Multicarrier appears to be a privilege

Retailers list technology integrations and fear of losing volume discounts as top two obstacles to carrier diversification

Are you tired of the words, “supply chain,” yet? Unfortunately disruptions are expected to stick around in 2022 and beyond.

In a recent survey, the Cleveland Fed asked firms in multiple sectors if they had made changes as a result. Almost half of retailers (48%) responded no, even though they had experienced persistent disruptions. Wait… what?

I got 99 (supply chain) problems, and multicarrier is one

While supply chain issues largely refer to inbound materials, we recently sat down with our client council to understand what challenges they’re working through. One of the primary pain points that emerged was limited capacity for delivering inventory (that's finally making its way to the supply chain), resulting in bottlenecks and continued difficulty keeping up with elevated consumer demand. The natural response: “Have you tried diversifying your carrier base?” A common answer: “Yes, but not fully.”

The volume caps applied by large carriers in 2020 drove the acceleration of multi-carrier for both omnichannel and digital shippers. Speed has been replaced by capacity, agility, and reliability as top priorities. But effectively executing multicarrier strategy comes with challenges.

This week on BOXpoll, we are exploring challenges retailers face when diversifying carrier bases. That’s right—don’t just think of us as a go-to for consumer research. Starting this year, BOXpoll includes retailer surveys on our platform as well.

Among the 168 U.S. retailers we surveyed, technology integrations and risk of losing volume discounts emerged as the top two barriers to furthering carrier diversification.

When parsing responses by retailer size (measured in annual direct-to-consumer order volume), it becomes clear that trouble with technology integration is the primary obstacle for larger retailers, while brands fulfilling less than 100k orders per year are most focused on keeping volume tier discounts in place.

Technology integration

We were surprised to see technology as the top obstacle for the largest shippers, given that they have sophisticated software and large IT teams available to them. This suggests that the technology investments these retailers have made leading up to the pandemic were not in the realm of multicarrier enablement.

The smallest firms are likely outsourcing their shipping technology to 3PLs that handle transportation decisions for them.

Volume discounts

When your carrier agreement is dozens of pages long and the tier system is structured punitively, it can be daunting (especially for smaller retailers) to determine how much volume they can afford to move to another carrier without incurring a discount loss—or more or more importantly, the true cost of that discount loss.)

Rate shopping (calculating different carriers’ costs, fees, and discounts) can be a headache, especially for smaller brands.

Internal bandwidth

While the smallest teams are outsourcing and the largest teams have had the capability for some time now, medium-sized retailers are most likely to be insourcing transportation strategies and technology and facing the steep side of the learning curve.

Multicarrier Dilemma