Plus, 2019 fourth-quarter freight trends and 2020 peak-season predictions
Supply and demand planning, data literacy, grit — These are just a few of the many skills that shippers have sharpened since the onset of coronavirus. In the face of a volatile economy and changing consumer preferences, shipping businesses in the United States have leaned on high-tech tools to improve forecasting and meet demand.
Although some industries have shipped less than others during the pandemic, freight volumes are presently 16.5% higher than they were this time last year. Experts don’t expect this figure to drop; peak shipping season is here in the midst of a global crisis. For shippers, there’s never been more to play for. Those that can provide a positive customer experience and keep their supply chains intact will earn credibility among consumers.
Read on to discover which sectors are shipping the most freight right now and how you can optimize your logistics processes during the industry’s busiest time of year.
2019 Industry growth rates
Before diving into today’s fastest growing industries and peak-season tips for shippers, let’s look at the outcomes of fourth quarter 2019, predictions for fourth quarter 2020, and current freight trends.
The retail industry was worth $730.2 billion in the last two months of 2019, up 4.1% from the same period in 2018. Though consumers had fewer days in 2019 than 2018 for holiday shopping, many retailers saw year-over-year growth, including food and beverage stores, which expanded by 2.9%, and home furnishing stores, which jumped 2.6%.
According to market research by The New York Times, the goods that performed well during the 2019 holiday season include:
- Apparel: +1% in general, +17% online
- Jewelry: +1.8% in general, +8.8% online
- Electronics and appliances: +4.6% in general
- Home furnishings: +1.3% in general
However, more than 9,000 retail stores shut down due to 2019’s e-commerce boom. Sales dropped by:
- 1.8% at department stores
- 2% at electronics and appliance stores
- 1.6% at apparel stores
- 0.4% at sporting goods stores
The shift to online purchasing emphasized the relationship between customer experience and retention. Retailers that altered their fulfillment operations and support activities for e-commerce had better luck delivering products intact and on time, gaining repeat customers and favorable reputations as a result.
Transportation proved key to executing online orders during the holidays last year. Here are some of the industry trends we noticed when freight shipping picked up in October 2019:
- Brick-and-mortar freight — like signs and advertising, commercial art, plastic bags, corrugated boxes, conveyors, plumbing, heating, and air conditioning — rose by 63%.
- Food and beverage freight saw an 89% increase.
- Alcohol freight saw a 50% lift in demand.
- Loads with home goods — including furniture, cleaning supplies, and other home fixtures — more than doubled.
- The movement of recreational consumer goods climbed by 41%.
Shipping demand hasn’t slowed down. In July 2020, e-commerce purchases were up 25-30% year over year. All of this data informs projections for 2020’s holiday season.
The fastest growing industries involve e-commerce and essential businesses
Because of the pandemic, peak shipping forecasts for this year consider more than 2019 outcomes. Inconsistent job growth, non-essential business closures, the uncertain economic outlook — These factors are setting the stage for fourth quarter 2020.
Big-box retailers such as Target and Walmart will be launching online campaigns for standard shopping events — like Black Friday — to prevent crowds from gathering. That shouldn’t hinder retail revenue growth though; every generation has gotten comfortable with online shopping during the health crisis and e-commerce sales have spiked. In fact, market research leads us to believe that this shipping season will be bigger than any other.
In anticipation of an overwhelming number of online orders to fulfill and long delivery lead times, sellers will most likely promote 2020 holiday sales earlier in the year than they normally would.
But are consumers willing to start holiday shopping (read, holiday spending)? And, if so, which products will they flock to? The unemployment rate is high, and people tend to save disposable income (not spend it) during tough times. That said, a recent survey reveals 59% of respondents have the same budget for holiday shopping in 2020 as they did last year; 20% of them even plan to spend more this year than they did in 2019. Where industry leaders expect a difference between the 2019 and 2020 holiday seasons is the type of product that’s in demand. “Essential” vs. “non-essential” seems to be an important distinction this year.
One source says, “…we predict retail growth in non-essential items, including [holiday gifts] … but at a slower rate in 2020 than last year, as consumers … prioritize essential items. However, it’s likely that store reopenings around the country and consumers feeling excited about the holidays after a rough year could lead to robust sales in some retail sectors, including housewares, appliances and electronics.” Demand for essential goods will likely remain high through the end of the year. While no one is sure which of these predictions will come to pass, one thing is certain: The freight industry is tight on capacity right now.
The current state of the trucking industry
As the trucking market has ebbed and flowed during coronavirus, supply chains have become more resilient. With surging e-commerce activity has come record-breaking freight volumes and stretched logistics networks. Consequently, delivery services have slowed and shipping costs have increased.
