‘Christmas In July’ events benefit trucking industry, boost slow summer retail sales

Events such as Amazon’s Prime Day are helping the trucking industry in historically one of the weakest months of the year, a transportation analyst said.

Trucking/transportation analyst Brad Delco of Stephens wrote an industry note, titled “Christmas In July,” about Amazon’s annual Prime Day, which features promotions and discounts on its website. Delco expects to see similar promotions from other retailers such as Macy’s, Wal-Mart and Target.

In his note, Delco looked at “earnings reports and transcripts from last year to get a better sense of what the combined impact these online promotional sales had on overall freight volumes. In short, we believe Prime Day and these other events are helping to support freight volumes and utilization trends among the (truckload) carriers in one of the seasonally weakest months of the year.”

Delco expects similar results from the events this year.

On June 29, Amazon announced it would host its annual Prime Day on Tuesday (July 11) with sales and discounts starting at 8 p.m. Monday, which is an extended timeframe from last year. The event will take place in 13 countries, including China, India and Mexico.

In 2016, Amazon hosted the event on July 12, and other retailers offered similar events. Macy’s hosted a five-day sales event that week, while Wal-Mart gave free shipping on orders and kicked off new online deals. Also, Target, Sears, Banana Republic, Express, Gap and Old Navy ran sales the week before or the week of Prime Day in 2016.

“We believe these retailers (and potentially more) will again run competing promotional events in the first few weeks of July to compete directly with Amazon’s Prime Day,” according to Delco.

Last year, trucking executives said they saw improvement “in freight volumes in early and mid-July, coinciding with these promotions outlined above,” according to Delco. July is usually one of the weakest months, if not the weakest, regarding freight volumes. July comes immediately following the food and beverage peak.

“However, many carriers noted that the acceleration typically seen in June actually continued into July last year, which is seasonally atypical.”

MARKET CONDITIONS
In June, dry-van spot rates rose 11% from the same month in 2016, according to DAT Trendlines. Spot market capacity declined 0.8% in June, compared to the same month last year. Over the same period, spot loads rose 90%.

“The end of the quarter and the run-up to the July 4th holiday combined to put pressure on spot market capacity and rates last week,” according to DAT. “The national average van rate for June rose 11 cents above the May average. Reefer rates were up 10 cents month over month, and flatbed rates got a 6 cents boost, compared to May.”

The truck driver turnover rate at large trucking companies increased 3 percentage points to 74% in the first quarter of 2017, according to trade organization American Trucking Associations. Companies included in the large category were those with more than $30 million in annual revenue.

“The slight uptick in turnover, despite weak freight volumes in the first quarter, may be indicative of a tightening in the driver market,” ATA chief economist Bob Costello said. “The situation bears watching because if the freight economy picks up significantly, turnover will surely accelerate — as will concerns about the driver shortage.”

While the turnover rate increased, it is 15 points lower than the same quarter in 2016. The turnover rate for small carriers increased two points to 66%, which is 22 points lower than the same period in 2016. The turnover rate for less-than-truckload carriers rose two points to 10%.