Margin Collapse: 9.7 to 0.6 in One Quarter

Margin collapse hit fulfillment operators fast: cushions fell from 9.7 points to 0.6 in one quarter. This breakdown digs into the live network data behind rising parcel costs, slower GMV growth and what it means before peak season. Eric Lemus of Deposco explains why shipping costs are rising faster than revenue, how order growth is diverging from dollar growth, and why lean inventory could backfire in Q4. If you run parcel, fulfillment or e-commerce ops, this is the number to watch. #ParcelShipping #Fulfillment #SupplyChainData

Operator margin cushions nearly vanished in the second quarter, shrinking from 9.7 percentage points in April to just 0.6 points by the end of June, according to Commerce Signal, a new quarterly report from supply chain software firm DePASCO built on live fulfillment transaction data. The collapse was driven primarily by accelerating parcel shipping costs outpacing gross merchandise value growth — and peak season surcharges have yet to hit.

Eric Lemus, Vice President of Strategy and Analytics at Deposco, said the divergence between GMV growth and order volume growth tells the core story. GMV growth decelerated from 15.4% to 13.4% during the quarter, while order volume growth nearly doubled, climbing from roughly 4% to 8.8%. “Demand is slowing in dollars, but not necessarily in units,” Lemus said. “Consumers are still buying, but operators are moving more units through their platform or through their networks without seeing the reciprocal revenue growth as they anticipated.”

Parcel shipping costs rose approximately 13% year over year by the end of Q2, more than three times the pace of broader consumer inflation. Lemus identified carrier mix, dimensional weights, and contracted rates as the primary internal drivers pushing costs higher within individual operator networks, on top of structural factors like energy costs. Deposco’s forward forecast calls for parcel inflation to remain elevated at a minimum of 12% year over year through Q4 — before peak season surcharges are applied.

“There’s been reports, and what we’re seeing is surcharges are likely to range anywhere from 6+% on average. So if you compound that with a pretty heightened environment of year-over-year inflation with parcels, this Q4 peak season will certainly show some pressure on the margins due to that carrier spend,” Lemus said.

Inventory levels add another layer of risk heading into peak. Days on hand closed Q2 at 89.3 — the leanest level in several months — and brands and third-party logistics providers ended the quarter just 3.3 days apart in inventory coverage, an unusually narrow gap. Lemus noted that inventory has begun ticking up since July, but said the pickup may be arriving too late to fully buffer peak season demand. Operators running in the leanest inventory quartile face the most acute exposure to stockouts and unfulfilled orders.

Deposco’s Commerce Signal report is drawn from more than $80 billion in fulfilled GMV across over 4,000 brands and operators, and hundreds of millions of orders per year on its warehouse and order management platform. Lemus, a former Wall Street analyst, said the real-time transactional foundation distinguishes it from survey-based or forecast-reliant reports, which he argued carry inherent bias and lag. The Q2 report’s four forward calls — continued parcel inflation, sustained GMV growth, lean inventory levels, and low days-on-hand turns — have largely played out as projected, with parcel inflation the one area that moderated slightly before an expected re-acceleration in Q4.

For operators looking to protect margins before peak, Lemus pointed to carrier diversification as the highest-impact lever available. “If you’re able to generate a more diversified carrier strategy, what we’ve seen and what we believe to continue throughout the peak season, you’ll likely reduce your parcel spend by 21%,” he said. He also cautioned operators against anchoring forecasts to last year’s peak season data, given the significant volatility in parcel costs this year, and urged SKU-level inventory analysis to identify replenishment gaps before demand accelerates.

• Operator margin cushions collapsed from 9.7 percentage points to 0.6 in Q2 as parcel costs rose ~13% year over year while GMV growth slowed from 15.4% to 13.4%.
• Deposco forecasts parcel inflation will remain at least 12% year over year through Q4, with peak season surcharges expected to average 6% or more on top of that baseline.
• Operators using diversified carrier strategies reduced parcel spend by 21%, according to DePASCO’s live transaction data across 4,000-plus brands and 3PLs.

This Summary is generated thanks to a transcription of the interview, for the full interview please enjoy the video above.