We all know that ecommerce has been growing as a component of retailing. It is interesting, however, to consider what is happening from the perspective of the world’s two biggest shippers: FedEx and UPS.
There is an interesting article by Stephanie Cliffords in The New York Times. The article, entitled “Online Sales Buoy U.P.S. and FedEx,” tells us that “good news for shipping is usually good news for the economy as a whole.” It then goes on to state that “FedEx…hired 20,000 holiday workers to deal with extra e-commerce purchases, an 18 percent leap from 2010, while U.P.S. hired 55,000 workers, an increase of 10 percent.”
It’s no accident that these shippers are benefiting as many ecommerce retailers offered free shipping as an inducement to buy. How important was it? “Between Thanksgiving and Christmas, 92 percent of e-commerce sites offered free shipping… more than a third of shoppers surveyed … said they would spend more online during that period if shipping were free.”
Many of these same retailers offered free returns as well so UPS and FedEx benefited in both directions. According to the article, as a result of all of this activity, shipping to homes (about 1/3 of shipments) is growing faster than business-to-business shipping.
Like it or not, ecommerce retailing is reshaping business models and having a positive impact on the shipping business. I am not so sure, however, that the quote at the beginning of this piece, ““Good news for shipping is usually good news for the economy as a whole,” is true in this case.
I think it’s more of a shift in the retail paradigm that is benefiting some players in the economy and punishing others. As the article puts it: “[S]hipping and logistics businesses that don’t deal heavily with e-commerce have been experiencing sluggish growth as the recovery drags. Cargo coming through many American ports leading into the holidays was lower than many had expected…
All of this bears watching.