Supply chain backups have hit small online retailers particularly hard.
The U.S. Census Bureau’s Small Business Pulse Survey found that 59.8% of retail small businesses reported domestic supplier disruptions as recently as August, with foreign supplier delays increasing 30% since April. Consumers have become jaded, with only one in five (21%) saying they’ll forgive a brand for disrupted service because of the supply chain, according to the EY Future Consumer Index. And as retail approaches the peak holiday season, U.S. ports are facing more congestion than they have at any time during the pandemic.
Simultaneously, the pandemic has increased online transactions. According to cumulative data synthesized by eMarketer, global ecommerce is expected to swell to $4.8 trillion — a 27.6% increase from the previous year.
Shippo, a San Francisco startup that supports online retailers, is dealing with both the good and the bad. The company, which works with everyone from high-end soapmaker Aesop to small sellers on Shopify to provide shipping labels, schedule pickup times and manage returns, has felt the effects of both increased e-commerce and supply chain delays. Shippo reached a $1 billion valuation in June, just four months after its $495 million valuation in February. At the same time, it’s getting complaints from some of its customers about all the delays.
With supply chain backups, many of Shippo’s customers are in a tight bind, said company Senior Vice President of Carrier Partnerships Vince DeAngelis. Caught dealing with labor shortages, coronavirus safety policies and inflation already, DeAngelis says the company doesn’t have the time to navigate the complex web of supply chain delays on top of everything else.
“The small business owner does everything: building the product, putting in orders and doing customer service,” explained DeAngelis. “But at the end of the day, moving goods and services — that’s what we do for a living. We try to keep ourselves educated on what’s happening, so that we can help our customers.”
It’s a complex problem: Choke points affect specific carriers in specific regions or at specific ports each day, said DeAngelis, who said that he believes the best thing Shippo’s employees can do is sift through the news to translate details of the supply chain backups to their customers. “We just want to take the mystery out of it,” he said.
The company has been publishing blog posts, sending emails and hosting webinars about how to manage delays. Sometimes it tells customers when to ship their products so that they arrive by Christmas, while other times it reminds retailers when the post office is closed for national holidays.
The most important advice Shippo can offer, DeAngelis said, is to diversify producers and carriers. Many supply chain delays are the result of understaffed warehouses or distribution centers, where labor battles, COVID outbreaks and the so-called “great resignation” has affected nearly every sector. The warehouse and transportation industry saw a record 490,000 job openings in July, according to the Bureau of Labor Statistics.
Though it’s a difficult undertaking for many small retailers, DeAngelis said that developing partnerships with various producers of different sizes and in different regions can allow companies to be more nimble long-term. “If you are somebody who needs to order product to build whatever you’re selling,” he said, “You don’t want to put all your eggs in one basket right now.”
In a similar vein, DeAngelis urges retailers to work with multiple carriers. Most small businesses opt for a singular carrier, either because it offers the cheapest rate or delivers the fastest. However, when a singular carrier starts experiencing delays, it has a ripple effect. Marginal differences in price and speed just aren’t worth sacrificing flexibility, DeAngelis said.
But the most important advice DeAngelis gives his customers is time-tested and simple: Plan ahead. Diversifying production and shipment routes is a laborious task, often requiring weeks — if not months — of preparation. While small retailers are struggling already, that hardship will only increase as the holiday season approaches, he said. A little preparation now can save a whole lot of pain later.
“There are so many things right now that are going to impact this holiday shipping season,” he said. “What we are telling our customers is that you’ve got to have a plan.”