Macy’s looking to tackle delivery costs

US department store chain Macy’s is looking at how it can reduce delivery costs after reporting that shipping parcels to customers cost the equivalent of 5.9% of its net sales in the 4th quarter of 2021-22.

A significant part of the costs was carrier holiday surcharges, which accounted for $511 million. According to Macy’s CFO Adrian Mitchell, these surcharges were ‘virtually non-existent’ in 2019.

Efficiency efforts such as improving in-store fulfilment and reducing the number of split shipments will be core to these cost reductions.

UPS is one of the major carriers in the US responsible for the cost hikes in deliveries. Thanks to its capacity not matching the increased demand the logistics giant, which is one of just three players that dominate the US market, has indicated that it can increase its rates. This has included a 5.9% general rate increase in 2022.

“So as we think about inventory allocation and our replenishment strategies, we’re using data science to just better align where the demand is by channel and location across the country with where we’re actually placing the appropriate level of inventory all the way down to an item level,” Mitchell said.

Macy’s uses its bricks and mortar stores for fulfilment of e-commerce orders. It has already been trialling some efficiency measures at a small number of stores and will be expanding the trial further in the coming months. This includes some automation of the fulfilment process.

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