Businesses who don’t meet customer expectations are about to be left behind, as brands work to digitize their supply chains, improve transparency, and invest in sustainable business practices.
These challenges require new shipping and logistics strategies to thrive. That’s why we’ve collected global, data-backed insights from hundreds of businesses and thousands of consumers to get the full picture of what’s in store for 2022, as well as the strategies and products your business needs to succeed over the next year.
Welcome to the future of shipping and logistics.
Supply chain vulnerabilities force merchants to permanently modify their fulfillment and shipping strategies
Merchants are rethinking where their stock is, and how to get it into the hands of customers
Supply chain concerns will continue in 2022
Shipping delays, shipping costs, and manufacturing delays are the top supply chain–related concerns for businesses.
Brands are revisiting their shipping strategies
Merchants are revising their manufacturing and shipping strategies, creating opportunities to lower costs and improve customer service.
Logistics companies are building more resilient supply chains
As challenges persist over the long term, businesses will look to build resilience into their supply chains with renewed focus on digitization and decentralization.
Supply chain disruptions will continue to happen with increasing frequency and severity
Years from now, we’ll remember the empty shelves of 2020 as symbolic of supply and demand issues during the pandemic. But while merchants can breathe a sigh of relief that some things are once again business as usual, shipping and logistics challenges continue. According to a commissioned study conducted by Forrester Consulting on behalf of Shopify, shipping delays, shipping costs, and manufacturing delays are the top supply chain concerns brands expect to encounter in the next 12 months.*
Their concerns are well founded. Suppliers and shipping agents are navigating a still-changing landscape of health regulations and restrictions. In addition, ongoing global energy and raw materials shortages in manufacturing hubs like China are impacting the availability of everything from milk to electronics.
At the same time, shipping container shortages have caused rates quoted by carriers and freight agents to soar. In 2019 it cost less than $2,000 to transport goods from Asia to the United States in a 40-foot container. By October 2021, the same service cost around $10,000—or up to $25,000 if an importer paid for the luxury of ‘on-time delivery,’ a cost that’s invariably passed down to merchants.
While increasing port hours to 24/7 and new air freight services will alleviate some of the congestion, shipping internationally isn’t the only issue. Labor shortages mean there may be no one to deliver goods to their next destination. And consumers aren’t the only ones engaging in panic-buying; supply chain issues have been exacerbated by ecommerce merchants overstocking merchandise for sales periods.
Experts predict that systems won’t “normalize” until 2023 at the earliest. Even once they do, the pandemic has exposed global logistic network vulnerabilities to future political instability, natural disasters, and regulatory changes. The effects of COVID-19 were not an exception to the rule: Supply chain disruptions are happening with increasing frequency and severity. McKinsey reports that significant disruptions to manufacturing production now occur every 3.7 years on average.
“There are [some experts] who think that supply chain problems are the new normal. There are other global crises afoot that are going to affect how global manufacturing happens,” supply chain reporter Rebecca Heilweil told Vox’s Explained podcast in October 2021. “There’s no reason to think that this system is not going to be susceptible in the future to other problems.”
Thanks to increased competition, consumers have rising expectations of how quickly goods will be delivered
Manufacturing shortages and bottlenecks at shipping ports don’t just have a real, rising cost—one that merchants must choose whether to pass on to customers. They also do damage to a brand’s reputation. In an era when 60% of global consumers expect same-, next-, or two-day delivery,* according to our study, customers aren’t above turning to competitors to get their goods when products are delayed or unavailable.
Simultaneously, the pressure to provide quick delivery is only intensifying, as established brands make bold moves to meet customer demands. For example, Walmart and Home Depot chartered their own boats and containers to meet the holiday sales crush—a $40,000-per-day expense that few retailers can afford.
To keep up, merchants are being forced to make strategic changes to their supply chains—from how and where goods are produced, to where they’re warehoused, to how they’re shipped to customers.
Revisiting supply chain strategies is a chance to build resilience, reduce carbon emissions, and get products to customers faster
Merchants are already responding to this challenge. Our survey found that 43%* are changing their shipping strategies to reduce the impact of global shipping delays, and 45% intending to improve their manufacturing capacity.
