When Pitney Bowes released its Parcel Shipping Index on April 17, the big news seemed to be that Amazon outpaced UPS for the first time in the history of the Index.
But in its own headline announcing the results, the global shipping and mailing company focused on something else: The influence of real-time retail on shifting shipping dynamics.
“Significant shifts”
In a press release entitled, “Pitney Bowes Parcel Shipping Index: Consumer Demand for ‘Real-Time Retail’ Shakes Carrier Market Share,” the company said its 2023 data revealed “significant shifts in the carrier competitive landscape and consumer behaviors” last year.
Key findings include:
- Among the top four carriers in terms of size (USPS, Amazon Logistics, UPS, and FedEx), Amazon Logistics was the lone standout experiencing YoY volume growth — which equated to a “staggering” 15.7%. After passing FedEx in parcel volumes the year prior, it surpassed UPS in 2023 and is gaining on market leader USPS.
- Amazon Logistics and USPS both enjoyed growth in revenue, but UPS and FedEx experienced declines in both parcel volume and revenue.
- Although Amazon Logistics nearly tripled its shipping volumes since 2019, it still lags in market share by revenue ($28.6B) — compared to UPS ($68.9B) and FedEx ($63.2B).
- Smaller competitors are elbowing their way in, with “other” carriers experiencing a combined volume growth of 28.5%.
“Despite the continued aftershocks of the COVID-19 pandemic, persistent inflation, and pessimistic economic perceptions, consumer spending remains resilient, primarily via a growing demand for affordable goods from global marketplaces,” said Shemin Nurmohamed, EVP and President, Sending Technology Solutions at Pitney Bowes in the statement. “The result is an influx of smaller, less-expensive, lightweight packages which drive up volumes at a lower rate of revenue-per-piece.”
“The legacy players are still adapting as the delivery landscape shifts to favor natively direct-to-consumer parcel networks that are designed from the start to serve residential deliveries, such as the USPS, Amazon Logistics and specialized/localized carriers,” said Vijay Ramachandran, VP of Go-to-Market Enablement and Experience at Pitney Bowes. “While parcel volume growth has shifted from double to single digits, consumers’ appetites for ‘real-time retail,’ or affordable goods that are brought to market based on fast-moving trends, will continue to elevate parcel volumes well beyond the effects of the pandemic.”
Influencing factors
In an analysis of the results for Supply Chain Dive, Senior Reporter Max Garland described several factors that likely influenced what this year’s shipping index revealed:
- UPS had a difficult summer of 2023 due to contract negotiations with the International Brotherhood of Teamsters, during which shippers sent their business elsewhere and companies like FedEx were happy to oblige.
- Despite gaining new customers from UPS, FedEx experienced soft demand in some business units and had to trim air cargo capacity as a result — and 2024’s data may offer more of the same after the company’s contract with USPS expires later this year.
- The boost experienced by Amazon and alternative carriers was likely influenced by their operating models that focus on “lightweight, business-to-consumer deliveries,” which represent a “growing part of the market.”
- Alternative carriers also benefited from the fact that many shippers find it best to keep their options open if and when the big carriers decide to increase their rates.
Another factor contributing to Amazon’s growth is its commitment to ramp up in-house delivery capabilities and reduce reliance on other carriers. In this context, Garland cited Andy Jassy, Amazon’s president and CEO from his recent letter to shareholders as saying, “[I]n the last few years, our scale and available alternatives have forced us to build our own last mile delivery capability (roughly the size of UPS) to affordably serve the number of consumers and sellers wanting to use Amazon.”
Real-time retail and the “Amazon effect”
FourWeekMBA creator Gennaro Cuofano says real-time retail involves the “instantaneous collection, analysis, and distribution of data to give consumers an integrated and personalized shopping experience.”
Although various retailers are making progress in this context with the adoption of cutting-edge technologies, the pioneer and ongoing leader here is Amazon.
In a recent article for CMSWire, “How the ‘Amazon Effect’ Has Impacted Ecommerce,” business journalist Scott Clark describes how the ecommerce giant has reshaped the retail landscape.
“The ‘Amazon effect’ has become a defining phenomenon in retail and ecommerce, reshaping customer expectations and industry dynamics,” Clark writes. “Stemming from Amazon’s unparalleled success, it refers to the impact that Amazon, which debuted in 1994, has had on online consumer shopping habits and expectations, as well as the pressure it has put on other retailers.”
Clark summarizes the “gist” of its impact like this:
- Industry transformation. “The Amazon effect has revolutionized retail and ecommerce, elevating customer expectations for speed, convenience and personalized experiences.”
- Pressure on competitors. “Amazon’s dominance and high standards in ecommerce have intensified pressure on other retailers to adapt and innovate in customer service and logistics.”
- Shaping customer service. “The Amazon effect influences customer service norms, pushing brands to offer quick, personalized support and integrate customer data across channels.”
Saying that the core of the Amazon effect is marked by a “demand for speed, convenience and a personalized shopping experience,” Clark notes that although Amazon’s impact has been raising consumer expectations for over a decade, the pandemic “exponentially” increased this dynamic.
“Consumers now expect swift deliveries, easy returns, and a vast array of product choices at their fingertips, all of which Amazon has mastered,” Clark writes. “With features such as one-click ordering, free two-day shipping for Prime members, and instant customer service callbacks, Amazon has set a high bar for ease of use. …”
One expert he cited underscored the need for rapid delivery and “seamless” service — which are the new standard and require investments in “robust supply chains and technology” to achieve it.
Clark agrees.
“Technological integration, including the adoption of AI, NLP and ML, has become a prevalent approach for brands looking to enhance customer experiences and stay competitive in the post-Amazon effect landscape,” he writes. “These adjustments underscore a broader shift in the industry toward customer-centric strategies, aligning with the lessons learned from Amazon’s customer-focused approach.”
