Recently, FedEx Ground and UPS have both announced they’re raising home delivery rates, again, this time by an average of 4.9%. According to Logistics Management, UPS rates increased in December and FedEx plans to implement this month (in addition to fuel charges that will fluctuate weekly).
So where does this leave meal kit companies as they look at the bottom line? In an industry that Fast Company says will grow between $3 billion-$5 billion over the next 10 years, the continued increase in home delivery rates will greatly affect the bottom line for these subscription-based services. At this point, some meal kit companies have closed or reorganized to cover costs as they look at the various budgetary factors.
The meal kit companies that are successful and make up the rapid industry growth are laser-focused on what we believe are three main factors. The first is affordability of product as they establish suppliers and distributors. The second is the cost to manufacture. And when it comes down to it, these are both fixed costs and the biggest opportunity for margin is going to be in transportation.
With the delivery “giants” continuing to raise rates and cause uncertainty, using a smaller (but just as mighty) home delivery company like Home Direct Express may be the difference between making or breaking your company. “We believe it’s time for a ground logistics specialist to provide unbeatable cost and delivery schedule control that meal kit companies need to sustain or obtain profitability,” says Terry Harris, CEO of Home Direct.
In 2017, it’s clear that transportation costs will be a major focus for meal kit companies, and deciding on a delivery service partner will be key. Logistics Management says it best in its article “FedEx follows lead of UPS, announces 2017 rate increases”:
“The cost to ship a package will have gone up on average more than 25% in the last four years between the tariff increase, the accessorial increases and the rule changes. Can you think of the cost of anything else that has gone up that much, and in the face of declining fuel prices?
As fluctuations continue in the market, Home Direct Express plans to offer its 25 years of experience in the home delivery industry to provide the best pricing models, customer service and flexible logistics to companies in the subscription commerce industry. After all, 2017 might just be your year to dominate profit year-over-year.