Ecommerce Shipping Challenges: The World Has Changed and Traditional Shipping Software is Not Enough

At Cahoot, we believe today’s ecommerce industry needs next-generation shipping software. Selecting the best shipping software is crucial for enhancing efficiency and customer satisfaction. But before we talk about this amazing technology, it’s first worth asking – why is now the time? After all, legacy shipping software has been around for years. Thousands of Sellers are already using these tools, so why make the switch?

We believe the present moment is perfect because ecommerce is dramatically different from how it looked just twenty years ago. The event that changed everything was the introduction of Amazon Prime in 2005. Just like the first iPhone revolutionized society’s experience with personal technology, Prime’s introduction transformed everything in the ecommerce industry. Sellers had to throw out old strategies and create entirely new ones to run their businesses.

The differences are stark, but we’ve summarized them in this table:

Parameter	Old World (1990’s, early 2020’s)	New World (ChatGPT – Present)
Sales Channels	Just one	Many, ever-increasing
Competitive Pressure	Minimal	Intense
Customer Expectations	Low	Sky high
# Warehouses	Just one	Four or more
Carrier Mix	Sign one contract	Rate-shop across multiple carriers
Order Profile	Small and simple	Large and complex
Carrier GRI	Stable for decades	Increasing
Warehouse Staffing	Easier and economical	Wages keep going up
Warehouse Leasing	Less competition for space	Heavy demand for scarce space

Let’s begin by going back to the 1990s and journey through the early 2020s to see what the ‘old world’ of ecommerce looked like, for Sellers and customers. By understanding these changes, we can see how modern shipping solutions can turn challenges into a competitive advantage.

The ‘Old World’ of Ecommerce: Lower Complexity

In the olden days of ecommerce, life was simpler. Fewer channels to manage, fewer customer expectations, and less technological complexity meant uncomplicated logistics and order fulfillment processes that seem almost quaint by today’s standards.

Just One Channel to Manage

In the old world, Amazon was not the ‘everything store’ yet. It was largely a first-party Seller of a few products like books, CDs, and DVDs. They did not face much competition – Walmart and Target restricted themselves to physical stores while shopping cart platforms like Shopify and BigCommerce did not exist. All this meant that Sellers did not have multiple sales channels to sell and take care of customers on. There was usually just one channel – their own website. With just one channel to support, it was also possible to operate with smaller-sized teams. Ecommerce companies now face a more complex landscape with multiple channels and higher customer expectations.

Minimal Competitive Pressure

In the 1990s, online marketplaces did not exist. Amazon launched its third-party marketplace only in 2000. In this environment, customers did not have a lot of choices. Sellers had to ensure they drew customers to their website through good marketing. Once they found you, it was not easy to do comparison shopping across different listings, brands, or platforms. There was little pressure on Sellers – it was unlikely a competitor would undercut you on price, or beat you on shipping speed.

Low Customer Expectations

Perhaps most importantly, customers had no expectation of free and fast shipping. Before Prime’s introduction in 2005, customers had never tasted that experience. They were willing to wait 7-10 days for orders and covered the cost of shipping. Even if they did not like this experience, there was no social media platform at the time where they could share their frustration.

Single Warehouse, Single Carrier

The combination of lower customer expectations and sales through a single channel meant that Sellers could get by with operating from a single warehouse location, or two if they really needed the space. Customers living far away were okay with waiting as long as 1-2 weeks for their orders. Because customers were willing to cover shipping costs, Sellers saw no reason to compare and find the lowest rate among multiple carriers. It was easier to just sign a contract with the one carrier with whom you could negotiate decent rates. Why bother with cost optimization when it was the customer paying the bill? Major shipping carriers were not as crucial in this old model as they are today.

Small and Simple Orders

In the old world, lower basket sizes (units per transaction) were common because customers were yet to trust making payments over the internet. The least risky way to test ecommerce was to just buy one item. As customer confidence grew, so did basket sizes. In the old world, Multi-Line, Multi-Quantity (MLMQ) orders were less frequent. MLMQ orders require Sellers to provide workers on the warehouse floor with various kinds of boxes. Workers also need to spend more time on MLMQ orders, figuring out the best-sized box to use. In the old world, order processing complexity was lower – you could order a few boxes of standard sizes, and your team in the warehouse could pack orders faster.

