How retailers gain an competitive advantage by diversifying their carriers
Putting all logistics eggs into one basket?
Independently of if you are the Head of Transportation, COO, or VP of Logistics at a large e-commerce retailer brand, you likely know of the high costs of going all-in with legacy carriers. However, those expenses have created a chance: by diversifying your carriers, you acquire a significant competitive advantage.
Your company risks being subjected to surcharges, volume minimums, high peak-season rates, potential shipping capacity constraints, and subpar customer service when it only uses traditional carriers (DHL, Hermes, UPS).
For at least three reasons, which I'll go into more depth below, carrier diversification has become essential: to reduce the risk of the legacy carriers' capacity, as we witnessed in 2020; to better estimate your overall expenses; and to boost brand loyalty by offering top-notch customer quality & service.
You're not alone if you're considering diversification. According to a recent survey by the industry publication PARCEL, 64% of shippers now use three or more carriers, and 82% claimed that shipping charges had prompted them to adjust their operation since 2020.
As CEO & Co-founder of a next-generation shipping platform, my experience aligns with this trend: Executives at companies in the e-commerce logistics industry are progressively putting carrier diversification plans into practice.
I'll go through the advantages of introducing a different carrier in more detail below. Let's first be clear about the risks of maintaining the status quo and allowing the legacy options to hold all your cards.
The major Risks of Carrier Dependency
1. Capacity shortage
You won't have a backup carrier to distribute your shipments if demand increases and the big carriers impose volume limitations. Both DHL and Hermes limited the amount of deliveries for select businesses as a result of the intense demand for e-commerce during the epidemic.
Volume limitations have reportedly impacted 28% of survey participants from PARCEL during the previous two years. Without other delivery choices, firms would be forced to let down their clients by not being able to take up capacity when necessary.
2. Unclear and complex rates
When you are all in with the legacy carriers, your billing may be unpredictable since you are subject to complicated fees that depend on the size of your package, the distance you traveled, and the yearly holiday peak rates. For example, you could look at the DHL’s pricing charts (I should say multiple charts of different surcharges types). Retailers shouldn't have to estimate their expenses by referring to several charts along their contract's conditions.
Recently, legacy carriers have also increased their prices significantly. But what about the quality increase? Let’s take a look at it in the following section:
3. Service suffers - a lot
There are months when the legacy carriers' on-time-delivery rate has been as low as 67% (That’s failing one out of three customers!). With wide delivery windows of up to several days, you leave your customers in the dark about when exactly their package will arrive. If you want to move up to Next Day Delivery, you can, for a high price with unknown reliability. Another very common pain point for retailers is that delivery exceptions - including lost, damaged, and missed drop-offs - affect a whopping 11% of all parcel shipments (coming from all types of carriers).
4. Sales are likely to be impacted
Unfortunately, when a poor delivery experience occurs, consumers are not always forgiving. But when a delivery is late or missed, it’s not always the carrier facing the consequences - it’s often your brand. When a poor delivery experience occurs, 48% of consumers said they would complain to the retailer’s customer service team as opposed to 39% complaining to the carrier.
Moreover, when asked who to blame for late delivery, 41% of consumers blamed the retailer, and more than one in ten said they were prepared to post a negative review, according to a survey by Loqate.
The major Benefits of Carrier Diversification
The appropriate alternative carriers, on the other hand, can act as the antidote to each of the problems mentioned above. The following are some of the primary advantages of switching from legacy carriers:
1. Flexibly scale up or down - Logistics as a Service
It's crucial to work with a carrier who can adapt to support your capacity. Unlike traditional carriers, certain regional carriers may easily accept changes in your business without charging more. Examples of these changes include a spike in demand, an unexpectedly successful new product, or a slack time. As a result, there is capacity for you to increase or decrease volume any given week, and the price per package shouldn't increase as a result.
2. Transparent Pricing
You always know what you'll spend and can plan appropriately when you work with a service provider with clear prices and no unforeseen fees added on while your products are in transit. In contrast to many other carriers, we at Glocally provide you with your charges upfront and leave it at that.
3. Fast Delivery
Fast delivery is king in the eyes of the consumer, with 65% of consumers saying they’ll even pay more for faster, reliable delivery. Without the infrastructure burdens of a multinational shipping conglomerate, efficient regional carriers, with warehouses or sorting centers close to your customers, can promise next-day or two-day delivery as a standard.
4. Experiment with Innovative Customer Service
When you partner with a new shipping platform, you have the opportunity to start offering all sorts of next-generation ideas and innovation. At Glocally, the key to our superior user experience is largely due to our real-time customer interaction and customized delivery services. One of the many features is that we provide clients the chance to reroute an item before we ask for precise delivery instructions ("Leave it behind the plant on the back porch!"). I have observed how our brand partners increase recurring business when clients receive this level of customized care.
5. Negotiating a better price with DHL and Hermes
Just show them our transparent and straightforward pricing in the next contract negotiation. The magic will happen by itself.
How to Diversify Your Carriers
There is an increasing trend among shippers to add additional carriers to the mix for all of the aforementioned factors—predictable pricing, flexible capacity, faster delivery, innovative customer service, negotiation leverage, and more. Furthermore, just 31% of shippers utilize two carriers, while only 5% use one, and 64% currently use three or more.
While new integrations for onboarding another carrier may sound scary in the beginning, it doesn’t have to be complicated. An important first step is to partner up with a multi-carrier management software such as Metapack or Centiro.
The next step is then to actually onboard a new carrier, which can be completed in as little as two weeks. When you begin onboarding with Glocally, you have access to open APIs, our top-notch Tech Team, and a sense of urgency, and premium support from the start.
If you, on the other hand, prefer a fast and easy start, we can also proceed without a direct API Integration.