If you've noticed a few more tractor trailers coming down your residential street these days, it's no accident. The e-commerce boom and resulting changes to consumer expectations about what kind of items can be delivered to their homes is putting a massive strain on trucking companies, as the Wall Street Journal reports:
A seismic change in the way Americans are shopping is affecting everything from how, when and where they make purchases to whether they pay with credit cards or mobile clicks. The transformation is rocking retail and shipping and rippling through real estate, banking and tech.
It is also roiling trucking, which is caught in a tug-of-war with shippers and parcel carriers over who should pay for the true price of delivering e-commerce, especially the ever-bigger items consumers are ordering. As they struggle with unanticipated costs, truckers are weighing whether to specialize, partner or ratchet up prices, which would pressure shippers and maybe consumers.
E-commerce comprises 10% to 20% of deliveries in the $35 billion trucking industry segment called LTL or “less-than-truckload,” estimates Kevin Zweier, a vice president at supply chain consultancy Chainalytics. LTLs pack loads from multiple customers into a single truck.
Amazon.com raised consumer expectations. Now, shippers like Home Depot Inc. oblige, mixing big and heavy residential shipments in with its commercial ones because it makes shipping simpler. So firms like Wilson are “kind of forced to take it all if they want to do business with that shipper,” says Mr. Zweier of Chainalytics.
But there's a problem, as the Journal story notes. For one thing, trailer truck deliveries to homes take a lot longer. Those big trucks also must contend with narrow streets, tight curves, overhead power lines and other obstacles that simply aren't a factor when delivering goods to a loading dock.
There's much more detail in the full Journal story, which is well worth a read (subscription required).
Analysis: A Problem That Will Get Worse Before It Gets Better
The trucking industry's woes reflect the continuously growing power consumers have over retailers, but it's a problem that needs a solution, says Constellation Research VP and principal analyst Guy-Frederic Courtin.
"In the past, we didn't have as much choice with what we could get delivered to the home," Courtin says. "But today there's this drive for a greater variety of products which can be heavier, bigger and bulkier. A consumer perceives there are almost non-existent limitations. Hey, I can get a battleship delivered to my home? Let's do it."
"What we're seeing from the logistics side is that it hasn't caught up," he adds.
It's not as if consumers haven't been able to get large items, such as furniture, delivered to their homes for many years. But the push e-commerce has made toward LTL deliveries has changed the game. Your local furniture store likely uses a local company or even has an internal delivery department, both of which know the ins and outs of the local area that count, such which street is too narrow or crowded with cars for a truck to get in and out, for example.
"If I order something from California and expect it to be delivered to my home, does that company know things like its impossible to deliver stuff in [Boston's] North End, but if it's in [Boston suburb] Natick it will be OK?" Courtin says. Google Street View and other types of research tools can help, of course, but there's still an additional layer of complexity for a logistics provider to consider.
So what's the solution?
"The third-party logistics providers and companies like Fedex really need to rethink this type of delivery," Courtin says. Moreover, "consumers will have to be retrained to the notion of this is not 'free delivery,' and it's not going to be easy and might not even be possible."
One option could be variable pricing for difficult deliveries, depending on certain conditions. "What if you don't mind if it's delivered to your house at 2 a.m. when there's no traffic, versus normal business hours," Courtin says. "Restaurants and stores get fulfilled late at night because there's no one around. The question then becomes, do consumers accept that? If the price is right, then I think they'll accept anything."
While it might be difficult to imagine consumers getting on board with more expensive or restrictive delivery options, just remember the changes that have gone on with air travel, Courtin says. "Ten years ago, would ever have considered paying to have your bag checked? One airline did it and then all the other ones did it. We begrudgingly pay, but it was inconceivable 10 years ago."
Although retail and air travel are two different industries, a similar phenomenon could occur if a major brand name made a bold policy change for difficult and bulk deliveries, Courtin adds.
Only one thing is for sure for now for the trucking industry's conundrum. "This is only going to get worse before it gets better," Courtin says.
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