In summary, Sellers faced little complexity in running their businesses in the old world. The environment was favorable – they had to sell on just a single channel, faced minimal competitive threats, and could easily satisfy their customers. All of this translated into simpler operations across the shipping lifecycle – be it warehouses, carriers, or packing boxes used.

The ‘Old World’ of Ecommerce: Lower Costs

We’ve taken a look at how operationally simpler it was to run an ecommerce business in the old world. But this was not the biggest advantage Sellers had – we’ll now explain how costs were lower back then.

Shipping Costs Were Cheaper

Carrier General Rate Increases (the annual rate hikes made by the shipping carriers) held steady at 4.4% to 4.9% through the entire 1990s, and well into the 2010s, which helped manage delivery costs. This provided Sellers with better predictability and control over operational costs.

Labor was Cheaper

In the old world, Amazon did not have a massive logistics network, requiring hundreds of thousands of workers. Walmart and Target did not have ecommerce operations. Without a large proportion of the labor pool being diverted to these large players, Sellers could easily staff their warehouses at wages that protected their margins.

Warehouse Space was Cheaper

The number of warehouses in the country has stayed relatively flat between the old world and the new world of ecommerce. But back in the old world, there were far fewer Sellers requiring this space. Warehouse space has never been easy to find – after all, they were not lying around vacant, waiting for the ecommerce boom to happen. However, because the competition for limited space was much less back then, Sellers could find space more easily, and at lower lease rates.

Across the order fulfillment workflow, Sellers had lower costs, which gave them more certainty and confidence. They could have reasonable confidence that carrier rates, labor wages, and warehouse lease rates were going to stay steady. They did not have to worry about any of these expenses creating a negative impact on margins.

Inefficiency in Operations Did Not Impact Margins

In a world without marketplaces, there was no significant threat forcing merchants to optimize costs. With customers willing to pay shipping fees and no social media for them to voice their feelings, there was no need to creatively innovate to find savings. And with it being much easier to hire workers and lease warehouses, there was no pressure to maximize resource utilization or be scrappy to cut costs. Margins were protected without having to do any of those things.

The ‘New World’ of Ecommerce: High Operational Complexity

Now that we’ve taken a look at the old world of ecommerce, it’s time to remind ourselves of the world we live in today – Prime’s launch in 2005 changed everything about ecommerce, for both Sellers and customers.

Many Channels to Manage

Today, Amazon’s massive third-party marketplace has made it the ‘everything store’ it dreamed of becoming. Major retailers – including Walmart and Target – have expanded into ecommerce, while shopping cart platforms like Shopify and BigCommerce help merchants sell directly to customers. Even retailers like Macy’s and Nordstrom, which stayed focused for a long time on their physical department stores, are now aggressively investing in ecommerce. This means Sellers now need to run marketing, sell, and support customers across multiple channels. This has also meant they need to hire larger teams to manage this complex operation. An effective ecommerce shipping solution is crucial in managing these multiple channels, as it integrates with various carriers and platforms to streamline the shipping process. Customers choose to shop online for the convenience of home delivery and the importance of fast and reliable shipping.

Intense Competitive Pressure

The rise of online marketplaces has meant that Sellers now face more intense competition than they ever did in the old world of ecommerce. Today, no Seller can relax once their marketing has attracted a customer to their listing or website. Customers have almost infinite choice and constantly compare products, prices, and shipping speeds across different platforms before they checkout. There is a constant threat of someone undercutting you on price, or offering faster shipping. Worst of all, counterfeit knock-off products are widely available and erode the sales of the original brand by shipping faster or being lower priced. Additionally, high shipping costs pose a significant challenge, impacting both profitability and consumer choice.

