Warehouse Wisdom. Weekly. 08/23/2024

Happy Friday!

Looks like our job growth numbers took a detour and ended up a bit off course. The U.S. economy just revealed it added 818,000 fewer jobs from April 2023 to March this year than initially reported. This revision suggests the job market is slowing down more than originally thought. It might just give the Federal Reserve a nudge to start cutting those interest rates sooner rather than later.

But hold onto your hard hats. One surprising twist in this tale is the transportation and warehousing sector. They’ve got more jobs than we ever thought! They adjusted the jobs in this field upward by an extra 56,400 jobs —a shiny 0.9% increase!

Now, here’s the kicker: Confidence in the North American economy took a nosedive in the second quarter of this year. Specifically, their confidence plummeted by a shocking 16.5 index points. Now, they’re sitting way below their historical average. It seems like the excitement of a hot 2023 is running out of steam, leaving finance professionals scratching their heads and wondering what’s next.

But, with all of the down news and doom and gloom, it’s good to see something positive, like the trucking industry helping vets find jobs. Who knew that trucking could be a call to duty, too?

And as our call of duty, we will update you in this week’s newsletter! We will catch you up on the U.S. e-commerce sales in Q2 2024, Amazon’s new “Returnless Resolutions” programs, the shipping price hikes, the Port of Vancouver gearing up for a possible shutdown, the new updates on drones in warehouse techs, and more!

LOGISTICS VITALS

PRIME DAY AND WALMART+ WEEK DEEMED AS BARGAIN HUNTS, NOT MEMBERSHIP MAGNETS

For most shoppers, Amazon Prime Day and Walmart+ Week seem like treasure hunts for everyday bargains, and not the golden ticket to join paid memberships. According to the data, around 75% of people are diving into these sales to score deals on their usual buys, rather than using them to sign up for Amazon Prime or Walmart+. Let’s take a closer look at the reasons why members are signing up for these memberships:

• 80% - of Amazon Prime subscribers cite that free shipping is the main reason for joining Amazon Prime, with 57% highlighting it as the most important factor.

• 61% - of Walmart+ members value free shipping, with 49% appreciating grocery delivery.

• 30% - Walmart+ subscribers joined for the sales events.

• 23% - Amazon Prime members signed up for the sales events.

So, while sales events might draw people in, it's the perks that truly seal the deal.

INTERNATIONAL FREIGHT

CANADA RAILWAY STRIKE IN LIMBO

It’s official - the Canadian freight railroads shut down yesterday, as contract talks failed to come to a resolution. But the government stepped in, binding both sides to arbitration. Even as some members went back to work, the union representing workers at two major Canadian railways said on Friday they would challenge the constitutionality of a government decision. This appears to be long from resolved.

With rail handling two-thirds of the port's cargo, the potential for chaos is high. The lockout of over 9,000 rail union workers by Canadian National Railway and Canadian Pacific Kansas City has left billions of dollars worth of U.S.-bound trade in limbo during peak shipping season.

And why is this Canadian rail strike such a big issue? The Canadian rail strike is no small potatoes—it's set to put the brakes on almost all rail freight in the country, causing a ripple effect across North America. With 10,000 workers locked out, we’re talking about a potential economic train wreck that could derail billions in trade, mess with U.S. and Canadian farms, and even trade with Mexico. While trucks are gearing up to fill the gap, they might not have enough muscle to handle all that rail freight, turning this strike into a real cross-border conundrum.

MARKETPLACES

E-COMMERCE SOARS TO NEW Q2 HEIGHTS, WALMART EXITS JD.COM, AND AMAZON REINVENTS RETURNS

U.S. e-commerce sales in Q2 2024 hit a high note, ranking as the third-highest total sales in a quarter. Sure, Q2's e-commerce penetration took a little tumble from Q1, but it still reached a record-breaking 21.7%. That’s a new record for Q2, beating out the old champ of 21.3% from Q2 2020. Despite the mild growth, 3PLs are struggling not only with decreases in sales but also with generating leads and prospects.

E-commerce is still cruising at full speed post-pandemic for food manufacturers. According to Source Advisors, food SMEs are getting smarter and are jumping on the direct-to-consumer (DTC) bandwagon. Online sales hit $652 billion— a 9% jump from last year! E-commerce now accounts for 72% of the total sales value in the industry. And, e-shipments have shot up by 18% compared to pre-pandemic levels. SMEs in the food industry are clearly cashing in on this growth and driving their revenue to new heights.

Walmart has decided to part ways with its stake in JD.com, ending an eight-year investment saga that kicked off with the sale of its China e-commerce ops. Despite Walmart’s impressive $17 billion haul in China for FY 2024 and its ambitious plans to build distribution centers, JD.com has been scrambling to stay ahead of rivals like Pinduoduo and ByteDance’s Douyin. Even though JD.com managed a 3.7% revenue bump in 2023, it’s clear the e-commerce race in China is as fierce as ever.

