Coronavirus is causing a surge in e-commerce purchases, and with it, a jump in rates. The Wall Street Journal reports that carriers are inundated with e-commerce business, putting them in a position to seriously increase rates. If a shipper does have a good rate locked in, they could expect limits on capacity.
Some online sellers are already dealing with limits and fees. FedEx limited the amount of product that could be shipped from stores at certain retailers, such as Kohl’s or Bed, Bath and Beyond. UPS surcharges are ranging from 30 cents per package for Ground Residential to $31.45 for large packages.
This is putting retailers in a tough spot. In spite of its popularity, e-commerce has struggled for years to turn a profit, and much of it has to do with shipping costs. Now, as e-commerce takes off, online sellers face a few unsavory options – raising prices, eating rate increases, or getting rid of free shipping.
This is not to place all the blame with carriers. UPS reported that home deliveries have accounted for more than 70% of deliveries since businesses closed and stay at home orders commenced. Normally, that number would be around 50%. The other half would come from larger deliveries to businesses, which is much more profitable. Last mile is expensive, and we’re seeing more of it with Covid keeping everybody home.
Suffice it to say, logistics companies are struggling this year. Net income at UPS fell by $965 million in the first quarter. CH Robinson saw profits and revenue fall in Q2. As more earnings information comes in, my bet is that we see more stories like these.