Increase in e-commerce and low air freight threatens holiday shipping
As the world enters the second holiday season since start of the pandemic, the shipping industry has yet to recover from the effects of COVID-19. There continues to be a dearth of cargo space as flights have decreased and shipping via ocean cargo containers could take weeks to reach its destination. During the first six months of 2021, commercial flight traffic did improve by 11% above 2020 levels, but that figure was still down 33.8% from 2019. Total flight traffic is somewhat more improved, with the total number of flights tracked in the first half of 2021 increasing by 25.2% over 2020. Despite flight numbers still being down, online shopping is more popular than ever. Retail e-commerce sales continue to boom, with 2020 sales amounting to $4.28 trillion and e-retail revenues projected to grow to $5.4 trillion in 2022. “There’s a massive demand and very little supply,” explains A.J. Hernandez, President and CEO of SkyPostal. “The supply chains are really broken and there’s a lot of employee turnover right now.”
In the 19 months since the pandemic began, cargo space is still at a premium. Even in the United States, the delivery infrastructure has been overwhelmed, from the first mile of transport to the last, due to the volume of business being generated by unprecedented levels of online shopping. The levels of e-commerce growth seen from May 2019 to May 2020 would have taken four to six years if growth had continued at the same levels seen in previous years.
Transporting via container ship is an option, but one that comes with a much longer timeframe. Shipping vessels originating in China have a 30-day sail to the U.S. or Latin America. However, the holidays are the peak shipping period, and, as this busy holiday shipping season approaches, it will be essential to communicate with customers to mitigate expectations regarding what timeframes are achievable and how costs will increase. Planning ahead, in terms of adding resources to manage increased volumes and delays, will be essential. Finally, when it comes to last-minute orders, clients need to be warned that chances are they will not receive them in time for the holidays. In anticipation of the continuing increased holiday shipping demand, some shippers have even had to initiate limits with some larger clients in terms of how much volume they can accept from them each month.
Shippers can be better prepared by following these suggestions:
• Have a clear knowledge of the volume that will need to be shipped
• Manage customers’ expectations
• Plan to ship early
• Be transparent about timeframes with last-minute orders
• Expect increased shipping costs
• Build in extra time, if possible.
These suggestions are of particular importance for those shipping to Latin America, where complexity is always part of doing business thanks to entrance codes, tax/tariff codes (such as the World Customs Organization Harmonized System, or HS) and the need to translate manifests into Spanish and Portuguese. Companies shipping to Latin America have to take care of this information, and most American companies do not have this ability. Essentially, the shipper serves not only as a delivery service but as an international go-between.
“Delays are something that everyone has to grapple within our business and with increased volumes come even more delays. Clients are expecting more and more as time goes on,” Hernandez says. “I think these new volumes are here to stay, because we’ve created a whole new group of people who are now comfortable shopping online.”