B2B Volumes on the Rise as Retailers Scramble to Meet Demand

July 29, 2021


UPS’ ‘Better, not Bigger’ strategy continued to be the main driver to another highly profitable quarter for the parcel giant as it reported another record quarterly earnings earlier this week (July 27th).

Within the largest division, US Domestic, Ground average daily volume dropped 4.1% year-over-year due to what UPS said was a difficult year-over-year comparison. That may be true, but most likely, it can be attributed back to UPS’ strategy that focuses more on profitability than volumes.

Ground’s average revenue per piece increased 13.2% year-over-year from $8.71 per package in the second quarter of 2020 to $9.86 per package in the second quarter of 2021. Not only did Ground’s average daily volumes decline from the same period last year, but the volume characteristics did as well.

Business-to-consumer (B2C) volumes declined 15.8% while business-to-business volumes increased 25.7% year-over-year. The B2B increase was attributed to retailers’ need for inventory replenishment.

See our Q3 Parcel Market Outlook for more.

Indeed, the latest data from the US Census Bureau finds that retail sales were up 24.5% while retail inventories only increased 0.2% compared to May 2020. As a result, the inventories to sales ratio was 1.09 for May 2021, a significant decline compared to 1.34 for May 2020 when many retail stores were closed due to COVID-19.

Retailers such as Steve Madden and Logitech noted in their second-quarter earnings calls that despite strong revenue gains, if they had more inventory, they could have increased revenue further.

The need for inventory is coming at a critical time for retailers with back-to-school sales in full swing and the holiday peak season just around the corner.

IHS Markit forecasts an 8.8% increase in back-to-school sales with electronics and clothing in high demand, while FedEx expects another “Shipathon” for the upcoming holiday peak season.

However, it will all come at a price for retailers. Salesforce expects retailers will pay $223 billion extra for goods in the second half of the year, a 62% increase compared to last year. It comprises an additional $12 billion spend with suppliers, $48 billion more in wage expenses, and $163 billion extra in logistics costs.

Buckle up. The second half of the year looks to be a bumpy ride for retailers in need of inventory and transportation services.

 


ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts has united with Transportation Insight to become North America’s #1 provider of small parcel management and optimization services.  Our team of best-in-class analysts employs cost modeling techniques to help clients optimize their supply chain spend, reducing costs by 20% or more.  Our approach is non-invasive to daily supply chain operations as we employ unparalleled market intelligence and proprietary cost modeling technology, targeting hidden costs and identifying savings opportunities. After establishing the success criteria, SME leverages proven project plans, data warehousing, and milestone documents to ensure an optimized and implementable solution. We build strong business cases based on your data to negotiate better terms, pricing, and service for our clients. We deliver your competitive edge.

Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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B2B Volumes on the Rise as Retailers Scramble to Meet Demand

July 29, 2021


UPS’ ‘Better, not Bigger’ strategy continued to be the main driver to another highly profitable quarter for the parcel giant as it reported another record quarterly earnings earlier this week (July 27th). Within the largest division, US Domestic, Ground average daily volume dropped 4.1% year-over-year due to what UPS said was a difficult year-over-year comparison. That may be true, but most likely, it can be attributed back to UPS’ strategy that focuses more on profitability than volumes. Ground’s average revenue per piece increased 13.2% year-over-year from $8.71 per package in the second quarter of 2020 to $9.86 per package in the second quarter of 2021. Not only did Ground’s average daily volumes decline from the same period last year, but the volume characteristics did as well. Business-to-consumer (B2C) volumes declined 15.8% while business-to-business volumes increased 25.7% year-over-year. The B2B increase was attributed to retailers’ need for inventory replenishment. See our Q3 Parcel Market Outlook for more. Indeed, the latest data from the US Census Bureau finds that retail sales were up 24.5% while retail inventories only increased 0.2% compared to May 2020. As a result, the inventories to sales ratio was 1.09 for May 2021, a significant decline compared to 1.34 for May 2020 when many retail stores were closed due to COVID-19. Retailers such as Steve Madden and Logitech noted in their second-quarter earnings calls that despite strong revenue gains, if they had more inventory, they could have increased revenue further. The need for inventory is coming at a critical time for retailers with back-to-school sales in full swing and the holiday peak season just around the corner. IHS Markit forecasts an 8.8% increase in back-to-school sales with electronics and clothing in high demand, while FedEx expects another “Shipathon” for the upcoming holiday peak season. However, it will all come at a price for retailers. Salesforce expects retailers will pay $223 billion extra for goods in the second half of the year, a 62% increase compared to last year. It comprises an additional $12 billion spend with suppliers, $48 billion more in wage expenses, and $163 billion extra in logistics costs. Buckle up. The second half of the year looks to be a bumpy ride for retailers in need of inventory and transportation services.  


ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts has united with Transportation Insight to become North America’s #1 provider of small parcel management and optimization services.  Our team of best-in-class analysts employs cost modeling techniques to help clients optimize their supply chain spend, reducing costs by 20% or more.  Our approach is non-invasive to daily supply chain operations as we employ unparalleled market intelligence and proprietary cost modeling technology, targeting hidden costs and identifying savings opportunities. After establishing the success criteria, SME leverages proven project plans, data warehousing, and milestone documents to ensure an optimized and implementable solution. We build strong business cases based on your data to negotiate better terms, pricing, and service for our clients. We deliver your competitive edge. Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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