But re-examining strategies shouldn’t just be a preventative exercise. It’s an opportunity to innovate how goods are procured and shipped, benefiting customers and businesses alike.
Decentralizing fulfillment—including by using retail stores as warehouse centers—means parcels get to customers faster, often at a lower cost. Our research indicates that 41% of merchants* plan to invest further in buy online, pick up in store options, which usually encompasses curbside pickup and click and collect. This lines up with an industry prediction that the sector will sustain double-digit growth through 2024. For merchants with and without physical locations, smart and multi-brand parcel lockers are becoming increasingly popular, with the market expected to reach $1.6 million by 2028.
Data will be key in making these changes. Whereas supply chain management was once based on past years’ sales trends, merchants now have technology at their fingertips to better forecast their inventory needs. According to McKinsey, early adopters of artificial intelligence-enabled supply chain management can improve logistics costs by 15%, inventory levels by 35%, and service levels by 65%, compared with slower moving competitors. The growing use of cloud-based software, which allows supply chain partners to share real-time data, is also hugely beneficial.
Likewise, data-driven optimized routing—a strategy 31% of merchants* plan to employ in the next 12 months—can also reduce carbon emissions. According to a study released in 2021 by MIT, this strategy can save 50% of transport-related greenhouse gas emissions, and reduce the overall footprint per package by an average of 10%.
Use cloud-based solutions
Digitizing supply chains can range from the affordable option of scanning apps or inventory management software to the more advanced option of relying on machine learning, internet of things, and AI-based solutions to do everything from load pooling to dynamic rerouting. Whatever solution you choose should be cloud based. According to Reuters Events, it is “the single most important tool supply chains need to future-proof their operations.” Cloud-based supply chain management software makes it possible to identify problems, make decisions, and communicate with partners along every node of your supply chain—all in real time.
This results in what Supply Chain Game Changer CEO Mike Mortson calls “lead time–agnostic supply chains.”
“When you can respond quickly enough and with sufficient agility, then it no longer makes sense to talk about lead times at all.” This same logic applies to forecasting and preventing overstock and understock. Ultimately, it might even help merchants achieve “zero inventory,” where they hold little to no inventory and instead make products to order, eliminating the risk (and cost) of holding inventory that might not sell.
Redistribute inventory closer to your customers
Redistributing your inventory to locations closer to your customers reduces costs by keeping merchandise within shipping zones—allowing you to provide same-day or two-day shipping without incurring extra costs—and increases resilience against regional supply chain snags.
If you’re a retail business, consider turning brick-and-mortar stores into mini-fulfillment centers. The conversion of just one retail store into a mini-fulfillment center has the potential to reduce last-mile costs by more than 60%. These hybrid retail spaces are also an opportunity to offer curbside pickup and click-and-collect options.
How Doe Lashes built a resilient inventory and fulfillment strategy
In under five years, California-based Doe Lashes has grown from a $500 launch to a multi-million-dollar business. Sales tripled in 2020 alone. This, in part, was due to a unique moment of opportunity for Doe Lashes and other beauty brands. When the pandemic made masks the norm, eyes were the only visible part of the face, and sales of eyeliner, mascara, and fake lashes all soared.
Growth during such a period of disruption hasn’t been plain sailing. Doe Lashes faced challenges including stockouts, shipping delays, and cash flow. “A lot of our products are bundled together,” says Jason Wong, CEO and founder of Doe Lashes. “This means if we’re missing one item, it actually means stocking up for two or three others, and that can be scary.”
Distributed warehouses have also helped the team get products into the hands of customers as quickly as possible. Doe Lashes uses customer data insights to determine where products should be located to ensure the fast delivery times that consumers expect.
We look at where our customers are placing their orders from. The way we respond is to place our inventory near those cities to reduce the overall miles traveled by those packages.
