OCEAN CITY — As more consumers flock to online stores instead of brick and mortar establishments, local companies are busy juggling the balance between meeting the increased demand and managing the rising costs to do business in cyberspace.
“Our online business started with me driving a few boxes of crab cakes to our customers back in 2000,” said Crabcake Factory owner Johnny Brooks. “Now 15 years later, the shipping part of our business has grown more than a 100-fold and it has its own dedicated building and small staff managing it.”
Yet, shipping high end seafood overnight comes at a significant cost according to Brooks, and that cost is going up each and every year.
“It’s always been on the expensive side to do this part of our business, but [the shipping cost] is definitely going up substantially so we’ve really seen a growth in our gift card sales and our non-food items like our bloody mary mix,” said Brooks. “People don’t want to leave their houses anymore to shop, and with the growth of these sites, we have to be able to get people what they want quickly.”
David Twining, owner of Nantuckets and the Lobster Shanty in Fenwick Island, has been shipping his Quahog Chowdah to customers for years, but says the rising costs of Fed Ex and UPS are driving his customers to the simplicity of gift cards, too.
“Fed Ex and UPS go up at least four percent a year,” said Twining, “and for me to ship a few gallons of chowdah to a customer overnight, it can cost almost $60 when it used to be $35, so while we are seeing fewer food orders, we are making it up in gift card sales.”
In this country in 2003, about $50 billion in retail sales were done on the Internet. Ten years later, that number exceeded $264 billion.
Furthermore, the rapid growth of e-commerce sites, like Amazon, have put the squeeze on traditional shipping companies like UPS, Fed Ex and even the US Postal Service. Industry experts point to the proliferation of “free shipping” incentives by large online stores as a big reason traditional shipping companies have spiked their prices.
A 2014 Wall Street Journal report outlined this trend pointing to UPS’s dwindling profit margins per parcel due to the growth of online stores. To combat this trend, UPS started charging by the size of ground shipments rather than just weight alone, thusly raising prices.
For businesses like Dolle’s Candyland on the Ocean City Boardwalk, shipping costs can sometimes be as much as the cost of what consumers are purchasing.
“Some of our customers have gotten a little bit frustrated that an $8 saltwater taffy order can cost $9 to ship,” said Dolle’s co-owner Anna Dolle Bushnell. “The other thing we are struggling to keep up with is how quickly customers want their order to get to them after they click the purchase button.”
Bushnell says small businesses like Dolle’s can’t compete with the sheer size or the speed in which a site like Amazon Prime operates.
“I think people realize that we make all of our products to order, but some customers don’t understand how if they place an order after hours on Friday night why their package isn’t on their doorstep by Monday morning,” Bushnell said.
Will Hall, vice president of Fisher’s Popcorn, says this time of year has always been busy filling orders placed by popcorn lovers. Couple that with a growing wholesale business and it’s easy to understand why the operation is bustling with activity during the holidays.
Still, Hall says online sales only make up a small chunk of the company’s profit margins.
“It’s probably 10 to 15 percent,” said Hall. “We are filling 200-500 packages a day, but you wouldn’t believe how much popcorn we move out of this store during the summer months. It’s a staggering amount.”
Brooks says despite the rising shipping costs the people that want his crab cakes, are willing to do what they have to do to get them.
“We’ve probably filled about a thousand orders since Black Friday, and we’ll probably fill another thousand orders by the end of next week,” he said.
However, high volume of sales from small businesses can sometimes be misleading for consumers, according to Bushnell.
“Some people think just because you have a website, you are a massive entity that has warehouses full of product and a huge team to fill orders immediately,” she said. “For a store like ours, that’s just not the case.”
The one thing Brooks notes is the fast pace and the increased demand from online buyers has improved productivity drastically.
“We’ve gotten better at it for sure, and it’s helped us to market ourselves better outside of this market,” he said. “If it continues to grow at this pace, I expect it to be keeping up with the volume of our restaurants in the next five years.”