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Welcome to Data File. In this weekly feature, The Current shares key findings shaping the ecommerce landscape. At The Current, we comb industry, analyst and economic sources for the data that matters to ecommerce professionals, and include it throughout our work. This feature is one of the ways we’re sharing what we find.
As ecommerce expands, the number of packages being shipped keeps growing.
US parcel volume grew 6% in 2021, according to data released this week from the Pitney Bowes Parcel Shipping Index.
The 21.5 billion packages shipped was a new record, up from 20.3 billion in 2020, according to the data. To put it in perspective, that means 59 million parcels were generated each day, and 683 parcels were generated each second. And it means 166 parcels shipped per US household during the year, according to Pitney Bowes.
Pitney Bowes said online shopping was driving the uptick in parcels. At the same time, the new record came in a year of supply chain challenges, demand fluctuations driven by spending on goods and the beginnings of inflation.
“Last year saw the industry rocked by outside influences as carriers continued to manage the impact of the pandemic,” said Jason Dies, EVP and president of Sending Technology Solutions at Pitney Bowes. “Despite these challenges, carrier revenues and parcel volumes reached a record high, showcasing the resiliency of the US consumer and the industry’s ability to absorb their growing appetite for internet retail.”
Looking ahead, Pitney Bowes forecasts US parcel volume to reach 25-40 billion by 2027, with a 5%-10% CAGR each year from 2022-2027.
Collectively, the carrier firms that deliver packages collected $188 billion in parcel revenue in 2021, a 16% increase year-over-year from $163 billion, according to Pitney Bowes. UPS generated $70 billion in revenue, while FedEx earned $62 billion, the US Postal Service recorded $31.5 billion.
In a year when it built out significant new capacity, Amazon Logistics grew revenue to $22 billion, a 19% year-over-year increase. However, growth of parcel volume slowed to 13%, down from 112% in 2020.
This underscores Amazon’s unique role as both a marketplace for sellers and a logistics provider. The company’s delivery network continues to include a mix of its own delivery services and outside carriers. Pitney Bowes offered a breakdown of volume in each. In all, Amazon generated 8.4 billion parcels in 2021. Of those, 57% or 4.8 billion parcels were delivered by Amazon Logistics, while 43%, or 3.6 billion parcels, were passed to carriers for last mile delivery. This was up from 2020, when Amazon passed 2.8 billion parcels to carriers for last mile delivery.
There are signs of a shift within Amazon's logistics network so far this year. In its first quarter earnings call, the company reported excess capacity in its logistics network after a buildout to coincide with the uptick in demand during the pandemic.
"During the pandemic, we were facing not only unprecedented demand but also extended lead times on new capacity. And we built toward the high end of a very volatile demand outlook," CFO Brain Olsavsky told analysts on the company's earnings call. "Now that demand patterns have stabilized, we see an opportunity to better match our capacity to demand."
Within the Fulfilled by Amazon program, which stores and ships packages for third-party sellers, the company made changes to sizing regulations, and added a fuel surcharge at a time of 40-year-high inflation. At the same time, the company is looking to continue building. It created a venture fund to invest $1 billion in logistics. But the biggest potential for growth this year could come as a result of Buy With Prime. The new Amazon service will embed Prime's two-day delivery and checkout capabilities on websites beyond Amazon, opening up its fulfillment and delivery services to a large new market.
The Parcel Shipping Index also showed notable growth for smaller carriers. The combined parcel volume of carriers outside the top four grew by 94%, the data showed.
When it comes to market share for the carriers, here’s the breakdown:
- By revenue, UPS had the highest parcel market share, with 37%. This was followed by FedEx with 33%, USPS with 17% and Amazon Logistics with 12 percent.
- By parcel volume, USPS had the highest market share (32%, down from 36% in 2020), followed by UPS (24%, the same as 2020), Amazon Logistics (22%, up from 21% in 2020) and FedEx (19%, up from 18% in 2020)
(Infographic by Pitney Bowes Parcel Shipping Index)
Trending in Operations
Walmart wants to provide omnichannel technology it developed in-house to other retailers.