Jason WongCEO and Founder, Doe Lashes
How Shopify can help
Automate your fulfillment tasks
Use Shopify Flow to automate your inventory and fulfillment tasks so you can get orders out the door more quickly. You can also use Shopify Flow to automate low-stock notifications, organize variants more effectively, and add tags to orders.
Manage all your orders in one place
From order received to order delivered, you can manage all your orders across multiple sales channels in one place with Shopify. This includes managing and prioritizing orders, adding notes and tags, editing orders, creating and purchasing shipping labels, and managing returns.
Bring inventory closer to your customers
Use Shopify to manage, monitor, and move inventory across any location to bring your products closer to customers. Sales and inventory reports make it easy to forecast sales demand, while transfers simplify the process of moving inventory between locations.
Alternatively, outsource inventory management and fulfillment. With Shopify Fulfillment Network, we can pick, pack and ship orders for you, so you can spend more time managing your business. Or, use one of Shopify’s premium third-party logistics (3PL) partners with seamless integration into your Shopify store.
Social and environmental impact will define the next era of shipping and logistics
Consumers are demanding socially conscious and environmentally sustainable businesses, with profit increasingly dependent on purpose
Consumers are seeking sustainably operated businesses
Consumer intentionality has shifted to action, as more people purchase products from sustainably operated businesses.
Brands are implementing more sustainable practices
Merchants focus on improving their sustainability, including both their environmental and social impacts.
Sustainability is improving customer and employee retention
Businesses that invest in sustainability through their supply chain will reap returns in customer and employee retention.
Customers are starting to put their money behind their beliefs
For years customers have indicated their willingness to buy from purpose-driven brands. In the last six years, there’s been a 71% increase in online searches globally for “sustainable goods,” especially in high-income countries like the United Kingdom, the United States, and Canada.
Actions haven’t necessarily matched intentions—until now. In the past year, our survey found that 44% of customers* chose to buy from brands that have a clear commitment to sustainability, while 41% chose to buy from brands that have a clear commitment to social causes. Overall, the consumers we surveyed want brands to have “actions that match their values.”
Consumers are no longer just virtue signaling. They’re finally putting money behind their beliefs, and brands are responding: 53% percent of companies* are making improved sustainability one of their top priorities for 2022, and 39% are improving efficiency in manufacturing processes, according to Shopify research.
But merchants aren’t just focused on reducing their carbon footprint; they’re also examining the social impacts of doing business, like the fair treatment of factory and fulfillment workers. A quarter of merchants surveyed* say one of their biggest supply chain–related concerns is ensuring manufacturing partners employ ethical and fair labor practices. More than one-third* report taking a more holistic approach to sustainability in the year ahead, and distancing themselves from partners that are unwilling to meet their sustainability standards.
Sustainability becomes an imperative as regulators move in, and customers demand transparency
There are many challenges to implementing sustainable practices, not least that they typically require a higher upfront investment. This explains why some businesses position themselves as “sustainable,” without adopting truly impactful practices.
Thanks to increasing media coverage of human rights issues and the climate crisis, sustainability has to become more than just a positioning exercise. Journalists and consumers alike have better resources than ever before to assess and report on how goods are made, with third-party organizations and databases like the Fashion Transparency Index and the Impact Index ranking brands and retailers on their social and environmental policies and actual impact.
In the future, the ongoing development of blockchain technology will give consumers even more avenues to trace the origins of their goods with greater accuracy. Forward-thinking brands are getting ahead of the conversation, with 41%* planning to be more transparent about their social impact’s vision, goals, and progress, according to our study.
But let’s be clear. Shifting to environmentally and socially sustainable supply chains will soon no longer be a choice—it will be a requirement. In the coming years, retail businesses will increasingly be held accountable for their sustainability practices by governments, shareholders, and customers. We have already seen an evolution in supply chain legislation, with Australia and the United Kingdom developing modern slavery acts, and California enacting the Transparency in Supply Chains Act.
It’s not just the B Corp-certified set who are making changes. Brands both small and large are adopting a “cradle-to-cradle” or “circular economy” mentality when it comes to production, distribution, and the end life (or continued life) of goods. Swedish children’s wear brand Polarn O Pyret allows buyers to return outgrown outerwear in exchange for a voucher. It’s then available for secondhand sale. And activewear brands Lululemon and Sweaty Betty have similar programs.
