According to Deloitte’s 33rd annual “Holiday Survey” of consumer spending intentions and trends, for the second consecutive year, 88 percent of survey respondents prefer free shipping over receiving their holiday packages faster (12 percent).

The majority (61 percent) of holiday shoppers report they will buy items that qualify for free shipping this season. For free shipping, two-thirds (66 percent) are willing to wait 3-7 days for their merchandise. More than 3 in 5 people surveyed (62 percent) define “fast shipping” as two days or less, up from 54 percent in 2017. One-quarter (25 percent) define three to four day delivery as fast shipping, down from 35 percent in 2017. Among the reasons for shopping in stores, 47 percent of respondents said it was to “avoid shipping costs.” Their No 1. reason to shop online is “convenience” (77 percent) followed by “free shipping” (72 percent).

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Target’s free shipping perk creates additional pressure on everyone to race to the common denominator — which is fast, free shipping.

It’s clearly a conversion driver for retailers and sets the longer term implication that fast, free shipping is going to be expected as the standard at all times and on all items. It’s surely becoming the norm and retailers have to be extremely efficient in order to be successful because of the high cost of shipping. All signs indicate this will be competitive holiday season.

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Recently, the USPS proposed a record price increase. If approved, which is expected, the higher rates will go into effect on Jan. 27, 2019. This will be the biggest rate increase in USPS history. Amazon’s retail operating income would take a 5 percent hit from shipping cost inflation if the new rates take effect, according to Barclays.

Here are some of the significant proposed 2019 USPS Shipping rate changes:

• The elimination of Commercial Plus Pricing (CPP), where now Priority Mail pricing will match Commercial Base Pricing (CBP). Many e-commerce and subscription trade shippers will be facing a painful price increase with the elimination of CPP programs.
• A conservative 5.9 percent Priority Mail increase is expected, while First Class Flat Pricing will change to zone-based pricing with an expected 11.9 percent increase. For shippers with a high proportion of outer zone shipments, the increase will be appreciably higher (as much as 21 percent).
• Perhaps most concerning is the pending reaction of UPS and FedEx as they re-evaluate their “hybrid” postal delivery products that use the USPS for last-mile delivery. Buried in the postal rate change are increases ranging from 9 percent to 30 percent on the work-share rate structures used by UPS and FedEx.

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“If you cannot measure it, you cannot improve it,” said famed British physicist Lord Kelvin about scientific experimentation over 100 years ago.

It’s still pertinent today as you seek to improve ecommerce operations, remain competitive and improve our profitability and customer service. In order to improve operations, you first need to measure key fulfillment metrics such as total cost per order (CPO), shipped cost per carton, cost per line and cost unit. Once you understand what these metrics show, you can then develop options for processes that reduce steps and cost, or improve service levels such as order turnaround time.

What key fulfillment metrics do you monitor and use to improve your performance? Here are 16 we recommend you use as a starting point.

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Total Retail’s Caitlin Sullivan and Joe Keenan discuss the National Retail Federation’s (NRF) new Package Coalition, a lobbying group in support of the U.S. Postal Service.

The coalition is being led by Amazon.com and other retail businesses, including QVC and Columbia Sportswear. In addition to analyzing the merits of the Package Coalition, the hosts offer tips for retailers to optimize their shipping rates.

Watch the video here.

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In the midst of the kickoff to the busiest shopping season of the year, news emerged that both the U.S. Postal Service and Amazon experienced data glitches that exposed customer information.

The USPS may have exposed the personal data of more than 60 million customers via a security hole, including access to information on when checks and other critical documents were set to arrive. Amazon meanwhile told an unknown number of customers their names and email addresses were exposed due to a technical error on its ecommerce site.

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Amazon.com Inc.’s retail operating income could take a 5% hit from shipping cost inflation if the U.S. Postal Service’s proposed price hikes go into effect, according to calculations by Barclays analysts. The proposed uptick in shipping and mailing fees at the U.S. Postal Service could cost Amazon more than $1 billion in 2019, according to Credit Suisse, which cut its near-term estimates for operating profit on the e-commerce behemoth.

“As we roll forward the sensitivity analysis to 2019, we arrive at a potential incremental Shipping Expense range of $400 million to $1.1 billion range with the assumption that 40 percent to 50 percent of U.S. packages are shipped via the Postal Service,” analyst Stephen Ju wrote Monday. “Our math …suggests Amazon will have 5% lower retail operating income from this shipping cost inflation, if we assume there are no offsetting factors,” Barclays said. The changes would go into effect on Jan. 27, 2019.

