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Online Selling and the Future of Package Delivery

Amazon Prime orders regularly arrived late over the holidays, according to a Reuters Ipsos survey reported in February. While Amazon said its own data showed significantly better results, Reuters raises questions about the ability of retailers to satisfy the high expectations around shipping and delivery they’re helping to create in shoppers’ minds.

Among the initiatives Amazon is working on is Sunday delivery with the help of the U.S. Postal Service, and next week, USPS Vice President of New Products and Delivery Gary Reblin will talk about “the Future of Delivery at USPS” on a panel about ecommerce logistics at the PostalVision 2020 conference, where the agency’s Chief Information Officer Jim Cochrane will also present a keynote address.

Shipping is top of mind for online sellers of all sizes. We spoke to the conference organizer, Ursa Major’s John Callan, to get his take on the changing expectations around ecommerce delivery, including his thoughts on drones, USPS “cluster boxes,” and whether small sellers are disadvantaged compared to large merchants when it comes to shipping.

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EcommerceBytes: What are the biggest challenges for online retailers with regard to delivery, and has that changed from previous years?

John Callan: What has changed dramatically in recent years are delivery options. Driven largely by Amazon in their “relentless” effort to meet every conceivable customer demand, consumers can now choose the day – now including Sunday, and even the time of day they want delivery – within the hour in parts of Manhattan. And they can also choose where they want to get their goods – at home or at a UPS Store or FedEx Office or even at a conveniently located locker-box.

These logistics complexities have to put a lot of pressure on all but the largest etailers to accommodate these choices, which will soon become expectations.

EcommerceBytes: Are online retailers setting unrealistic expectations regarding delivery times and costs?

John Callan: No. These expectations are not unrealistic. And online retailers should not be setting them in the first place, since they have no real control over them. They can only offer the delivery service standards that they buy from their providers. But just about any expectation can and will be achieved along with commensurate expectations and willingness on the part of consumers to pay what it costs to achieve them and/or what the market will bear.

Think of airline and hotel pricing that now changes by the minute depending on capacity and demand. With delivery, the future model to look to is Uber’s “surge pricing.”

Of course it is up to the logistics providers and not the retailers to develop these live online pricing exchanges and online retailers will simply access them the way consumers do.

EcommerceBytes: When do you think drones will be a realistic option for delivering online orders?

John Callan: This won’t happen anytime soon in the U.S. due to extremely restrictive FAA regulations. Nor will everyday orders be delivered by drone in other countries in the near future either. There are simply too many safety and security issues to overcome before even scheduled flight patterns are established. But drone delivery will develop the way the airline industry did. It will begin with individually scheduled routes operating at high cost in response to high demand. The perfect real time example is what DHL is already doing delivering lightweight medical supplies to a nearby island in Germany vis “ParcelCopter.”

But, long term, I can easily imagine an air traffic control system to manage drone flights. If, with today’s technology, we can safely control 30,000 aircraft flights a day crisscrossing the U.S. at hundreds of miles an hour each carrying hundreds of passengers, I feel certain that we will achieve this with drones with tomorrow’s technology. And what the FAA should do now is encourage the development of this technology in test lab environments in the U.S., and not impede it only to see it happen in other countries. Amazon for example is already setting up its drone delivery development labs at Cambridge University in England.

EcommerceBytes: What is the US Postal Service doing to capitalize on the ecommerce opportunity, and what are they doing right (and wrong)?

John Callan: If it weren’t for the phenomenal growth of ecommerce, USPS would certainly be planning its sunset strategy. It’s ironic that while digital technology disrupts its core First Class Mail business it also “e-rupts” its parcel business. And USPS is responding proactively to these transformative forces by downsizing its excess mail plant capacity while gearing up for more productive parcel volume.

Fortunately, what USPS does best suits both mail and parcels both and that’s deliver to households. They do it so well, that their competitors are rapidly becoming the best customers of their Parcel Select service. Fast growing FedEx SmartPost and UPS SurePost depend entirely upon USPS for residential delivery. Think about it. USPS has a vehicle on every street every day. Especially in residential neighborhoods, doesn’t it make more sense to have one vehicle stopping at every household than three?

What USPS is thinking about “doing wrong” is retrenching from this unique, highly cherished, all-American delivery model to households. In order to reduce costs of stopping at individual residences, the Postal Service is exploring the efficiencies of delivering to centralized “cluster-boxes.”

If this plan prevails, I wonder what will happen to the “monopoly” USPS has to access to our personal mailboxes!?

EcommerceBytes: Do small online sellers have any advantages or disadvantages over large retailers when it comes to shipping issues?

John Callan: Sure. They are disadvantaged as any small business is when costs are based on volume. Large sellers who can fill trucks can achieve lower pricing from the large commercial carriers. It is also unlikely that they will have the integrated technology that only the largest shippers can afford.

On the other hand they may have more flexibility and are not necessarily locked in to carrier contracts the way large sellers are. And a number of shipping technology companies like Endicia and Pitney Bowes pay special attention to small shippers enabling them with tools to easily label and pay postage on small shipments with USPS, who let’s remember provides superior delivery of small parcels to households.

EcommerceBytes: Who should come to the PostalVision 2020 conference and how much does it cost?

John Callan: Anyone with a stake in the postal/parcel delivery ecosystem will benefit greatly from attending PostalVision 2020/5.0. Especially if they are interested in where the industry is going, what trends are driving it and what new product ideas are in the works. And, they will benefit from hearing all sides of the story since all parties are represented, including the large private carriers like FedEx, UPS, USPS; leading technology service providers like Bell and Howell, Endicia, Grayhair, Pitney Bowes, as well as inventors of new products from Silicon Valley to Europe. It’s not inexpensive. Registration for the day and half event is $1495. But personal access to some of the world’s foremost thought-leaders and their visionary thinking may be well worth it.

EcommerceBytes: What’s on the agenda for this year’s conference?

John Callan: In appreciation for the increasing empowerment of Customers and their technological Connections with online sellers and a dependence along the entire global postal value chain upon Collaboration, this year’s conference is themed – you guessed it – “Customers, Connections and Collaboration.”

USPS’s CIO Jim Cochrane will present the USPS view of this theme at his Keynote Luncheon address. And the rest of the day and a half will be spent listening to and conversing with leaders from global posts, innovators and inventors.

Of particular interest to EcommerceBytes readers will be sessions devoted to E-Commerce Delivery and CrossBorder E-Commerce.

Experts will be showcasing examples of new delivery models, locker boxes, and even the DHL drone that I mentioned earlier.

EcommerceBytes: Where can readers learn more?

John Callan: Conference session highlights are described in our Point of View postson our PostalVision 2020 website. And the full agenda and registration details can be found here .

Do online shoppers have realistic delivery expectations? Comment on this recent EcommerceBytes Blog post.

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Ina Steiner

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. Send news tips to ina@ecommercebytes.com.


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