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While a holiday season “Shipageddon” may have passed, new consumer behaviors are proving to have staying power leading to increased online sales and keeping shipping levels at a peak. According to a Global Shopping Index report by Salesforce, updated in March 2021, global digital commerce growth increased 56 percent year-over-year in the fourth quarter of 2020.
While pre-pandemic, FedEx had projected that the U.S. domestic package market would hit 100 million packages per day by the year 2026, the company now expects to hit this mark four years sooner than expected, growing to 101 million packages a day by 2022. And further, according to FedEx, 86 percent of this growth is expected to come from e-commerce.
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But amid challenges, a year in navigation has served to inspire new practices for businesses to meet consumer expectations and reach new ones. “The speed of change across every industry has been unlike anything we’ve ever seen, with e-commerce behavior-changing more in three months than it has in the previous three years,” said Ryan Kelly, vice president of e-commerce and alliances at FedEx. “Many brand manufacturers developed their own online stores quickly and carefully without disrupting their relationships with key retailers [and] many retailers who didn’t have an online presence adapted by adding that channel [while also] introducing or expanding their buy online, pick up in store capabilities or added curbside pickup — the speed at which this happened is very impressive.”
Here, Kelly talks to WWD about new consumer behaviors, the meaning of convenience, key learnings from a year in peak shipping and how FedEx has shifted to meet new needs.
WWD: From your perspective, what are the new practices for businesses inspired by the last year?
Ryan Kelly: Consumers want to choose how they shop, when they shop and where they shop. If you don’t give them that choice they will quickly move on.
Throughout the pandemic, businesses that developed an omnichannel operation have been more flexible, moving sales online and using physical locations for fulfillment. The same is true for brand manufacturers, as those that sold through retailers and their own online storefront were better equipped to weather the disruption to their normal business model. This is a must for any business as consumers need to find your product in a way that’s most convenient for them.
WWD: What are the new consumer behaviors inspired by the unusual last year as it relates to shipping?
R.K.: The rapid onset of COVID-19 has been felt by nearly every industry across the globe, and it has forever changed e-commerce. Shoppers were pushed online overnight, and in that instant, everyone from large industry retailers to small mom-and-pop businesses had to revamp their business models to meet changing demands.
As a result, e-commerce has experienced a surge in demand, and we expect many consumers to adopt online shopping as their new normal. According to a new Global Shopping Index report published by Salesforce, the number of unique digital shoppers rose 40 percent year-over-year.
And a consumer study that FedEx commissioned through C Space in March found that 70 percent of shoppers are buying from more online retailers today compared to a year ago. Although the majority said COVID-19 is the reason they’re shopping more online; some realized the added convenience of e-commerce.
WWD: Has the way consumers see shipping evolved and what are the current expectations?
R.K.: Consumers expect a frictionless process, which ultimately encourages brand loyalty and must be a consideration for any business that wants to maintain repeat customers. Increasingly, online shoppers want fast, predictable deliveries any day of the week. While COVID-19 has caused disruptions, consumers still expected fast shipping. However, after a year of unpredictability, predictability and control is starting to trump fast.
Our consumer study fielded in March found that convenience is less about receiving items fast than it is about reducing the time and effort it takes to shop at brick-and-mortar stores. In fact, 73 percent of respondents replied “no” to the question, “When shopping online, is convenience about getting items as fast as you can?”
Convenience means factors like large selection, no driving anywhere, shopping from home or anywhere and anytime, and no crowds, lines, parking. Merchants need to think about how to adjust operations accordingly, including partnering with a service like FedEx that delivers seven days a week and enables consumer choice on when and where to receive their orders.
WWD: In terms of shipping, are there any trends that you expect to continue to grow?
R.K.: Of course, we all know that concern for the environment is growing from all angles, so it’s important to consider the impact of e-commerce. An in-depth analysis by the MIT Real Estate Innovation Lab and Prologis did just that and found that “carbon emissions from online shopping are on average 36 percent lower than those produced by in-store shopping.”
In the FedEx/C Space consumer study fielded in March, approximately 75 percent of consumers said it would be helpful to have information at checkout about which delivery options are more environmentally friendly. Almost 60 percent said they were likely to choose the most environmentally friendly option.
WWD: What about returns? Have returns been up with the rise of e-commerce?
R.K.: As e-commerce purchases increase, so do returns. According to RetailWire, estimates for returns of online purchases range from 15 to more than 30 percent. FedEx set new record highs in returns volume for the last six months of the calendar year 2020. We know returns matter to online shoppers.
Recent FedEx research shows 52 percent of those surveyed have abandoned a shopping cart due to the returns policy. Eighty-six percent have checked an online retailer’s return policy before placing an order. That’s why we encourage retailers to ensure their return policy builds shopper confidence. Make the process easy by including a return label in your original shipment or take advantage of tools like FedEx Returns Technology to create a QR code label for customers who don’t have a printer. Remember, every return is an opportunity to create a repeat customer.
WWD: Looking back at the last year, what are some of the key lessons learned that brands can carry forward to ensure the best consumer experience?
R.K.: First of all, both retailers and brand manufacturers must sell through multiple channels in order for consumers to quickly and easily find their desired items at the best value, and consumer experience must be consistent and seamless. Also, selling directly to consumers through an owned channel allows companies to capture and analyze data more quickly about what the shopper expects from both a product and experience perspective.
Fulfilling through multiple channels, when applicable, is smart.
WWD: How has FedEx shifted to meet new needs in the industry?
R.K.: Our strategies have very much prepared us to help our customers — especially with the increased need for brick-and-mortar to become “click-and-mortar” retail stores can use their physical footprint as fulfillment centers to ship-from-store using our cost-effective networks.
This e-commerce growth underscored the importance of our business initiatives that directly address the e-commerce market’s inherent challenges, including FedEx Ground seven-day operations, new FedEx Ground regional sort centers, FedEx Returns, in-home deliveries of large, bulky items through FedEx Freight Direct, integration of SmartPost volume into FedEx Ground to increase density, and automation.
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