The Crystal Ball: Three Trends Shaping Tomorrow’s Parcel Shipping Industry

Worldwide parcel volume is expected to have a cumulative annual growth rate (CAGR) of 8.5% from 2022 to 2027, reaching 256 billion parcels by the end of that span. As global parcel volumes continue to grow like this, shippers face increasing pressure to quickly adapt to the demands of a fast-growing industry.

It’s helpful for parcel shippers to try to look ahead and forecast what to expect next in shipping. That’s why this article provides the crystal ball showing three trends shaping tomorrow’s parcel shipping industry, as well as how to gain the upper hand in a dynamic industry.

Three Trends Shaping Tomorrow’s Parcel Shipping Industry

What is parcel shipping expecting next?

1. Legacy Parcel Carriers Face a Turbulent Period

Parcel shippers mostly rely on legacy carriers UPS, FedEx, and USPS. While USPS has faced its own troubles over the years, the other two are going through a difficult time, potentially with ongoing struggles brewing on the horizon. These are three problems faced by legacy carriers:

• Falling volumes are one challenge carriers face. They have had increased capacity without enough freight volume to fill it. In turn, this trend has resulted in falling rates.
• This year has seen FedEx laying off more than 10% of its top management. This is indicative of company problems like a leadership failure and a culture change away from the employee loyalty it previously had.
• UPS will go through union contract negotiations this year, as the current contract expires at the end of July. It’s possible that this situation will lead to UPS workers going on strike, so that’s something to keep an eye on leading up to the contract date. The Teamsters union has already pledged a strike if it doesn’t find the contract satisfactory. Also, UPS is trying to adapt to post-pandemic shipping needs, including through hope for increased international parcel shipping.

2. E-commerce Boom Picks Back Up

The COVID-19 pandemic created an increase in e-commerce activity, which is a pattern that is continuing. The e-commerce growth rates worldwide reached 17.1% in 2021 due to the pandemic. After 2022 had a dip, there is an increase again as the forecasted global e-commerce growth rate for this year is 10.4% — a 0.7 percentage point increase from last year. This year’s growth rate creates the expectation of $6.3 trillion in e-commerce sales globally.

The continued rise of e-commerce will lead to the increasing importance of omnichannel distribution strategies. This means the integration of different strategies, making it easier to get items to customers. So, a customer could have the option to buy something online and have it shipped to their home or pick it up at a brick-and-mortar store or a carrier location. They could then return it via a carrier or directly to the store. Another example is purchasing in-store and having the item delivered. Providing numerous options that work together creates a better experience.

3. After Turbulent Years, Shippers Regain Control

Parcel shippers have had to adapt to a range of difficult challenges over the past few years that put them at a disadvantage with carriers and made it harder to run a successful business. When shipping parcels, they have had to deal with massive increases to base rates, as well as accessorial charges, with little control or negotiating power to manage the situation. In addition, volumes were often capped during peak seasons, and money-back guarantees were lost. Shippers had to play along or stop shipping. They didn’t have many options.

Now, changes in the industry have been putting shippers back into an advantageous position. Parcel shippers have more options, including USPS, regional carriers, and parcel consolidators that work with USPS for last-mile delivery. Some businesses are creating their own delivery networks. Increased options are creating better competition, including the quality and reliability of services for shipping parcels. Even the USPS has made improvements that help create more competition.

In addition, carriers have been facing less demand and overcapacity, which contributes to shippers gaining the upper hand. Carriers aim to gain business ahead of the new year and make deals that secure customers over their competitors. Shippers should be able to take advantage of good discounts and have negotiating power.

Plan for Tomorrow With the Right Strategies

When dealing with a dynamic industry like shipping, parcel shippers must always be ready for tomorrow. The need to plan ahead is evident when looking at major changes like turbulence at legacy carriers, growth of e-commerce, and shippers gaining more negotiating power after having lost it. Technology makes it easier to see what’s coming and continually adapt to changes.

Intelligent Audit’s cloud-based parcel management software gives shippers more control through features like:

• Automated freight audits
• Machine learning
• Analytics and business intelligence
• Optimization of logistics networks

Get started with Intelligent Audit today to plan ahead for parcel shipping challenges that tomorrow may bring.