Still in the depths of the COVID-19 pandemic, more holiday shopping is being done online this year, marking a significant and likely permanent shift in consumer behavior. Both retailers and carriers are trying to address this demand so they can deliver for Christmas and well into the new year. But the 2020 holiday season is already stressing the limits of delivery service companies like FedEx and UPS. Experts estimate that there will be close to 3 billion packages shipped between Thanksgiving and Christmas, 250 million more than logistics providers’ systems can handle.
FedEx and UPS have responded to the surge in packages in a variety of ways to ensure items are delivered on time. Before the season, carriers anticipated a shipping surge and therefore encouraged holiday shoppers to start early while they hired temporary, seasonal workers. Further, to reduce last-mile costs, both FedEx and UPS have promoted their package management products (e.g., FedEx Delivery Manager and UPS My Choice) so consumers can redirect their deliveries to retail locations. To drive signup, UPS discounted its UPS My Choice Premium offering to grow and better serve a valuable customer base.
But on December 4, the WSJ reported UPS instructed its delivery drivers not to pick up packages from six retailers including Nike, Macy’s, Hot Topic, and L.L.Bean. And most recently, major carriers have placed daily limits on the amount of packages retailers can ship, resulting in backlogs of orders to be delivered. Clearly, logistics providers are throttling the flow of packages the best they can, so their systems make it to the end of 2020 while also touting high on-time delivery scores.
Meanwhile, retailers have launched their own efforts to capture sales while also maintaining a positive online experience. Many held their holiday sales early in line with carrier calls to start shopping ahead of Black Friday. Retailers have also communicated drop-dead dates (ranging between December 10-15) for when customers need to order gifts to arrive on time and without significant shipping costs. Best Buy and Sephora are hiring alternative last-mile providers, like Postmates and Instacart, to offer same-day delivery services, reduce shipping delays (and limits), and better meet customers’ on-demand needs. In addition to having direct impact to retailers’ bottom line with higher operating costs, these efforts will evolve how consumers approach future holiday shopping—it will begin earlier to avoid disappointing delays, and retailers will offer incentives to accelerate consumer adoption.
After this holiday season, shipping companies and retailers will learn and quickly evolve in a variety of ways to respond to the permanent shift in online shopping and same-day delivery expectations. For instance, carriers could begin treating customers in a manner similar to airline loyalty programs. For example, UPS My Choice Premium subscribers automatically receive upgrades and free services to get their packages faster, while non-members will be the last to receive them. Some deliveries will be automated to control last-mile delivery costs. Or they could in vest in new tech. FedEx is bullish and making significant investments in its delivery bot, Roxo, for same-day deliveries on items ranging from pizza to auto parts. The logistics carrier has also announced plans to acquire ShopRunner to expand its e-commerce platform that will rival Amazon. Initiatives like these reveal how carriers and retailers are making big plans for e-commerce in 2021 — given $407 billion is at stake.
Contributed by: Marie Burns, Integer Dallas
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