After the past few years of insane rates on ocean freight and nearly-as-astronomical increases in land-based shipping costs, this holiday season looks like it will deliver some good news when it comes to getting packages from Point A to Point B.
All three of the major freight companies that deliver the vast majority of packages for the Christmas season – FedEx, United Parcel Service, and the U.S. Postal System – are all offering discounts or rates that are lower from a year ago. The amounts vary by carrier, distance, package size and other factors but across the board it looks like both retailers and suppliers who need to send goods will be able to do so for less compared to 2022.
The main reason is clear: demand has slackened off versus the height of the pandemic years when e-commerce gained so much market share and created logjams in the supply chain. Online purchasing is still gaining but at nowhere near the rate it had been and consumers are doing much of their shopping in person and carrying their purchases themselves.
“It’s not going to be a good peak. People are spending money on things that we don’t transport,” said Satish Jindel, president of ShipMatrix, a consulting firm said in a recent interview. The company estimated that carriers will deliver 82 million parcels a day during the peak holiday season versus an average of 90 million a day during that period a year ago.
The other big factor is the leveling off of inflation that spiked labor rates, fuel charges and even the cost of trucks and vehicles used to transport all of those packages. Again, we haven’t seen significant reductions in inflation or gasoline prices but they are not going up either.
A third factor, smaller but perhaps gaining significance, is that there is also more competition in package shipping creating more aggressive pricing structures. DHL and OnTrac are two of the second-tier package movers expanding their services while Amazon’s in-house shipping service is also expanding now that demand has lessened.
Many of the lower prices will be driven by a reduction or complete elimination of holiday surcharges, something all the major carriers put into place the past few seasons when demand was so high.
So, how much will you save this year? Again, much depends on a series of variables but in one published report a food products company said in a test it had saved between 10 and 40 percent compared to a year ago.
Certainly some ho-ho-ho news for companies this holiday season.