For more than a year, Convey’s clients, partners and the media have turned to us to provide data, trends, and insights into how COVID-19 is impacting retail and ecommerce.
As the pandemic recedes in the US, we will continue to publish our monthly performance index to help retailers understand and act on the data and trends shaping the delivery experience and last mile transportation.
This month’s index reveals that on-time performance is stabilizing after more than a year of change, and debuts new data on delivery distance and transit times heading into the back half of the year.
Key findings for May 2021 include:
On-Time Performance Holds Steady at Healthier Levels
Convey analyzed data from its Delivery Experience Management platform derived from tens of millions of packages shipped from more than 500,000 locations in North America in May 2021. The index finds that 82% of parcel shipments were delivered on time in May 2021 which matches overall OTP performance in April 2021.
This general trend of much healthier OTP overall is a clear positive for retailers and consumers. A year ago in May 2020, overall OTP had sunk to 73% due to volume-related network stress of the COVID-19 pandemic. However, on-time performance still hasn’t quite caught up to pre-COVID levels (88% in February 2020), indicating room for additional OTP gains leading up to the holiday season.
FedEx OTP Lags Behind UPS, USPS…For Now
FedEx continued to perform significantly lower than other carriers in May 2021 (71% OTP compared to 89% for UPS and 91% for USPS). So, while UPS has returned to pre-pandemic performance and actually posted its highest OTP in 2021 to date, FedEx’s OTP performance remains significantly lower than both pre-pandemic levels and the competition.
FedEx’s cheapest service levels are hit hardest, indicating OTP is likely impacted by FedEx’s strategic decision to rebrand its SmartPost business as FedEx Ground Economy and fully integrate last mile delivery operations formerly handled by the USPS into the Ground network.
Despite the short-term performance impact, this move sets FedEx up for better performance because they are taking full control over the delivery of their packages, versus relying on the USPS who had significant performance issues this past holiday. It also gives them economies of scale; for example, more packages in each geo means more cost-efficient delivery routes.
It is also the right time of the year to implement this change. Historically, Convey’s data has shown a downward trend in volume in Q2 due to a lack of peak season returns and major shopping events. So this is the “lowest risk” time of year to reallocate volume back into their home delivery network.
FedEx Leads in Market Share
FedEx continues to lead in market share with 36% of deliveries compared to UPS (28%), USPS (9%), DHL (10%), Regional Carriers (17%). FedEx’s market share has held steady for the past 3+ months despite on-time performance challenges.
The biggest movement in carrier share comes from a 1% increase in regional carriers’ market share (primarily OnTrac, Newgistics, and LaserShip) at the expense of USPS. This could be due to a less urgent need for overflow carriers during this time of year, allowing for the strategic transition of volume to regional carriers in certain markets.
Monthly Deep Dive: Distance & Transit Times
The retail winners and losers in 2021 will be dictated by how effectively retailers place inventory in the right places and how efficiently they can get that inventory to a customer’s door. Amazon continues to set the bar for fast delivery, and research shows that fast, free shipping and convenience - not necessarily price and selection – are the drivers of Amazon’s success. While not every purchase needs to be delivered the same or next day, there’s no question that speed matters.
According to Convey data, retailers are successfully reducing distance and transit time even in the face of the pandemic. Average distance is dropping over the last year, and delivery distance in May 2021 dropped by ~6.5% (57 miles) compared to the year prior. This decrease is likely due to continued advances in supply chains and the ongoing commitment of retailers to try to start their inventory closer to the customer.
More good news for retailers and consumers: parcel transit times averaged 3.3 days in May 2021 compared to 3.9 days in May 2020, a reduction of more than 15%. Looking forward, retailers will need to focus on placing merchandise in closer proximity to shoppers, for example forward stocking, ship from store and dark stores. At the end of the day, retailers must continue to tackle the problems of cost, speed, and customer experience, holistically without sacrificing one for the other - so they can confidently make bold customer promises they can keep.