Growth in Parcel = Growth for 3PLs
Part 1 of 3
Welcome to a three-part series about the opportunity that parcel shipment management represents for 3PLs, and how to capitalize on it. In Part 1, we’ll be discussing the size of the parcel industry, and how shifting market dynamics have made this a segment 3PLs would do well to focus on.
First things first, whether or not your shippers have come to you expressing parcel needs, chances are, they are shipping their fair share of parcels. The only question is: Are they leveraging a 3PL partner to do it?
During the beginning, and through the height, of the COVID 19 pandemic, parcel shipping took off, largely as a reflection of surging e-commerce purchases. However, much of that seemed to come at the expense of freight shipping. That makes sense, given the flow of goods direct from distribution centers to consumers, bypassing retail stores. According to the Journal of Commerce, during 2020 the 50 largest domestic trucking companies saw their collective revenues rise by 7.4% – from $157.9 billion to $169.6 billion. However, the vast majority of those gains were amongst parcel-heavy carriers. In fact, TL/LTL-only carriers saw revenues decline during that year.
What this means is that people are still buying, shippers are still shipping, but any 3PLs without a hand in parcel management are leaving money on the table. The trend has continued during 2021: While all trucking segments saw revenue increases over 2020, parcel carriers still outpaced their TL and LTL counterparts (despite their disproportionate growth during the previous year). The size of the domestic parcel market ballooned to nearly $135 billion in 2021, with much attributed to the continued rise in e-commerce.
The good news for 3PLs is that there are plenty of parcel management opportunities within their current customer bases. Whether or not that conversation has happened doesn’t change the fact that, chances are, most freight shippers also have parcel needs. By one large carrier insider’s estimate, up to 80% of that company’s LTL freight customers also maintain sizeable parcel accounts, too.
What does that mean? That means the time is now right to begin having the parcel conversation with shippers. If you need help doing so, let us know. Having worked with both 3PLs and shippers for years, and understand the nuances of where the two can partner for successful, efficient parcel management. Parcel is easier than freight to self-manage, so many may still be taking that route – but just because it can be self-managed doesn’t mean they enjoy doing so (or are realizing the greatest possible efficiencies).
In the next chapter in this series, we’ll begin looking at the types of growth opportunities 3PLs can realize by addressing their customers’ parcel management needs, and what it means to pursue them.