Sky High Customer Expectations

The biggest change is that customers are now used to the 1-day and 2-day free shipping experience. They abandon their carts if they do not see free and fast shipping offers. And if they see any drop in quality, they can use the power of social media to hurt your brand equity and customer sentiment.

Multiple Warehouses, Multiple Carriers

Free and fast shipping has become central to today’s customer experience, but making it happen is neither easy nor economical for Sellers. Prime raised customer expectations to a whole new level. To highlight just how dramatic the shift has been, consider this. When Prime introduced free 2-day shipping in 2005, it took competitors like eBay and Walmart over a decade to catch up, with the launch of their competing services in 2017. However, when Amazon announced its plans to move the Amazon Prime program from 2-day to 1-day shipping in 2019, competitors responded almost immediately. This highlights just how important free and fast shipping has become across every channel today.

However, offering free shipping on every order is not an easy task. The only economical way for Sellers to make it happen is through distributed fulfillment. Inventory needs to be spread across a strategically located network of warehouses. This ensures that products are placed closer to customers, shortening transit times. It also ensures a reduction in the number of shipping zones packages must cross, making operations more economical for Sellers. To preserve margins and profits while still offering free shipping, Sellers must now also work with a wide mix of carriers to ensure they can pick the cheapest label on every shipment. Multi-carrier shipping software plays a crucial role in optimizing shipping options by comparing rates across different carriers and automating the selection process based on various criteria.

Large and Complex Orders

Orders are more complex to process in the new world of ecommerce, with a higher proportion of Multi-Line, Multi-Quantity (MLMQ) orders. This has been driven by two major developments. The first is that not everyone is deep-pocketed enough to offer free shipping on every single order. To make the economics work, Sellers set high free shipping thresholds (you’ll get free shipping if you spend $50 or more). This means orders are likely to be larger and contain multiple items. The second is that consumer confidence in making payments and purchasing products over the internet has peaked. Customers are more likely to add multiple items to their cart today than they were in the old world of ecommerce. However, with more complex orders, you need to provide your team on the warehouse floor with more boxes of various sizes. This also means your team has to spend more time on orders, figuring out the best box to use to pack them.

Today, Sellers face a lot of challenges running their business. The environment can seem hostile, there are multiple channels to sell on, competitive pressure is unrelenting, and customer expectations are sky-high. All this has resulted in having to reinvent every step of the shipping workflow through distributed fulfillment, multi-carrier rate shopping, and figuring out how to effectively process larger orders.

Rising Costs

We’ve now seen how complex it is to run an ecommerce business today. To compound the problems of Sellers, costs in the new world are significantly higher.

Shipping Costs Are Expensive

It is becoming increasingly difficult for Sellers to absorb the costs associated with small parcel shipping. Carrier GRIs which held steady for nearly three decades are now increasing year over year. UPS and FedEx imposed a 5.9% GRI in 2022, after many years of only increasing 3.9% or 4.9%, followed by the largest increase in history in 2023: 6.9%, and in 2024 and 2025 increases were 5.9% each. The trend is clear. These increases are significantly higher than historical trends and exceed the prevailing inflation rate, making it difficult for Sellers to handle the impact, especially when combined with delivery delays. These increases after years of stability have provided Sellers with little time to adjust their operations and budgets.

Labor is Expensive

Sellers also have to deal with increased competition in the warehouse labor market, which is driving wages up. Amazon is no longer the only major employer of warehouse workers. The company is now facing competitive pressure from Walmart, Target, and other retailers getting into ecommerce. Workers now have a variety of options to pick from – driving up the wages and benefits packages that companies must offer workers. Standard warehouse staff are now expected to be paid as much as $20/hr in California where a law was mandated to pay fast food employees a $20 minimum wage. The entire local labor market has to compete at that rate. And that’s not considering specialized warehouse staff that can drive forklifts or the managers. At this rate, this is no longer a “minimum” wage occupation. With the pool of workers being diverted to Amazon, Walmart, and Target as they command $19+ average hourly rates, it has become very difficult for smaller brands and retailers to sufficiently staff their warehouses.

