Bumps in Parcel Volumes Expected Thanks to Amazon Prime Day

May 27, 2021


Get ready. According to Bloomberg, Amazon Prime Day is scheduled for June 21 and 22, which means another bump in last-mile delivery demand. A good bit of this last-mile delivery demand will be handled by Amazon Logistics, which noted on its quarterly earnings call on April 27 that its delivery services partner program (DSP) employs more than 100,000 drivers. In addition, Amazon Flex, its crowd-sourced delivery service, also continues to grow.

Amazon’s last-mile delivery partners such as the USPS, UPS, and parcel regional carriers will probably also see a bump in demand in terms of deliveries. However, it comes at a time of capacity constraints among last-mile delivery providers.

E-Commerce Remains Dominant

The growth in e-commerce sales continues to represent a large chunk of deliveries. According to the US Census Bureau, first-quarter e-commerce sales increased 39% over the 2020 first quarter, representing 13.4% of total retail sales. But business-to-business (B2B) last-mile volumes are growing, as noted by UPS in its first-quarter earnings call. For UPS, B2B volumes have improved to 40% of total volumes, after reaching a low of 30% last year.

Combined, e-commerce and B2B volumes are constraining last-mile networks and have prompted FedEx to increase its peak surcharges (not to be confused with the seasonal peak surcharge) effective June 21. “The impact of the virus continues to generate elevated volumes, high demand for capacity, and increased operating costs across our network,” according to the FedEx announcement.

Retailers fight back

Because of network constraints, Amazon will likely promote its locker network and third-party pick-up locations such as Whole Foods and Rite Aid during Prime Day. Brick-and-mortar retailers will likely offer their own sales promotions at the same time as Amazon and highlight curbside pick-ups and same-day services for faster delivery options.

Retailers are benefiting from curbside and same-day delivery options. Target, for example, reported a 123% growth in Drive-Up sales and a 52% increase in in-store pick-up sales for its first quarter.

What Can We Expect from Prime Day?

Year-to-date through April, US retail sales continue to remain strong, up 23% year-over-year, with non-store retailer sales up 24.2% for the same period, according to the US Census Bureau.

According to Digital Commerce 360 estimates, last October’s Prime Day, sales were estimated at $10.4 billion, up from $7.16 billion in 2019 when it was held in July. Amazon may surpass $10.4 billion but it will be a struggle, thanks to increasing pressure from the likes of Target, Walmart, and other brick and mortar retailers.

Despite the increased competition, expect more pressure in last-mile providers’ networks as volumes rise thanks to Amazon Prime Day.


ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered.

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

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Bumps in Parcel Volumes Expected Thanks to Amazon Prime Day

May 27, 2021


Get ready. According to Bloomberg, Amazon Prime Day is scheduled for June 21 and 22, which means another bump in last-mile delivery demand. A good bit of this last-mile delivery demand will be handled by Amazon Logistics, which noted on its quarterly earnings call on April 27 that its delivery services partner program (DSP) employs more than 100,000 drivers. In addition, Amazon Flex, its crowd-sourced delivery service, also continues to grow. Amazon’s last-mile delivery partners such as the USPS, UPS, and parcel regional carriers will probably also see a bump in demand in terms of deliveries. However, it comes at a time of capacity constraints among last-mile delivery providers.

E-Commerce Remains Dominant

The growth in e-commerce sales continues to represent a large chunk of deliveries. According to the US Census Bureau, first-quarter e-commerce sales increased 39% over the 2020 first quarter, representing 13.4% of total retail sales. But business-to-business (B2B) last-mile volumes are growing, as noted by UPS in its first-quarter earnings call. For UPS, B2B volumes have improved to 40% of total volumes, after reaching a low of 30% last year. Combined, e-commerce and B2B volumes are constraining last-mile networks and have prompted FedEx to increase its peak surcharges (not to be confused with the seasonal peak surcharge) effective June 21. “The impact of the virus continues to generate elevated volumes, high demand for capacity, and increased operating costs across our network,” according to the FedEx announcement.

Retailers fight back

Because of network constraints, Amazon will likely promote its locker network and third-party pick-up locations such as Whole Foods and Rite Aid during Prime Day. Brick-and-mortar retailers will likely offer their own sales promotions at the same time as Amazon and highlight curbside pick-ups and same-day services for faster delivery options. Retailers are benefiting from curbside and same-day delivery options. Target, for example, reported a 123% growth in Drive-Up sales and a 52% increase in in-store pick-up sales for its first quarter.

What Can We Expect from Prime Day?

Year-to-date through April, US retail sales continue to remain strong, up 23% year-over-year, with non-store retailer sales up 24.2% for the same period, according to the US Census Bureau. According to Digital Commerce 360 estimates, last October’s Prime Day, sales were estimated at $10.4 billion, up from $7.16 billion in 2019 when it was held in July. Amazon may surpass $10.4 billion but it will be a struggle, thanks to increasing pressure from the likes of Target, Walmart, and other brick and mortar retailers. Despite the increased competition, expect more pressure in last-mile providers’ networks as volumes rise thanks to Amazon Prime Day.

ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered. Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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