As eCommerce demand surges into the holiday season the impact of friction along the last mile is wide ranging, touching companies far and wide. For the carriers that navigate that last mile, with trucks and vans winding their way through streets and traffic and to customers’ doorsteps, there are any number of pressures tied to keeping up with demand.
To that end, FedEx and United Parcel Service have been experiencing delivery van shortages, which has been hitting profits. Bloomberg termed it a “surprise cost squeeze” and amid record demand for deliveries, these carriers are scurrying to deploy vehicles to augment their last mile efforts. That means the leasing firms are buying used vehicles as rentals are increasingly harder to come by.
“If there’s a cargo van out there, we’re trying to buy it,” Brendan Keegan, chief executive officer of Merchants Fleet, told Bloomberg. Merchants Fleet provides vehicles to package delivery companies. Last year it had 6,000 vans for lease to delivery firms at the end of last year; that tally has exploded to an estimated 15,000 as of the end of 2020.
As for even further ripples of the ripple effects: Automakers themselves are struggling to keep up with demand. There were 1 million fewer vehicles available in the U.S. in October than had been available a year ago, reported the newswire. In the meantime, the carriers are compensating contractors for the costs incurred as they rent additional vehicles.
The pressures on the rental markets, on the contractors, on the vehicle makers and the carriers show just how interconnected the eCommerce supply chain is. There is already pressure on the flows of goods as they make their way from manufacture to ports. As profiled in this space earlier in the month, there has been mounting evidence of shipping delays and shipping surcharges that, ultimately, might result in higher prices charged to consumers (and that would come on top of, we’d assume, costs tied directly to last-mile efforts).
Shipping lines tied to Asian tradelines are seeing port congestion surcharges. Several cargo vessels have been anchored outside the Port of Los Angeles, as empty containers have been in short supply. Labor shortages are a hallmark all around.
The deluge in eCommerce spending implies, too, that sales will shift away from brick-and-mortar conduits (after all, a sale online is a sale not made in-store). That’s especially true as a significant percentage of consumers surveyed by PYMNTS in a recent study focused on holiday spending said they would spend the same amount or less than they spent during the holiday shopping season of 2019. Only 18.7 percent said that they would spend more.
To get a sense of how widespread the digital shift is this holiday season will be: 96.5 percent of holiday shoppers said they would make an eCommerce purchase, while 17.5 percent said they would do all of their shopping online. And about three quarters of those surveyed said they would use mobile devices to conduct their eCommerce, we found.
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