Going forward, merchants will need to comply with more stringent human rights and environmental regulations, including extended producer responsibility measures, which seek to manage and reduce consumer waste.
Finally, sustainability can improve employee retention. Multiple studies show that businesses with better environmental standards and corporate responsibility typically have higher productivity and lower staff turnover. Fifty-six percent of professionals report being more likely to stay in a company with a sound sustainability agenda.
How to make your supply chain more sustainable
Reduce your fulfillment footprint
If you don’t have your own delivery fleet, there are ways to reduce your footprint in your fulfillment processes, like decentralizing inventory centers, using parcel lockers, or working with a 3PL. Not only will your customers receive their goods faster, but building out logistics networks, including urban fulfillments centers, can reduce transportation-related emissions by 50%.
Use AI to make packaging decisions
In addition to replacing packaging with more eco-friendly alternatives, using artificial intelligence to analyze and determine the best size and type of packaging for different combinations of items can help reduce emissions. Swapping out boxes for padded mailers, for example, can reduce the weight and volume of packages in a delivery vehicle, which lowers emissions.
Keep your sustainability and social impact messaging simple
Whatever you do, don’t make it complex. Of the consumers surveyed, 41%* said a significant influence on their purchasing decisions in the last year was when a brand made it “easy to understand the actions they are taking to achieve their environmental and/or social impact goals.”
How A Good Company champions sustainable business practices
A Good Company is on a mission to transform commercial consumption into conscious decisions. While they’re at it, the team is also proving that it’s possible to embed sustainable practices throughout the supply chain.
For A Good Company CEO Anders Ankarlid, this means communicating the environmental impact of every product—from materials to water consumption to the source of energy used in production. The information has been a hit with website visitors.
Along with full supply chain transparency, Ankarlid sees an opportunity to help consumers make more informed, responsible choices. He notes that this will become more important because “people are going to become more cautious about what they buy and for what reasons.”
A Good Company applies this logic to its delivery and returns policy, which, Ankarlid admits, can be a “conversion killer.” He explains, “We don’t believe it’s okay that you buy one notebook and expect free shipping—that’s not sustainable for anyone. So we incentivize our customers to buy a little bit more at the same time. That way they get better bulk pricing and we can ship the order in the most sustainable way possible. A lot of what we do is to influence consumers to calm down, take a chill pill.”
We see a massive trend in consumers who are more and more enlightened. Our top-read pages include our emission reports and those that relate to our philosophy.
Anders AnkarlidCEO, A Good Company
Thoughtful and well-designed products are not the only reward when a customer receives their order. Just as much consideration has gone into the packaging of the items, with simple and efficient designs that can be reused as storage around the house. Ankarlid says, “With the bottles, we should basically have a defined second purpose. It could be used in the bathroom [or] kitchen or so on and so forth.”
This is a piece of the sustainability puzzle that A Good Company wants to support other companies with too. Ankarlid and his team worked closely with their supplier to develop the durable and environmentally friendly Stone Paper shipping material, now offered at cost price to all other ecommerce companies interested in becoming more sustainable. The team has helped 10 other brands with packaging so far, with another 10 in the pipeline.
Climate change is the defining challenge of our era, and the actions taken by A Good Company pave the way for other brands to embed sustainability into everything from product sourcing to shipping options to packaging materials.
How Shopify can help
Build sustainable practices into your shipping strategy
Shopify is committed to being a positive contributor to building a more sustainable future for commerce. Part of that commitment is to offer solutions that help merchants build more sustainable practices. We recently worked with leading scientific experts Carbon Direct on a guide to global transportation decarbonization, which will inform our own efforts and is intended to support other businesses as well.
Beyond this, Shopify offers a range of solutions that can help businesses in the right direction:
- Start small by offering an optional carbon offsetting add-on at checkout with Shop Pay.
