Shipping costs through the U.S. Postal Service went up roughly 10 percent last month, and it’s putting a strain on retailers dependent on strong online sales. In some cases, the rate increase constitutes a huge increase in expenses for companies, cutting into revenues and raising the cost of doing business online.
Consumers can expect those costs to be passed down the chain from retailers to shoppers. That won’t curry much goodwill among online audiences, and it presents a window of opportunity for retailers looking to drive brick-and-mortar business.
As Internet Retailer reports, the average rate spike on USPS Flat-Rate boxes and other shipping boxes is 9.5 percent. It’s the first such increase on commercial Priority Mail in three years.
The biggest headache figures to revolve around retailer offers of free shipping for orders. Brands that currently offer no-cost shipping — even at certain thresholds — are eating that cost to create a more consumer-friendly experience. Now that this cost is increasing, retailers have to choose between eating the cost and watching revenues dip, or passing on that cost to consumers.
Neither scenario is good for online retail.
As Online Adapts, In-Store Gains Leverage
Retailers looking to nurture the in-store retail space have reasons to be optimistic, even if they also have online shopping outlets affected by the price hike. Even if the consumer impact is minimal, shoppers should be a little more motivated to shop at physical locations, instead of doing business online.
With less incentive to shop online, in-store retail can target dismayed consumers by emphasizing the quality of their shopping experience, tapping into other pain points and consumer motivations to try and wrest some of the retail market from the online realm.
One of online retail’s greatest selling points is the lower prices and expedited shipping it can offer by cutting out the overhead of doing business at physical locations. The shipping increase on its own won’t tip that scale in favor of in-store retail, especially when large online sellers can negotiate their own special rates and contracts with shipping providers.
But it could balance out competition just enough that other factors take on greater importance. Customer service and the overall brand experience figure to move into a more central role. And, with retailers already reinvesting resources into a better in-store experience, brick-and-mortar stores could be positioned to win this next round in the retail war.
To seize this opportunity, retailers will need to focus on bolstering the in-store experience with new features and mobile technologies that distinguish in-store from online retail. The Postal Service’s increased rates don’t spell the end of online shopping, and for most online brands, the complications will be only temporary.
Nonetheless, the rate hike props open a door for brick-and-mortar shops. Time will be of the essence.
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