Why are Parcel Shipping Costs on the Rise in 2021?

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If you own a business, you may have noticed a significant price increase announced by most carriers for the start of 2021. Increasing parcel shipping costs aren't just an anomaly either, they are here to stay.

In this article, we are going to examine why freight rates and the overall price of shipping are seemingly rising across the board in 2021... and what can be done to mitigate it just a bit better.  

COVID 19’s Effect on Shipping Costs

The year 2020 was undoubtedly catastrophic in many ways, and the shipping industry was hit especially hard during this time. As people were forced to stay home more than they typically did, parcel deliveries increased significantly. This was in order to accommodate individuals who were now forced to shop remotely. The changes caused by the pandemic-related stay-at-home orders necessitated that the shipping companies increase their rates to overcome the huge rise in delivery volume they experienced. This in turn put a strain on mid-sized retailers whose customers still expected swift, affordable delivery service.

Large companies have also made it supremely difficult for the mid-sized companies to compete during this time, as these smaller companies have fewer options to keep up with customers’ demands. Additionally, these mid-sized businesses may have been sidelined for a time by the pandemic restrictions or COVID outbreaks within their company.

Lastly, the trend toward working from home and the home office puts a large strain on suppliers and businesses. Now, instead of delivering large pallets to stores in one fell swoop, small deliveries need to be made to employees’ individual homes.  

General Trend Toward Ecommerce

More and more people prefer to shop online these days, and this was the trend even before the pandemic began. Even the baby-boomer population, who have long been a staple of in-person shopping, now participate in “a significantly increased interest in online shopping even after the pandemic ends,” according to a recent Deloitte survey.

Further straining retailers and delivery services, is the fact that customers place heavy emphasis on a company’s return policy, with some customers purchasing goods with the thought that they will likely return the items. This means that shipping costs have to be considered in both directions: to the customer, as well as back to the retailer.

In a world of “fast fashion” and expected ease of returns, it is increasingly difficult to keep up with these rising costs, for all portions of the delivery chain.  

What are Some Solutions to Combat the Rising Cost of Shipping?

Luckily, people always tend to show ingenuity during times of struggle, and numerous solutions have evolved to address these issues. Some of the effective solutions that have been developed to overcome rising shipping costs are as follows:

• Alternative Delivery Methods. Options like “pick up in-store” and “curbside pickup” options have been common solutions to the issue at hand. These options are a happy medium between consumers who want to be home for the entire process of order and delivery, and customers who are willing to go out to the stores in person.

• Third-Party Delivery Services. Doordash, Postmates, and similar apps have boomed during the past year. With more and more users downloading the apps as well as companies using them for their deliveries, these services are another convenient solution to help overcome the price increases.

• Regional Carriers. In some areas of the country, there are regional carriers that only operate within a small geographic window. If your business is within this region, you may consider using one of these carriers for your shipping, as their rates may not have increased as much as the larger carriers.

• Less Expensive Packaging. Is there a way you can cut down on packaging material? If there is anything that can be removed from the packaging while still protecting the product and preserving the integrity of your brand, this may be an effective method to combat the rising costs of shipping.

Bottom Line

While we all wish that the world would return back to “normal,” it appears that some of the changes that came about during the pandemic and recent years are here to stay. Ecommerce isn’t going anywhere, and no one can say if there will be other world events that will force us to adapt even further down the road.

Small and mid-sized companies certainly have their work cut out for them to try to overcome these changes, but there are solutions. If businesses are willing to innovate and adapt, they will find a way to get through these difficult times.