And Amazon is shaking up the returns game with its new Fulfillment by Amazon Returnless Resolutions program, letting sellers issue refunds without requiring customers to send items back. This new program helps sellers dodge those return fees by cutting out the physical return hassle. Just a heads-up, though—dangerous goods, hefty items, and pricey products over $75 are still on the "return required" list. Looks like Amazon is leaving the post office to wonder where all its packages went!

SMALL PARCEL SHIPPING

SHIPPING COSTS SURGE AS UPS AND FEDEX HIKE FEES AND SHIPPERS SCRAMBLE AFTER PITNEY BOWES' EXIT

UPS is rolling out a surge fee for imports heading from China to the U.S. starting September 15. It’s not just a casual charge; it’s based on billable weight. That’s right, your shipments will cost a bit more. Ten countries will face a $0.25 “Surge Fee” for their cargo. Oh, but if your goods are coming from China, Hong Kong, or Macau, brace yourself for a hefty $0.50 per pound! And don’t forget, the company has also decided that this fee has no end date. It could change anytime, so keep your shipping calculators handy.

And, not surprisingly, FedEx has joined UPS and USPS in increasing holiday prices. Starting October 28, get ready to see a 30-cent surcharge for FedEx Ground residential shipments, which will jump to 55 cents during the holiday frenzy. Also, those shipping via FedEx Ground Economy will cost an extra $1.90 per package, soaring to $3.15 from November 25. Overnight and two-day deliveries will also start with a $1 surcharge, ramping up to $2 in November. All these festive fees will wrap up by January 19, 2025—because even shipping needs a holiday.

So, how can shippers navigate the Pitney Bowes Fallout? With Pitney Bowes Global Ecommerce (GEC) winding down and its delivery services already shut, shippers need to pivot quickly. The good news is that carriers now have ample capacity and are offering competitive rates. Meanwhile, those relying solely on GEC must act quickly to avoid disruptions. For now, shifting volume to other consolidators like DHL eCommerce or OSM Worldwide offers a straightforward alternative, but shippers should also explore national carriers like FedEx and UPS or even direct Postal Service contracts for potential savings. Keep in mind, though, that while the market's less tight than in recent years, finding rates as low as GEC’s might be a stretch.

WAREHOUSE TECH

DRONE DELIVERY PUSH TECH BOUNDARIES—BUT NOT ALL DRONES ARE FLYING HIGH

Today’s tech news is all about drones.

Ikea’s turning up the tech dial with a new AI-powered drone system that’s about to make their distribution centers the ultimate high-tech playground, where these drones work alongside human staff in their distribution centers. Since teaming up with Verity in 2021, Ikea now has over 250 drones buzzing around 73 locations, handling inventory checks, and delivering real-time data to keep everything running smoother. Looks like the only thing Ikea workers will need to assemble now is their own drone sidekicks.

Have you imagined drone delivery as a service? Well, California's A2Z Drone Delivery just made that a reality with their new autonomous drone docks. These handy portable or permanent sites let drones charge up and drop off or pick up packages without a single human in sight! You can also either buy or lease this tech from A2Z or join their cool kids' club—a drone-network-as-a-service subscription model. Who wouldn't want to fly high with their very own delivery drones?

But Amazon drones in Texas aren’t making a big hit. Amazon is testing delivery drones in College Station, Texas. But it turns out, these flying gadgets aren't winning any popularity contests. Some residents are calling the drone a "giant hive of bees." Mayor John Nichols mentioned that nearby residents have been buzzing about the noise levels, especially when the drones take off and land. Seems like the friendly skies are a bit noisy in College Station!

And Walmart is suspending drone deliveries in certain states. Sorry, Phoenix, Salt Lake City, and Tampa, Fla. Your drone buddies are grounded, and you’ll have to wait a little longer for your flying packages. A spokesperson for Walmart said they’re cutting drone operations because they want to focus on figuring out how to make drone delivery work like a charm in just one place: Dallas-Fort Worth. Well, it's all about finding the best place to take flight, right?

WAREHOUSE OPERATIONS

ADIDAS AMERICA SLAMMED WITH NEARLY $400K IN FINES FOR IGNORING SAFETY HAZARDS

Adidas America is in hot water again. This time, they’re facing nearly $400,000 in fines for fall hazards at their Chester, N.Y. warehouse. In March 2022, they were already hit with a $17,403 penalty after OSHA found missing guardrails and a dodgy ladder that could send their employees plummeting nearly 10 feet. Fast forward to January 2024, the company didn’t fix anything for workers navigating that high-up mezzanine. They also forgot to extend the ladder – a must-have to reach at least three feet above the landing. Now, with a grand total of $396,377 in new fines looming over them, it’s clear that Adidas needs to lace up its safety measures!

WAREHOUSE QUICK DELIVERIES

WELLS FARGO OFFLOADS BILLIONS IN COMMERCIAL MORTGAGES, AND MORE…

• Wells Fargo Sells Off Billions in Commercial Mortgages to Global Loan Services Provider, Trimont.

• Target Sales Grow 

• But Macy’s Online Sales Struggle 

• Cargo Theft Soars 49% in First Half of 2024