Despite promising success and growth, external issues this year, including inflation and supply chain disruptions, have led to the emergence of several challenges that the industry will need to tackle in 2023.
“In 2020 and 2021, Australia saw a shift to online purchases, with CouriersPlease delivering 28 million parcels last year, a 53 per cent increase on 2019 volumes,” says CouriersPlease CEO, Richard Thame.
“This year, with the rising costs of living, cybersecurity risks and the return to in-store shopping, I believe several challenges will emerge that the industry will need to solve, either through technology, partnerships, new customer strategies or a focus on new markets.”
1 Labour shortages. Australia will see a continued tight labour market in 2023, putting a strain on the logistics industry. However, in the second half of 2023, Thame anticipates that labour shortages will be offset by reduced volumes for some companies, as an economic downturn kicks in.
He also predicts a growing uptake of automation in the industry and an increase in skilled migrants will also help.
2 Natural disasters. This year, flooding across NSW and Victoria impacted supply chains and delivery networks. For example, a recent train derailment caused by heavy rain in regional New South Wales impacted companies that deliver freight on the railway line from Sydney and Brisbane to Perth.
Thame anticipates natural disasters such as these will continue to cause disruption to the industry in 2023.
3 Managing new customer expectations such as same-day delivery. New consumer behaviours and expectations have emerged in the last three years. Most significant is the expectation for faster delivery, particularly the demand for same-day delivery, which is putting additional pressure on the industry.
Thame expects retailers and carriers will try to meet the demand this by establishing smaller, satellite warehouses and fulfilment centres in populated metropolitan areas, a move that some retailers in the US have made. Some retail stores will also be transformed into fulfilment centres, also known as ‘dark stores’.
4 Rising costs of warehousing. Neither building new warehouses nor renting new warehouse space may be economically viable for many retailers as supply and materials costs and renting costs continue to surge—industrial rent has increased an average 14.9 per cent year-on-year, nationally.
Thame says retailers will need to look for more cost solutions such as automated warehousing—the process of automating the movement of inventory into, within and out of warehouses to customers with minimal human intervention.
5 Cybersecurity risks. Thame expects cybersecurity will be a prevalent challenge for many businesses, given the concerning increase in data breaches in 2022. As cargo, passenger, fare and other systems used by Australia’s transportation industry become more complex and digitised, they are increasingly targeted in high stakes cyberattacks including ransomware and phishing.
Thame says companies will take a more rigorous approach to updating their systems and processes to prevent attacks.
6 Economic burden due to rising fuel prices. Petrol costs increased in the major capital cities from 16 and 22 cents per litre from 28 September to 16 November this year alone, while experts predict costs will continue increasing well into 2023.
Thame expects these rising prices to lead to higher freight costs in 2023, particularly on the transport of goods that are time sensitive or require refrigeration. He anticipates that while carriers will absorb as much of these costs as possible, consumers may see a slight increase in delivery costs in 2023.
7 Demand for sustainable deliveries. Australian consumers increasingly want assurances from retailers and carriers that they are considering their environmental impact. Thame says the industry will need to be more agile when adopting important sustainability goals.
He anticipates the growth of parcel collection-point networks will help fulfil decarbonisation goals. Collection point networks in other markets, such as Parcelly in the UK, are already innovating by offering ‘dark store’ options to retailers to reduce the distance between customers, while in Australia, Hubbed’s recent acquirement of Parcelpoint will also broaden consumer accessibility to these options.
Thame also expects an uptake of electric vehicles will help carriers achieve their goals—it is estimated that collection point networks and EVs, combined, can reduce carbon emissions by 87 per cent.
8 Maintaining online customer loyalty. In 2022, many consumers were drawn back into stores and through-the-year sales were down 16.9 per cent as at September 2022. As a result, the challenge for retailers in 2023 will be to attract customers to shopping sites and retain them. This may be a formidable challenge as more ecommerce stores emerged during the pandemic, leading to increased competition.
Thame anticipates that promotions, discounts, shopping events such as Click Frenzy and exclusive online stock and deals will increase, as retailers compete for the consumer dollar in a climate of inflation and rising interest rates impacting consumer spending.
