The holiday shopping season is becoming the holiday shipping season. What was in previous years a minor inconvenience (late holiday gifts) is now the star of the show as UPS and FedEx take center stage as key players in the highly pressured digital-first economy.
And both companies have taken two different roads to get here. UPS put the first three letters in “upset” on Wednesday (Dec. 2) as The Wall Street Journal reported it imposed shipping restrictions on some large retailers such as Gap, Nike, L.L.Bean Inc., Hot Topic Inc., Newegg Inc. and Macy’s as it struggled with the unprecedented demand from the pandemic-driven eCommerce surge.
A UPS spokesman told the WSJ that the company will pick up packages from customers whose “demand exceeded allocated space” once more capacity becomes available. Reaction from the brands involved did not show any alarm over the move and UPS had no official confirmation of the selective delays. According to the Portland (Maine) Press Herald, L.L.Bean confirmed that “there have been some delays, primarily at a few of our retail stores,” but said UPS “continues to be a great partner” and is “actively picking up packages from our warehouse facility and our retail locations daily.” The company said it shipped 14.5 million packages in 2018, but hasn’t provided numbers for last year or this year.
The Gap was also nonplussed. “We are happy with the performance of our parcel delivery network following the higher cyber week demand,” a Gap spokeswoman said. “Knowing the unique constraints the industry is facing this peak season, we worked with our carriers early on to collectively build a strategic plan of execution.”
FedEx, which had announced shipping surcharges recently, is dealing with the capacity crisis by closing on its deal to acquire ShopRunner, which directly connects brands and merchants with online shoppers. ShopRunner is a members-only service that connects more than 100 brands and merchants to millions of consumers and offers a seamless shopping experience from inspiration through delivery. Members get free two-day shipping, free returns, member-exclusive discounts and seamless checkout. The company positions itself not only as a shipping service but as a “data-driven marketing and omnichannel enablement” platform that allows retailers to connect with high-value customers.
“The acquisition, once closed, aligns with our continued efforts to create an open, collaborative eCommerce ecosystem that helps brands and merchants deliver seamless experiences for their customers,” said Raj Subramaniam, president and chief operating officer, FedEx Corp. in a statement. “We are committed to growing the ShopRunner platform and combining it with our global digital and logistics intelligence to create new possibilities in e-commerce.”
Some analysts see the ShopRunner acquisition not only as a possible ally in the current crunch, but as a jab against Amazon. Amazon is restricting the use of FedEx Ground for certain Prime orders from its third-party sellers, citing changes in transit times, Commercial Appeal reported. When FedEx can’t meet the two-day delivery commitment for “Seller Fulfilled Prime” orders, it won’t be available as a shipping option, Amazon told sellers in an email. Amazon said in the email that FedEx made recent changes to its shipping speeds, adding an additional day for some Ground shipping lanes during the peak season.
“The acquisition tightens FedEx’s embrace of surging e-commerce deliveries, adding to earlier moves such as adopting seven-day service and investing in handling large residential packages,” said Bloomberg. “ShopRunner allows online shoppers to choose its two-day shipping and free returns service for brands including Bloomingdale’s, Saks Fifth Avenue and Under Armour.”
The problems will undoubtedly be magnified as the record-setting Thanksgiving weekend eCommerce sales work their way (or don’t) through the system. They have been predicted almost since the pandemic began. Example: Lateshipment.com’s “2020 State of Holiday Shipping in the US — COVID-19 Edition” report analyzed shipping data from the 2019 holiday period (Nov. 22 to Dec. 31, 2019), the pre-pandemic period (Jan. 1 to March 31, 2020) and the pandemic period (April 1 to Oct. 31, 2020). The report said the 2020 holiday season delay rates could be double the delays of past years. The average 2020 holiday delay rate is expected to be between 14 percent to 18 percent, though urban centers like New York and Los Angeles could see package delay rates as high as 30 percent.
According to the report, during the 2019 holiday season, surges in shipping resulted in a 10 percent delay rate for packages sent through the UPS ground networks. During the pandemic, that delay rose to 12.1 percent. Packages shipped through the FedEx ground services during the 2019 holiday season, meanwhile, saw a 19.8 percent delay rate. FedEx’s delay rate fell to 12.8 percent during the pandemic.
Demand will also grow as COVID-19 cases surge across the U.S.
“This holiday season, like everything else in 2020 is … going to be unprecedented,” Brie Carere, executive vice president and chief marketing and communications officer for FedEx, said in a USA Today report. “We were at holiday level volumes in March and April. So now … you’ve got a peak on top of a peak.”
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