Walmart is known for its marketplace of consumer goods. Now, it is setting up shop on a B2B software marketplace as it seeks to work with other retailers.
The news: Walmart will make services for pickup and local delivery through Salesforce’s app store. The release from Walmart Commerce Technologies is a move to expand use of the capabilities that Walmart developed in-house to power omnichannel operations, and grow a business line as a vendor to other companies in the process.
What will be available? Walmart is making the following apps available in the Salesforce AppExchange:
- Walmart GoLocal: Walmart’s local, white-label delivery service allows retailers to offer delivery under their own brand, and tap Walmart’s drivers and network.
- StoreAssist helps retailers with in-store fulfillment. The app is designed to increase packing and efficiency, while also creating a handoff experience between store employees and customers, or third-party delivery drivers. This can also enable BOPIS (Buy Online Pickup In Store).
Key quote from Anshu Bhardwaj, senior vice president for technology strategy and commercialization at Walmart Global Technology: “Through this partnership, retailers can leverage the same innovative and scalable technologies that power Walmart’s pickup and delivery experiences. The same technology that powers Store Assist has enabled Walmart to fulfill over 830 million orders across over 4,700 Walmart stores. Together with Salesforce, retailers can scale their business and deliver the personalized, convenient experiences shoppers expect.”
Let’s break down the key parts of this partnership:
Omnichannel imperative: We’ll keep repeating it this year: The return to in-person shopping in 2022 didn’t cancel out ecommerce. Rather, it underscored how physical and digital have to operate together going forward. In-store fulfillment, BOPIS and local delivery from stores are just a few of the operations through which this blend will play out. The partnership underscored how Walmart has been expanding aggressively in omnichannel. The GoLocal service launched in 2021. By 2022, it had topped 1 million delivered and was on track to reach 5,000 pickup locations.
Walmart as tech company: Building enterprise tech and launching it on an app store. These are typically the tasks of software companies, and Walmart is now among them. Working at massive scale, Walmart is an operations juggernaut. As it sought to leverage its stores while building out ecommerce, it built the technology that connected those operations, and solved problems that were unique to an organization of its size at a time of massive change in consumer behavior during the pandemic. Having pushed out ahead, Walmart now sees opportunity to offer its capabilities to other retailers. It stood up the Walmart Commerce Technologies division last year to bring these capabilities to market.
As Bhardwaj told us in April, “We have a world class organization including technology, product and operations teams that we believe, combined with our retail strength and scale, will allow us to build a mutually beneficial flywheel that unlocks new revenue for Walmart while improving the customer experience for everyone.”
Salesforce ecosystem: There is always lots of discussion about consumer app stores from Apple and Android, as well as Shopify’s app store for commerce technology. Less is written about Salesforce’s AppExchange, but there probably should be more. It provides complementary apps to Salesforce’s cloud-based and CRM technology, creating a B2B software ecosystem. Like the other app stores, it opens up access to technology that can make Salesforce more valuable, and provides entrepreneurial opportunities for developers. Launched in 2017, the AppExchange crossed 10 million downloads in early 2022. It also includes consultants that can provide services around the apps offered. While app stores often bring to mind small startups launched by a single developer, Walmart’s entrance shows there is room even for the largest companies to offer their technology there, as well.
Commerce complement: The partnership between Walmart and Salesforce leaves room for the two companies to expand their commerce capabilities by working together. Salesforce provides tools to help retailers operate their stores across channels, and now Walmart is bringing its own technology into that mix. An announcement notes that the fulfillment and delivery services from Walmart can be used alongside Salesforce’s store management solution, called CommerceCloud, and order management. This means Walmart will also work with more brands and retailers, potentially helping to gather data that will fuel its own retail media. In turn, this can help the brands that already sell and advertise at Walmart. Further demand for its delivery network can also help to grow that business further.
“With the combined power of Walmart and Salesforce, retailers can drive success with best-in-class technology to advance their omnichannel capabilities, drive efficiency and ensure that every purchase quickly gets into the hands of the shopper – no matter where they are," Garf said.