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Earlier this March, US President Donald Trump made an emergency declaration over the COVID-19 outbreak. Shortly after, the White House Coronavirus Task Force issued a two-page guide, where it advised Americans to avoid social gatherings of over 10 people and refrain from ‘discretionary travel, shopping trips, and social visits’. By early April, most of the US states had issued lockdown orders for their residents to prevent the spread of the coronavirus.
An article by CNBC said that major retailers such as Macy’s, Apple, and Nike were closing their physical stores or reducing operating hours in response. Most retailers kept their e-commerce sites intact to allow consumers holed up at home to continue making purchases online.
A report made by eMarketer in July forecasted that the US retail spending would decline by 10.5% because of the pandemic. The report also predicted that e-commerce sales in the US would grow by 18% this year. True enough, new data released by the US Department of Commerce saw e-commerce sales soar 44.4% in the second quarter of this year.
With this context in mind, we looked into the impact of COVID-19 on the e-commerce logistics industry in the US; focusing on transit times for domestic and international shipments during the first half of 2020.
Here are the two primary effects we observed from our data:
Average transit time increased by 140% for domestic shipments
After the US went into a state of emergency in early March and lockdown orders implemented in most states, we saw average transit times for domestic shipments increase from 2.6 days to 5.2 days in May. This is an increase of 140.4% as compared to the same period in 2019, where the average transit time was 2.8 days.
With social distancing measures and lockdowns in place, consumers turned to online shopping and home deliveries for almost everything; including groceries. Online grocery delivery services like Instacart and Amazon Fresh saw exceptional growth in orders; with Instacart experiencing a 500% increase in order volumes in May as compared to the year before.
The outbreak increased e-commerce demand; creating a challenge to both online retailers and logistics companies alike to keep up with the surge in demand. To cope, companies have suspended service guarantees and prioritized essential shipments. Even Amazon; as one of the largest online retailers, has faced their own manpower challenges coping with the surge in demand with employee safety measures in place.
International shipments both going in and out of the US saw a significant increase in transit time (210%)
In May, international parcels going into the US took 19.4 days on average to make their first delivery attempt. This was a 210.9% increase as compared to the average of 9.2 days in 2019.
A report by Global-e found that US consumers were shopping more from international retailers; with 7% and 42%, year-on-year growth in April and May respectively. However, with the worldwide increase in e-commerce sales and widespread supply chain disruptions, shipping delays were also on the rise.
Likewise, the average transit time for shipments going out of the US from March to June has also increased. Compared to an average transit time of 9.9 days in 2019, we found a 167.4% increase in outbound transit times to 15.4 days in June. As seen from these numbers, the surge in e-commerce sales affected the logistics industry in the US.
Whilst it is expected that e-commerce adoption will continue to rise, the future remains rather uncertain for logistics players. Pandemic-driven volatility in parcel volumes and the high return rates of e-commerce orders are some of the factors that have made capacity management and planning a challenge for logistics carriers.
To prepare for the upcoming holiday season, carriers in the US are starting to implement peak season surcharges as one of the measures to help manage their capacity as e-commerce sales are predicted to continue growing through the remainder of the year.
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