Commercial Carrier Journal Magazine says the following about the state of the market: “Capacity is very constrained. As long as volumes continue to rise or even stabilize, we should see rates continue to rise. … Accelerating spot rates are forcing shippers [to] grab contract capacity as they can, even if it means paying higher rates to do so.” Industry leaders believe rates will fall as shippers establish systems that meet the unfamiliar requirements of this day and age.
The pandemic’s effect on the spot market has been of particular interest. With such limited capacity in the shipping landscape right now, the spot market has been absorbing freight that would typically move under contract. This high degree of capacity strain has been problematic for business-to-consumer (B2C) companies that are under pressure to deliver to customers directly. The Logistics Managers’ Index notes, “It is interesting that logistics capacity is already this pressed at the end of Q3. Traditionally Q4 is when we see peak logistics demand, so the fact that it’s already close to maximum utilization calls into question whether or not missed or late deliveries will become an issue through peak retail times in November and December.” Clearly, the role freight transportation plays in meeting demand can’t be overstated.
Home, medical, and technology industries up; services industry down
Online shopping began gaining traction in 2014 and has been reshaping logistics ever since, heralding changes in last-mile delivery, omnichannel retail, and other support activities. In hindsight, this shift helped prepare sellers for this year’s e-commerce rush. According to a shipper survey by Echo Global Logistics, 82% of respondents have been affected by coronavirus. With consumers accounting for the health risks of COVID-19, buying patterns have favored such products as:
- Home furnishings
- Exercise equipment
- Consumer packaged goods
- Food products and beverages
- Computers and electronics
- Office supplies
Market research indicates growth in the following industries during the pandemic:
- Food and beverage
- Consumer goods
- Home improvement
- Healthcare (including ambulatory healthcare services and other health practitioners)
- Medical textiles
- Robotics and information services
- Online streaming services
With limited desire and ability to travel, the general public has been taking fewer vacations and putting dollars toward home enhancements and entertainment. The uptick in freight-intensive purchases has partly contributed to volatility in the trucking sector. That’s why shippers that expect business to boom during the holidays should be bolstering their logistics processes at present.
Other industries have struggled because of government restrictions and falling demand, like:
- Live entertainment
- Restaurants and bars
- Personal grooming services (hair salons, etc.)
- Brick-and-mortar retail
- Transit (Buses, taxis, etc.)
- Energy and related services
- Durable goods (cars, lumber, machinery)
Consumers and businesses alike have shied away from these sectors since many of them support activities that violate social-distancing recommendations.
Tips for shippers as we head into the holiday season
Whether your industry has expanded or contracted during the health crisis, you’ll want your logistics operations to run smoothly through the end of the year. Here are four obstacles shippers might face this quarter and some ideas for overcoming them:
- The capacity crunch: Shippers can combat finite capacity and avoid bottlenecks by arming themselves with information about problematic regions, strategically planning pickup and delivery locations, and reviewing contract terms to ensure quality service.
- Delivery delays: Setbacks like bad weather are inevitable. Shippers can eliminate many late-delivery hassles by ordering early and improving visibility. Maintaining a steady flow of goods and tracking shipments will help you address issues and meet demand.
- The dreaded “second wave” and potential lockdowns: While a second wave of the virus hasn’t yet come to pass, authorities have vacillated between loosening and tightening safety restrictions. Shippers should stay up to date on relevant guidelines and COVID-19 support services to keep workers safe as they move forward.
- Right-sizing supply: Shippers may be tempted to store too much product to ensure continuity in tough times, or too little product to reduce freight costs. However, given climbing warehousing costs and the need to ensure inventory, neither is a good idea.
Don’t let a few bumps in the road prevent your business from reaching its peak-season targets. Book Flock Freight’s shared truckload service to meet delivery requirements and keep customers happy. Shared truckloads deliver on time and damage-free. With shared truckload, shipments that are traveling on a similar route move on the same truck. Freight travels directly from its pickup location to its destination without passing through hubs or terminals, giving you truckload service for a fraction of the price. Experience the joy of stress-free shipping this holiday season with shared truckload.
Insights from the past offer clues about the future
This year’s top-growing industries are using future-focused freight processes to overcome the unique challenges of coronavirus and meet consumer demand. By analyzing last year’s peak-season trends and predictions about fourth quarter 2020, shippers will be better prepared to adapt to changing circumstances and optimize their logistics operations for 2021 and the next decade. If in doubt, make data-driven decisions, account for seasonality, and trust efficient shipping methods like shared truckload to drive your business forward.