Warehouse Space is Expensive

Lastly, warehouse rents reached an all-time high during the early COVID-19 years (2020-2022), and remain unusually high in 2025 after decades of low and steady price increases. Warehouse demand is expected to rise in 2025 compared to 2024 as availability constricts. Conventional wisdom would suggest that the number of warehouses would have increased proportionally with the growth of ecommerce, ensuring Sellers today paid roughly the same to lease warehouses as those in the old world. The reverse is actually true – the number of Sellers continues to increase while the construction of warehouses lags well behind. According to research from real estate firm JLL Inc., the average US warehouse is 42 years old! A 2024 Heptagon Capital study found that as many as 82% of America’s warehouses were built before 2000. This has meant that a huge number of Sellers have been competing for the same limited space – driving up leasing rates.

Sellers today are caught in a tough spot – while they’re trying really hard to catch up to customer expectations, they’re also facing cost pressures on many of the elements required to make it happen. With carrier rates, leasing rates, and labor wages all beginning to climb upward after years of relative stability, it adds to the stress and uncertainty that Sellers are already facing in today’s deeply competitive ecommerce industry. The supply chain inefficiencies, including disruptions and environmental impacts, further exacerbate these challenges, highlighting the need for sustainable practices and advanced technologies to enhance operational efficiency.

Efficient Operations Essential for Margins and Profits

In the world of marketplaces, Sellers need to constantly find innovative ways to drive down costs to stay ahead of competition. If they do not find creative ways to offer free and fast shipping, customers will simply abandon their carts and go to a competitor. And in a world where everything has become more expensive, maximum resource utilization is vital. Today, scrappy and smart solutions to pool resources and cut costs are essential. In the new world of ecommerce, it’s the only way to preserve margins, stay competitive, and win. Additionally, businesses must navigate supply chain disruptions that can lead to delayed shipments and increased operational costs.

Why Sellers Need to Switch to Next-Gen Ecommerce Shipping Software

Now that we’ve taken a look at the old and new worlds of ecommerce, you might be wondering what role shipping software plays in all of this.

We believe that legacy shipping software was designed and built from the ground up for the old world of ecommerce. We are not saying these tools are bad – they worked well in the old world that they were designed for, but we believe they are not well-equipped to handle the challenging demands of the new world of ecommerce. We’ve already seen how costs were lesser, hiring was easier and operations were simpler in the old world. Legacy software does not provide Sellers meaningful automation or cost savings, because there was no need for it in the old world. In the new world, it is actually adding to the problems Sellers face by increasing costs and consuming their time. Rather than automating and simplifying, their technology creates more problems.

Choosing shipping software is crucial in developing an effective shipping and fulfillment strategy for ecommerce businesses.

We think a small tweak or minor enhancements will not cut it. Today’s Sellers need purpose-built, next-generation shipping software designed for the new world of ecommerce. As we all know, operations are complex, costs are rising and staffing is harder today. Sellers need all the automation and cost savings that technology can generate. They need technology that helps, not hinders.

The next generation of ecommerce shipping software must solve 3 key problems that are at the heart of the differences between the old and new worlds:

• Simplify the operational complexities of the new world of ecommerce
• Drive operational efficiencies and productivity gains for your team
• Generate meaningful cost savings across each step of the shipping and order fulfillment workflow

In the coming sections, we’ll dive deeper into each of these aspects, and explain how legacy software fails to solve these challenges. We’ll also explain how Cahoot’s next-generation software is purpose-built to address these key requirements.

Summary

Ecommerce has come a long way since its early days, and let’s be honest—there’s no turning back. The simplicity of the past has given way to a fiercely competitive, complex, and high-stakes environment where every decision matters. Sellers today are not just managing one storefront; they’re juggling multiple sales channels, working around rising costs, and trying to meet sky-high customer expectations. And in this landscape, traditional shipping software is more of a relic than a reliable tool.

That’s why it’s time for a new approach. The old world of ecommerce didn’t demand automation, cost savings, or multi-channel flexibility. But the new world? It absolutely does. To stay competitive, businesses need shipping software that doesn’t just keep up but actually propels them forward—software that simplifies complexity, enhances efficiency, and drives down costs in ways that were never needed before.

