E-Commerce Evolution in an Uncertain Economy

We’ve observed a notable shift in parcel volumes this year, especially in areas like DIY, where we handle numerous projects. Carrier parcel volumes have dropped and interestingly, this decline has resulted in better quality of delivery services due to the reduced volume.

Even during high-volume events like Black Friday and Cyber Monday, the numbers have been unexpectedly low. For one of the largest networks, on Cyber Monday, where they anticipated 3.5 million parcels, only 2.1 million were processed. This trend isn’t limited; other major networks have seen drops in volumes being processed.

These changes can be attributed to wider economic factors, although foot fall on the High Street is up. With inflation and rising interest rates affecting consumer spending, we’re seeing a contraction in the market. This situation is leading to an unusual pattern, where we might see a spike in activity in the final week of December, differing from the usual distribution of sales throughout November and early December.

It’s important to note, however, that the impact varies across sectors. While our clients in the DIY sector have reported, as much as 40% decrease in sales compared to last year, our high-end apparel clients have experienced an increase in orders and volumes.

Despite a general downward trend where 2022 saw a 7% drop in domestic parcel volumes compared to 2021, these clients are exceptions. Initially, there was an expectation of a rebound in 2023, but various economic factors seem to be contributing to a continued decrease in overall volumes.

In response to these challenges, my team and I have focused on offering real value to our clients, beyond mere cost-cutting. We’ve effectively shielded our clients from the brunt of surcharge increases and managed to negotiate price hikes that are well below the current inflation rate. Our strategies have proven particularly beneficial in both parcel and palletised distribution.

Service quality of delivery services has also been a key focus. Last year, the combination of bad weather and Royal Mail strikes posed significant challenges, but we navigated these effectively, ensuring our clients didn’t suffer to much from service disruptions.

Last year, we assisted a client in the fresh food sector during a particularly challenging period. Due to a combination of strikes and adverse weather conditions, service levels had plummeted to an unprecedented low, around 75 to 80% efficiency, which we hadn’t witnessed in our several decades in the industry. This all unfolded right after Black Friday, leading to a rapid decline in service quality.

However, we managed to bypass usual protocols to enact swift changes and support our client through these difficulties. As a result, we’ve seen improvements in service levels, particularly in the small parcel sector.

Additionally, we’ve achieved significant progress in negotiating down potential double-digit price increases. The drive for price hikes has intensified due to inflation, posing a substantial risk for 2024. The concern now shifts to potential underinvestment, as suppliers lacking sufficient capital might struggle to maintain service standards. This situation opens doors for businesses to explore new and unique service offerings. The full impact of these changes on service levels and business opportunities remains to be seen.

Looking towards 2024, we anticipate further challenges due to the ongoing economic pressures. However, we also see this as an opportunity for businesses to explore new service offerings and adapt to these changing times. Our experience this year underscores the need for flexibility and strategic foresight in the ever-evolving world of e-commerce, especially in an uncertain economic climate.

As for peak market times, they usually see the highest parcel volumes, and this year is no exception. However, from our perspective, while we’ve had a very successful year and maintained strong client relationships, we foresee 2024 presenting more challenges, especially regarding liquidity of businesses. Our clients, both existing and new, are increasingly focused on saving money. It’s a delicate balance.