What do US shipping reforms mean for e-commerce?

What do US shipping reforms mean for e-commerce?
parcelLab
parcelLab
Wed, 10/19/2022
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One of the biggest challenges for e-commerce is the cost of shipping. In 2022, international tensions, rising fuel costs, and labor shortages have created a perfect storm – resulting in slower and more expensive freight.

But that might be about to change, at least in the United States. So, what do the latest US shipping reforms mean for e-commerce retailers? And how can you protect your business from rising shipping costs?

 

What’s wrong with shipping today?

Everybody’s seen the headlines: inflation is at a forty-year high in Western countries. It’s putting pressure on consumer spending and retail margins. And a significant amount of that pressure is coming from sky-high freight prices.

Some retailers say that they’re paying upwards of $25,000 for a single shipping container – a container which cost just $3,500 in 2020. That kind of price increase isn’t feasible for retailers, unless they pass the costs on to customers.

Governments are beginning to take action. In the US, federal agencies have used hearings and fines to push down the costs of rail shipping and ocean shipping. They’re also boosting recruitment in the shipping industries, with new apprenticeships and incentives on offer.

But it’s still not enough. That’s where the new ocean shipping reforms come in.

 

What do the reforms include?

In June 2022, US President Joe Biden heralded the reforms by announcing, “the rip-off is over”.

The Ocean Shipping Reform Act is part of a raft of measures against consumer price inflation. It has two key points for e-commerce retailers:

The Federal Maritime Commission will have the power to investigate ocean carriers for unfair business practices.

Retailers will be able to appeal against unreasonable charges and even get refunds.

This is because ocean shipping is currently controlled by just a few major companies. Since there’s a lot of demand for ocean freight, they’ve been able to charge high prices, with extra fees added on. That should now change.

 

What do sea shipping reforms mean for e-commerce retailers?

E-commerce retailers are especially vulnerable to inflation and supply chain problems. They’re more than twice as likely than brick-and-mortar retailers to report unprofitability. And they have more difficulty investing in infrastructure, which means they store up problems for later. https://nrf.com/media-center/press-releases/nrf-responds-house-passage-ocean-shipping-reform-act

How did we get here? In part, e-commerce is the victim of its own success.

E-commerce retail grew astonishingly fast during the pandemic years of 2020-2022. Many companies were moving so fast that they didn’t have time to create stable operations management or supply chains.

As the National Retail Federation has observed, a lot of the problems with ocean shipping costs existed before the pandemic. But the pressure of growing e-commerce retail, alongside inflation, has made those problems worse.

The new reforms should give e-commerce retailers some breathing space to catch up. Smart businesses will invest in systems to protect them from future price shocks.

 

What e-commerce retailers should do next

According to a recent survey by Ipsos, the top investment priorities for e-commerce are:

Digital customer experience

Omnichannel commerce

Supply chain modernization

Monetization of marketing tech and data

Customer service

Most of those priorities come back to operations management… and operations experience management.

Omnichannel commerce and a modernized supply chain give you the flexibility to handle logistical problems. Better customer service and digital customer experience mean that when problems do arise, customers are kept in the loop, and they’re less likely to abandon your brand.

Yes, shipping costs are a challenge across the board. But individual e-commerce retailers can’t bring down fuel prices or increase ocean shipping capacity. What they can do is refine their own operations experience management to cushion potential shock as much as possible.

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