- Download the Offset app to go carbon neutral. Offset calculates the carbon emissions for each of your shipments, and then charges you to offset those emissions by contributing to carbon offset initiatives through Pachama.
- The closer your inventory is to your customer, the less you or they have to rely on carbon-heavy distribution methods. Where possible, emphasize low-carbon alternatives like walking or cycling when offering local pickup and delivery.
- Many Shopify Partners are committed to making commerce more sustainable. For instance, Australian Shopify shipping partner Sendle is a certified B Corp and carbon-neutral company committed to reducing the carbon footprint of the fulfillment industry.
Customers choose to shop with brands that are transparent around delivery times
Clear communication will help set expectations and retain new customers during a period of high distrust and data legislation changes
Customers expect fast and free shipping
Shoppers have been conditioned to expect fast, free, on-time delivery and will abandon their carts if it’s not available.
Consumers want access to delivery timelines at checkout
Customers say estimated delivery times are the top thing they look for before purchasing.
Brands are making shipping more transparent
Merchants plan on improving transparency into shipping and deliveries in 2022.
Higher-than-ever delivery expectations are colliding with the reality of fulfillment challenges
There are more new online shoppers than ever before, with 90 million more digital buyers today than in 2020. And thanks to industry leaders, they’ve already been conditioned to expect fast, free, on-time delivery. According to our research, free shipping continues to have a significant influence on purchasing for 75% of global shoppers,* with 58% of people expecting free next-day delivery.
Sourced from Shopify eCommerce Market Credibility Study, 2021
Inaccurate delivery times can jeopardize customer relationships at a time when retention is paramount
At this critical moment, winning over first-time buyers and turning them into lifetime customers is of the foremost importance—and meeting delivery promises is key to retention. Our study found that around 45% of shoppers* are actively “looking for businesses who clearly show anticipated delivery times.”
But high consumer expectations coupled with supply chain bottlenecks make this easier said than done. Getting packages to customers on time when there simply aren’t enough drivers to complete last-mile deliveries comes at a cost. Due to an increase in national and cross-border volume orders caused by online shopping, delivery agents like UPS and FedEx have instituted increased surcharges on expediting shipping, with peak periods lasting longer than ever before.
“[It’s created] a scenario where the brands are going to have to figure out how to get a consumer comfortable with a longer shipping time, whether that’s a discount or charging for [expedited] shipping,” says Sharon Goldstein, CEO of LimeSpot.
Being fully transparent about delivery times is an opportunity to win over and retain new customers
In 2022 the opportunity to build trust and transparency through delivery-related communications will be key to creating long-term relationships resilient enough to withstand the industry’s continued challenges. Customers report that two of the most important qualities when they shop online are cost and estimated time of delivery: 74% of consumers surveyed* are influenced by price, while 68% are influenced by estimated time of delivery.
Sourced from Shopify eCommerce Market Credibility Study, 2021
As unboxing becomes as important as the retail experience, customers are seeking out proactive communication, regular shipping updates, and delivery options that suit their needs. For example, our survey found that 35%* are choosing shipping options like curbside pickup or click and collect to receive their orders in time, which can also have a positive impact on lifetime customer value and average order value. Research conducted by Shopify in 2020 found that online shoppers who chose in-store pickup or delivery will spend up to 23% more, while those who choose local pickup have a 13% higher conversion rate.
Currently, 49% of the brands we surveyed* are investing in not just their delivery practices, but transparency with their delivery promises, like sharing when an order is prepared and shipped. Providing a friction-free and more transparent purchasing experience will contribute to lower cart abandonment, improved customer trust and retention, and lower overhead operating costs.
How to overcome shipping challenges in 2022
Keep customer service at the heart of your process
A strong and responsive customer service team should sit at the heart of the experience. This helps connect the dots among expectations, merchant promises, and the vast system of order and inventory management happening behind the scenes. Chatbots can support your team, but at the end of the day, you’ll need to have real people who are capable of proactively responding to—and resolving—issues like unexpected shipping delays.