“Specifically, the USPS shipping rates for small and medium boxes, typically used by e-commerce companies, are proposed to be increased by 10% and 5% respectively,” Barclays analysts led by Ross Sandler wrote. “[T]he price increases for packages suggested by USPS this year are higher than in prior years.”

“If other Amazon shipping partners like UPS, FedEx, On-Trac, etc. raise their prices, which has happened in the past (but we are currently not factoring in), every 5% hike for last mile would weigh down operating income by an additional 3%, all else constant,” the note said.

President Trump said the USPS is Amazon’s “delivery boy” in a tweet earlier this year, and blamed the e-commerce giant for its billion-dollar-plus losses in the second fiscal quarter. However, the USPS said it’s actually government policy that’s hurting the group’s finances. The USPS said “legislative and regulatory changes” would be necessary for financial stability.

“To be clear, our current estimates already factor in [a] shipping cost increase by a modest level, consistent with prior years,” Barclays said. “However, the steeper increase proposed for 2019 could weigh further on Amazon’s FY19 profitability.”

Barclays forecast that Amazon shares could take a hit after third-quarter earnings if they are in line with guidance and forecast below expectations. And in the fourth-quarter, the $15 minimum wage hike will add about $310 million to expenses.

Amazon will already see declines due to the $15 minimum wage hike, analysts say. Barclays analysts think the minimum wage hike is just one of a few coming initiatives that could impact operating margin expansion.

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The U.S. Postal Service has proposed a 9 to 12 percent increase in fees for the shipping service used by Amazon, just months after President Donald Trump criticized the USPS, saying it gives Amazon too good of a deal.

The parcel select service, which is also used by United Parcel Service and FedEx, is the last and typically the most expensive step in the shipping process that gets the packages to customers’ doorsteps. The USPS proposed a 9.3 percent increase on this service for packages weighing over one pound and a 12.3 percent increase on lighter packages.

Trump issued an executive order in April to set up a task force to examine the USPS, claiming that it was on an “unsustainable financial path.” He’s also tweeted that the USPS is Amazon’s “delivery boy” and doesn’t make money from Amazon’s business.

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Amazon.com Inc. and Target Corp. have opened the floodgates on free shipping. Web orders with the free service have increased 13% in 2018. Offer can boosts sales but wreaks havoc with profit margins.

Recent moves by the two retailers to eliminate minimum-purchase amounts for free shipping have boosted the share of online orders that get delivered gratis, according to data from retail analytics company DynamicAction. Orders with the free service included have risen 13 percent so far this year through Nov. 16, including an 18 percent spike in the week that began Nov. 5., when Amazon unveiled its offer.

Free Falling

Amazon and Target have eliminated shipping fees for online holiday orders

“Free shipping is the new normal,” DynamicAction’s Chief Marketing Officer Sarah Engel said.

While free shipping can entice customers to buy, it can wreak havoc with retailers’ profit margins, which are typically razor-thin already during the holiday quarter due to rampant discounts and increased marketing costs. Web orders that included some sort of promotion since the end of October have risen 13 percent from the same period last year, DynamicAction found. It also doesn’t help that transportation costs were already soaring this year due to a shortage of truckers.

Target is offering two-day free shipping from Nov. 1 through Dec. 22 on hundreds of thousands of items with no minimum purchase, while Amazon said on Nov. 5 that shoppers without Prime memberships need not buy at least $25 to earn free regular shipping, which typically takes five to eight business days.

Walmart Inc. has thus far declined to match the offers, sticking with its $35 minimum purchase requirement. The world’s largest retailer has suffered from narrowing gross profit margins in recent quarters, even as its online sales have grown.

E-commerce sales overall will jump 17 percent this holiday season, according to data tracker EMarketer, and account for about 12 cents of every holiday dollar spent. Amazon garners just under half of all online sales in the U.S., EMarketer said.

This article was written and published at Bloomberg by Matthew Boyle

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A 5% increase in customer retention can improve a company’s profitability by 75%, according to Bain research. Yet most retailers are more focused on acquisition and conversion than retention. Despite investing billions in this pursuit, ecommerce has created a “customer experience gap” for retailers unable to engage customers at key post-purchase moments. Brands are learning the hard way that lackluster engagement and an afterthought communication strategy is a guaranteed way to lose loyalty.

To address this important issue Pulse Commerce conducted mystery shopping at nearly 500 leading U.S. online merchants prior to the 2017 peak holiday shopping season. The result is a picture of true behavior rather than survey feedback, and benchmarking by product category for comparison to peers as well as to Amazon.

Download the full study here.

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