The number of foreign markets that the U.S. Postal Service (USPS) will not be serving until further notice has climbed to 72 countries as of April 17. This list includes major economies like India, Saudi Arabia and South Africa, causing widespread distress to U.S. businesses that bank on USPS for their shipment needs in those markets.
"Though the blanket reason for services to be suspended is COVID-19, there can be several reasons why it happened. It could be that the receiving postal service may have suspended shipments. Or it could be based on USPS's comfort level on delivering packages in the destination country, or because there are capacity issues," said Krish Iyer, the director of strategic partnerships at ShipStation.
Iyer pointed out that for businesses impacted by the USPS decision, it is time to start looking at domestic fulfillment by probing alternate selling channels within the U.S., rather than looking to fulfill international shipment.
"Though the knee-jerk response would be to satisfy the customers in all destination markets, companies need to look if the high-ceiling shipping costs can cause a potential issue. While companies might think consumers will understand that shipping costs will be passed down to them, this is necessarily unknown," said Iyer. "If you are a consumer buying from them for the first time, what would your lasting impression be if you are charged high shipping costs? That's the real question."
Certain markets like Saudi Arabia or Oman might actually justify high shipping costs, as consumers might agree to retailers partially offloading shipment costs. However, fulfillment with expensive shipping options within emerging economies like Laos or Kenya might not make sense.
If the shipping costs are justified, companies will have to look at alternate logistics forwarders to partner with, like UPS or FedEx. This will not be easy with capacity remaining tight globally, making any alternative likely to cost considerably more than existing arrangements with USPS.
Iyer contended that companies would first have to decide on the percentage of shipping costs that they would want to pass on to their customers. "Companies will have to reevaluate their shipping models immediately, and would have to align their strategies on the destination markets based on each market individually and uniquely, as opposed to a hard and fast rule," he said.
That said, domestic selling channels are also tight in the wake of the pandemic. On a typical day, companies look to centralized warehouses in a location, while absorbing shipping costs to destinations that are far away. For instance, if the warehouse is in New York, retailers would usually absorb costs when shipping to California, except for a small surcharge.
But with domestic capacity tight, companies cannot afford to do that any longer. Iyer explained that companies will have to look at warehouse partners in the short-term that are closer to their domestic destination market. Using the example above, this would mean moving inventories much closer to California, rather than shipping out of a New York-based warehouse.
Even with high shipping costs, there is no guarantee of deliveries being on time, as these extraordinary times have led to a rise in the percentage of late deliveries across the country. Since late deliveries have led to a dip in customer service appreciation, retailers need to make sure their customers understand – and even expect – deliveries to be later than usual.
For ecommerce companies, Iyer said that it is necessary to explicitly mention on the product listing that deliveries will take longer than usual. "The idea of over-communication is really important right now. And companies must get this communicated in the listing itself and not wait for consumers to get to the checkout page before they are notified of longer delivery schedules," he said.
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