At Cahoot, we’re not just witnessing these changes; we’re actively shaping the future of ecommerce fulfillment. Because in today’s market, the right technology isn’t just helpful—it’s essential. And those who embrace the next generation of ecommerce shipping software will be the ones who thrive.

If you’d like to learn more, check out our Next Generation Shipping Software Guide, Part 2: “Shipping Software for Ecommerce Fulfillment: The Next Generation of Shipping Simplified”.

Frequently Asked Questions

How can I reduce shipping costs for my ecommerce business?

Reducing shipping costs requires a multi-faceted approach:

• Negotiate rates with multiple carriers rather than relying on a single provider
• Consider using regional carriers for deliveries within specific areas
• Optimize packaging to reduce dimensional weight charges
• Implement zone skipping by shipping bulk orders to carrier hubs closer to final destinations
• Use shipping software that compares rates across carriers in real-time
• Offer local pickup options for customers in your area
• Consider flat-rate shipping for certain product categories

What are the most common causes of parcel delivery delays?

Several factors commonly contribute to delivery delays:

• Weather events and natural disasters
• Carrier capacity constraints during peak seasons
• Customs clearance issues for international shipments
• Address errors or incomplete delivery information
• Staffing shortages at carrier facilities
• Vehicle breakdowns or logistical issues
• High volume surges (like during Black Friday/Cyber Monday)Last-mile delivery complications in rural or hard-to-access areas

How can I reduce the environmental impact of my ecommerce shipping?

To make your shipping more sustainable:

• Use right-sized packaging to minimize waste and reduce dimensional weight
• Choose recycled or biodegradable packaging materials
• Offer carbon offset options at checkout
• Consolidate orders when possible to reduce the number of shipments
• Partner with carriers that have environmental initiatives or electric vehicle fleets
• Implement a packaging reuse program for returns
• Consider local fulfillment options to reduce transportation distances

What should I do about rising return rates in ecommerce?

To address the challenge of increasing returns:

• Provide detailed product descriptions, measurements, and high-quality images to set accurate expectations
• Implement a clear, easy-to-understand return policy
• Consider offering free returns as a competitive advantage
• Use analytics to identify products with high return rates and address underlying issues
• Implement a return merchandise authorization (RMA) system to streamline the process
• Consider restocking fees for certain categories to discourage unnecessary returns
• Offer virtual try-on or AR features for appropriate products

How can I improve last-mile delivery efficiency?

Improving last-mile delivery, often the most expensive part of shipping, requires:

• Partnering with multiple carriers to diversify delivery options
• Implementing delivery management software to optimize routes
• Offering alternative delivery options like BOPIS (Buy Online, Pick Up In Store)
• Using lockers or pickup points in convenient locations
• Providing narrow delivery windows to improve customer experience
• Leveraging data analytics to predict delivery challenges in specific areas
• Considering micro-fulfillment centers in urban areas for faster delivery

What are the best practices for international shipping in ecommerce?

For effective international shipping:

• Partner with carriers experienced in global logistics
• Understand customs documentation requirements for each country
• Use harmonized system (HS) codes correctly for all products
• Be transparent about duties and taxes that customers may need to pay
• Consider using a third-party logistics provider specializing in international shipping
• Implement reliable package tracking for international orders
• Offer DDP (Delivered Duty Paid) options for a smoother customer experience
• Research import restrictions for products in your target markets

How can I manage shipping expectations during peak seasons?

To handle peak season shipping challenges:

• Plan ahead by increasing inventory and staffing well before peak periods
• Communicate realistic delivery timeframes to customers
• Consider implementing order cutoff dates for holiday deliveries
• Diversify carrier partnerships to spread volume across multiple providers
• Use shipping software that can automatically route orders to carriers with capacity
• Offer incentives for early shopping to spread out order volume
• Maintain transparent communication about potential delays
• Consider temporary local pickup options during extremely high-volume periods

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