With 2021 expected to be the largest e-commerce shopping season ever, companies without a planned shipping option are going to face challenges in coming weeks. Direct-to-consumer companies essentially have two choices – take a hit to their margin or increase the consumer’s shipping cost. Both approaches will be challenging.
Shipping delays and sorting facility back-ups are expected to rise past the peak experienced in 2020, leading to higher returns and charge backs for direct-to-consumer shippers. This will be driven by several factors including the ongoing labor shortage, supply issues/freight cost and the demand for long-haul truck drivers who are more often opting for shorter, more local routes.
Additionally, port congestion in major markets such as Los Angeles is pushing companies to quickly seek secondary port locations in other markets including Houston, Texas and Savannah, Georgia. Ports which were already at capacity with retailers are trying to ramp up inventory for the holiday season, and now more direct-to-consumer companies are searching for inventory.
Most companies are not prepared to face these challenges, and the impact they suffer over the next three months will ultimately lead them to search for redundancy in the future. However, companies can invest in technology such as audit and management software systems that catch errors and mistakes, assist with payment processing, and more, which offer many avenues to explore for offsetting these costs.
Companies seeking ways to mitigate risks with carriers should engage commercial real estate brokers who can help navigate the intricacies of these issues. While peak shipping season will end, issues with labor and the ports continue to increase.