US e-commerce market share will increase by over $18bn if delivery charges are reduced, says ParcelHero

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Package delivery costs have held back online Christmas orders in US, says Roger Sumner-Rivers

US e-commerce is falling behind UK this Christmas, says ParcelHero

Decreased US postage costs could see a retail boom.

Internet guru Roger Sumner-Rivers, founder of international courier services experts, says that the growth of e-commerce in the US is being restricted by the delivery costs charged within the country. He says that consumer buying trends in the run up to Christmas have highlighted the difference between the UK and US.

In the UK 46% of regular internet users planned to shop online this Christmas, and only 32% in high street stores; however in the US more internet users still plan to shop in store than online, with 44% preferring to purchase their gifts from a bricks and mortar store, as opposed to just 40% online, according to recent research by IT and information systems membership organisation ISACA.

Roger argues that more competitive mailing costs, matching the UK’s like-for-like, would result in at least the equivalent 6% rise in consumers planning to buy online (a rise of $18.24 billion on 2014’s likely figure of $304 billion spent online), and could actually increase retail spending overall.

Says Roger: ‘The true potential of e-commerce in the US is being held back by the cost of delivery. Of course average mailing distances are greater in the US, but even short distance postage costs more. For example the postage charge for a typical 1kg parcel sent from one US postcode to another, both in central New York, is $20.05 (£12). The same parcel sent between two neighbouring postcodes of the same distance within central London costs £5.65 ($8.86).'

Roger says: ‘Just in case you are still unconvinced that it’s distance alone that is deciding factor in mailing costs, India, a country twenty times larger than the UK, is leading the way in internet shopping. In all 63% of regular internet users in India said they would do the bulk of their shopping online, and only 25% in malls and stores. And no wonder: our 1kg parcel sent between two addresses in Delhi costs just 40 Rupees. That’s 41pence! It’s no surprise that so many prices on India’s Amazon equivalent, Flipkart, include free P&P.’

Roger adds: ‘Of course the USA can’t introduce prices similar to India’s. India’s postal system is heavily subsidised, and that would be something that would not fit well with American ideology. But the current prices of US postal services need to be reduced to encourage online retailers. Either the consumer has to pay delivery costs directly, or the retailers will, through ‘free P&P’ which in fact factors in postage prices. Either way, it’s a strong discouragement to buying online in the US.’

However Roger believes things could be about to change. ‘The Postal Reform Act of 2014 has been stalled in Congress but at least shows real intent. In addition ParcelHero’s US partners UPS are showing the way with a very competitive $12.16 through its UPS Ground service, which isn’t tied in to aging infrastructures, for the same 1 kg weight parcel delivered within New York. With companies such as Amazon pushing ahead with revolutionary new ideas such as drones delivering parcels, mailing costs could really come down. Imagine the potential for e-commerce in the US if domestic parcel delivery prices became more competitive.'

Roger explains: 'Online spending is expected to amount to $304 billion in 2014 in the US, out of a total of $4.5 trillion overall retail sales. If US mailing costs per mile were to fall to UK equivalent levels, it is entirely reasonable to expect a similar jump in usage by 6%. In fact overall retail sales might grow as distances in the US become proportionally less expensive; it’s a long way to drive to the nearest good shopping area in many parts of the US and that might be deterring overall purchases. Decreased postage costs could see a retail boom, not just increasing online’s take but increasing overall sales.'

Says Roger: ‘It only costs the equivalent of $30 to send a parcel from the UK to New York next day through ParcelHero. No wonder $20 postage costs within the same city are putting off America’s potential online customers!’

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