Whether you’re the COO at an enterprise retailer or the VP of logistics at a mid-sized e-commerce brand, you likely know of the high costs of going all-in with the legacy carriers. But those costs have led to an opportunity: when you diversify your carriers, you gain a huge competitive edge.
When your brand relies solely on legacy carriers (UPS, Fedex, USPS), you risk facing surcharges, volume minimums, high peak-season rates, potential shipping capacity limits, and inadequate customer service. Luckily there has been a proliferation of both reliable regional carriers and innovative shipping platforms to provide you with lots of coverage (even if you still have to rely on the legacy carriers in some areas).
Carrier diversification has become a must-have for at least three reasons, which I’ll further detail below: to mitigate the risk of the legacy carriers’ capacity like we saw in 2020, to better predict your total costs, and to increase brand loyalty by providing exceptional customer service.
If you’re thinking of diversifying, you’re in good company. 64% of shippers already use three or more carriers and 82% of shippers said that shipping rates have forced them to make changes in their business since 2020, according to a new survey by the industry publication PARCEL. As Senior Director of Sales at a next-generation shipping platform with a multi-regional presence, my experience aligns with this trend. Other leaders at brands in the same sector are increasingly implementing strategies centered around carrier diversification.
Below, I’ll run through the benefits of adding an alternative carrier. But first let’s be clear about the risks of staying with the status quo and letting the legacy options hold all your cards.
The Risks Of Being All In with The Legacy Carriers
Although you’re likely well-aware of many of the concerns when you go all-in with the legacy carriers, here they are:
1. Capacity shortages
If demand spikes and the major carriers place restrictions on your volume, you won’t have another carrier to distribute your packages. Under pressure from the high e-commerce demand during the pandemic, both UPS and FedEx capped some brands’ delivery volume. 28% of respondents to the PARCEL survey said they have been affected by volume caps over the past two years. Without alternative shipping options to pick up capacity when you need it, brands would be left disappointing their customers.
2. Unclear and complex rates
When you’re all in with the legacy carriers, you are beholden to complex surcharges—based on package size, distance-traveled, and the annual holiday peak charges—leading to unpredictable billing. As an example, you could look at FedEx’s peak pricing chart (I should say multiple charts of different surcharge types). Retailers shouldn’t have to use multiple charts along with the terms of their contract to attempt to predict their costs.
3. Service suffers – in many ways
There are months when FedEx’s on-time-delivery rate has been as low as 67% (That’s failing one out of three customers!). FedEx’s standard ground delivery option promises a wide delivery window of 1 to 5 days, leaving your customers in the dark about when exactly their package will arrive. If you’d like to move up to two-day delivery, you can, for a high price with unknown reliability. Another very common pain point for retailers is that delivery exceptions—including lost, damaged, and missed drop-offs – affect a whopping 11% of all parcel shipments (coming from all types of carriers).
4. Sales are likely to be impacted
Unfortunately, when a poor delivery experience takes place, consumers are not always forgiving. When a delivery is late or missed, it’s not always the carrier facing the consequences—it’s often your brand. In fact, when a poor delivery experience occurs, 48% of consumers said they would complain to the retailer's customer service team as opposed to 39% complaining to the carrier. Moreover, when asked who to blame for a late delivery, 41% of consumers blamed the retailer, and more than one in ten said they were prepared to post a negative review, according to a survey by Loqate.
The Major Benefits Of Carrier Diversification
On the other hand, adding the right alternative carriers can like kryptonite to every single one of the above issues. Here are some of the main benefits of diversifying away from the legacy carriers:
1. Flexibly scale up or down
Partnering with a carrier that can flex to support your capacity is critical. When there’s a change in your business—a spike in demand, a new product selling unexpectedly well, or a slow period—unlike the legacy carriers, some of the regional carriers can flexibly accommodate that without any additional fees. That means if you want to add or subtract volume any particular week, there is availability for you, and the cost per package shouldn’t have to go up.
2. Predicable rates
By partnering with a service provider with predictable pricing, straightforward rates, and no unexpected surcharges tacked on while your packages are in transit, you always know what you’ll pay and you can budget accordingly. Here at Veho, unlike many other carriers, we give you your rates up front, and that’s the end of it.
3. Fast delivery
Fast delivery is king in the eyes of the consumer, with 65% of consumers saying they’ll even pay more for faster, reliable delivery. Without the infrastructure burdens of a multinational shipping conglomerate, efficient regional carriers, with warehouses or sorting centers close to your customers, can promise next-day or two-day delivery as a standard.
4. Experiment with Innovative Customer Service
When you partner with a new shipping platform, you have the opportunity to start offering all sorts of next-generation ideas and innovation. At Veho, the key to our 4.9-out-of-5-Star Customer Satisfaction Rate is our real-time communication with customers to offer them personalized delivery. One of the many features is, before a package goes out that day, we ask customers for specific delivery instructions (“leave it behind the plant on the back porch!”) and the option to reroute. When customers receive this kind of personalized service, I have seen how our brand partners generate more repeat business.
There’s more innovation where that came from, including Veho’s next-Day Doorstep Returns, which are label-less and boxless for the customer, making the returns process easier for both brands and customers.
5. Negotiating a better price with UPS and FedEx
As your contract runs out with the national carriers, if you are getting transparent prices with a regional carrier, you can use that as leverage as you negotiate.
How to Diversify Your Carriers
For all of the above reasons—predictable rates, flexible capacity, faster delivery, innovative customer service, negotiating leverage, and more—there is growing movement among shippers to add new carriers into the mix. Not only that, 64% of shippers are using three or more carriers already, a mere 5% of shippers use only one, and just 31% use two.
Onboarding a new carrier doesn’t have to be complicated. An important first step is signing up with multi-carrier management software such as LogistyX, Shipium, EasyPost, ProShip, Project44, Shippo, Green Mountain Technology, or Intelligent Audit that can help you decide which carrier is the best choice for your packages. Our team can help you get there.
The next step is actually onboarding with a shipper, which can be completed in as little as two weeks. When you begin onboarding with Veho, you have access to open APIs, our world-class tech team, and sense of urgency from the start. Not only that–but you have the option of moving forward without API Integration, saving months off onboarding time.
There’s more good news. Unlike the legacy carriers, with an alternative or regional carrier, you’re not expected to go all-in. You can commit a portion of your parcels every week and evaluate the change to your service. Meanwhile, you can add an entirely separate carrier in a distinct region, and evaluate your metrics.
Relying 100% on legacy carriers just doesn’t need to be a reality anymore. Capacity, pricing, and service, all suffer when you put all your eggs in one logistics basket. Fortunately, there are alternative carriers ready to step in and vastly improve your customer service and reliability. If you want to work with us to diversify your shipping—and in the process reinvent your customer experience—we’re here to help you start.
