I am back after a couple of days this week at the Parcel Forum conference, held at the Hyatt O’Hare in the Rosemont area just a few miles away from the airport.
Before starting my trip report, a couple of side notes.
Gilmore Says.... |
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| Discounts off published rates of 15-20% were easy to find pre-pandemic; starting in 2020, such discounts became a lot more the exception, Shanker said. |
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The Hyatt O’Hare may be familiar to some old timers out there as the site for several years in the 1990s of the Distribution/Computer Expo trade show, before it moved I believe for just one year to the Hilton in downtown Chicago and then the Navy Pier, before it ran (unnecessarily in my opinion) out of steam.
For those who remember “D/C Expo,” it really rocked for a good while, back when there were like 100 Warehouse Management System providers – all with booth at this show – and lots of other software firms exhibiting there as well. It was fun while it lasted. Anyone else remember that show?
Also, I started talking with guy who worked for a number of years in a senior technology role at i2. I started talking about my following i2 very closely as an analyst pre-SCDigest for META group, later acquired by Gartner. This when i2 was on fire before its later collapse.
I guess it took a few minutes, but my name finally registered with the guy as he took another look at my badge.
“I remember,” he told me, “inside i2, they always said ‘Dan Gilmore and Bruce Richardson [then of AMR Research], that’s who we have to focus on’” in the analyst community, which was much broader back then. It was nice to be remembered.
Back to Parcel Forum.
As some context, according this year’s State of Logistic Report from CSCMP, US spending on parcel shipping in 2021 was a staggering $134.5 billion, so this is really big business.
This was the 20th year for the conference, which was held last year but with a COVID-reduced crowd.
This year was much better attended – I am going to estimate about 500 – and once again was just run very effectively, as has been true all the other years I have attended this event as well.
The show of course benefits from the huge growth in parcel volumes coming from ecommerce. Parcel shipping not all that long ago used to be primarily a B2B thing BA (before Amazon). Not only have B2C parcel volumes exploded, but many shippers which had little or no parcel volumes now have ecommerce channels and growing parcel shipments, the cost of which they would like to reduce.
And the complexity is overwhelming, involving rates increases, new and rising accessorial charges, new and rising surcharges, and more. As just one easy example, surcharges from some carriers for shipping in peak season are based on what a company shipped in the summer, and vary week to week. So if you don’t get a parcel out the door on a Friday, there’s a different peak surcharge for shipping on Monday.
In the space I have left, I am just going to relay some highlights from the Tuesday keynote speech from well-known transportation sector analyst Ravi Shanker of Morgan Stanley, who follows the major parcel carriers very closely, and always has some interesting things to say.
 He started by noting how the pandemic distorted the parcel market, with ecommerce volumes going from what seemed like rapid growth of about 15% annually to around 40% from the last three quarters of 2020 and into 2021.
Everything naturally flowed in the carriers’ favor. For example, discounts off published rates of 15-20% were easy to find pre-pandemic; starting in 2020, such discounts became a lot more the exception, Shanker said.
But many (including I will confess myself) believed the surge in ecommerce and its share of total retail had made a permanent shift to these levels. That appears not to be the case. Ecommerce sales are “normalizing” back to pre-pandemic levels, which Shanker admitted caught him by surprise as well.
He noted ocean container shipping and air freight rates have already plummeted, partly a reversion to mean, partly in the case of air freight because airlines have rapidly added back international passengers flights that increase capacity in the air freight market as a result.
He also said the swing in the pandemic of consumers switching spend from goods to services is also starting to reverse itself, with sales down in almost every product category while things like travel spend are surging.
Amazon is of course also a factor. I believe what I heard Shanker says is that Amazon now has capacity in terms of boxes that can be moved that is slightly greater than that of UPS and FedEx combined – and in fact has excess capacity versus its own needs.
And in the UK, a market where Amazon often tests things before bringing them to the US, it is running a full blown parcel service that competes for business independent of where the order came from.
All of which is to say the “demand-supply dynamic in the parcel sector is soon to be very different” than we’ve seen in the last two years, Shanker said.
He also commented on the growth of “ship from store” in retail, and how this creates all kinds of new of new options, from traditional couriers to people on bikes – and thus reduces demand for traditional parcel carriers. And by the way, Shanker is still very bullish on the potential for drone deliveries.
However, he noted Amazon and Google had both recently announced they were ending work on “sidewalk” robots for delivery groceries and restaurant meals.
Add it all up, and parcel shippers should expect some relief and soon, Shanker said, jokingly noting that if he’s is wrong, Parcel Forum probably won’t have him back.
It was a good presentation n and a good conference. My only complaint was you couldn’t find a Diet Coke or Pepsi during the day – water only at breaks – but a minor gripe in what was otherwise a solid event.
I plan to be back for Parcel Forum 2023 in Nashville.
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