Offer fulfillment options that match your market’s expectations
In the midst of uncertainty, it’s important to remember that people are reasonable and willing to adjust their shopping patterns. Almost half* are committed to making purchases earlier to guarantee delivery by a set date.
“Recently, smaller brands especially have shifted back to the five- to seven-day shipping periods. Previously, we would’ve been like, ‘Wow, that’s a no-go. How can you compete in the age of Amazon?’” says Megan Chen, ecommerce senior investment associate at Encore Consumer Capital. “But they’ve been proactively communicating to their consumers and saying, ‘Hey, we’re a small brand and we have to do this to stay alive, especially in the mess that was COVID.’”
In the end, a good shipping strategy doesn’t mean offering every available shipping option: It’s about finding a balance between what’s affordable, realistic, and aligned with the needs of customers. Depending on the category of goods that you sell, “free” can be once you hit a $50 free shipping threshold, and “fast” can also be a relative term, with 44% of customers expecting deliveries to take a week or longer to arrive. It can also depend on your target demographic. Millennials and Gen Z shoppers are up to three times more likely to want and pay for expedited shopping, compared with older age groups.
“It’s really important for brands to know their consumers. For example, are you selling instant gratification products? Do consumers need them yesterday? Or are they okay to wait it out for the next three days?” advises Saujanya Shrivastava, director of products, shipping at Shopify. “Understanding what the customer is expecting is really important to set your shipping strategy.”
How Manly Bands beats supply chain delays to get rings into the hands of customers
Manly Bands exists to help every person find the wedding band that is unique to them. So what happens when international supply chain disruptions get in the way of products that are needed for one of the biggest days of a customer’s life?
Manly Band chief operating officer Eric Farlow discusses the challenges the company has faced this year: “Shipments of ring boxes, branded boxes, and other supplies have been delayed for months at port. We have had to diversify our portfolio of suppliers so that we can still meet our commitments to our customers.”
Supplier diversification isn’t an overnight fix, and Manly Bands has had to air freight orders—which can increase the cost threefold. Sea shipment planning that used to be done two to three months in advance has been revised up to accommodate five to six months’ lead time.
Give the customer options to choose their own destiny, and ensure they can track progress until delivery is complete.
Eric FarlowChief Operating Officer, Manly Bands
The team has also started to invest in 3PLs to fulfill orders closer to customer locations. Farlow says, “As it is our priority to make sure the customer is 100% satisfied, we have taken on the shipping challenges at our warehouse instead of the customer. For this reason, we have set up 3PL relationships allowing us to fulfill orders closer to the customer. By doing this, we have found that we have more control over our shipping commitments.”
Manly Bands has air freighted fulfillment supplies, diversified partners, and invested in a 3PL network to mitigate the impact of delivery delays. When delays do occur, the company focuses on strong communication and customer empowerment.
“Customer commitments are extremely important since their ring needs to arrive before the biggest day of their lives. We have mitigated any delays by over-communicating expectations prior to the sale so that the customer can shop in confidence, offering multiple shipping options so they can choose the best fit for them, and maintaining a best-in-class customer service organization to communicate post sale up until delivery.”
This strategy has proven to be successful, with the brand’s customer satisfaction score holding steady at 97.9% throughout 2021.
How Shopify can help
Create transparency throughout the checkout experience
Shopify’s Online Store allows you to add sections to the product page that clearly articulate shipping and return policies, making it easy to set delivery expectations from the moment your customer starts browsing straight through to checkout.
With shipping speeds, you can create transparent checkout experiences that improve your customer experience and reduce cart abandonment.
Make it easy for your customers to track their orders
Automate order notification emails and SMS to let your customers know when their orders have been received, packaged, and sent out for delivery.
Through the Shop app, your customers can automatically access up-to-the-minute tracking information for their order, and anticipate or mitigate delays.
With Shopify, your customer service team can easily check the order timeline to address any questions that come in about an order.
Take the hassle out of the returns process
Shopify’s platform helps you create a painless return experience for your customers. You can easily initiate returns, automatically email customers a return label, track progress, and refund customers.
You can also automate notifications to keep track of ongoing order refunds and returns.