company specializing in last-mile delivery, Shipa Delivery has an array of solutions to meet the challenges of parcel shipping in these uncertain times.

Why not let our experts help you design cost-effective strategies for your parcel shipping needs that will see you through 2022 and beyond? Contact us today. Our experts are always on standby for your call.