FedEx ruins Christmas for some

Discussion
Image: Fedex
Dec 28, 2015

Missed Christmas deliveries again made the headlines this holiday season. The culprit this time was FedEx.

Like 2013, when both UPS and FedEx failed to deliver holiday packages on time, weather took some of the blame. FedEx’s major air hub in Memphis was blasted by storms in the days before the big day. But even before the storms, FedEx’s systems were being overtaxed by high delivery volume.

On Dec. 20, a Pacific Sunwear e-mail sent to customers blamed FedEx for delayed shipments, and Eddie Bauer made similar comments on Dec. 22. Jet.com the prior week warned customers that the company could miss holiday delivery deadlines due to “nationwide shipping delays that have affected many of our shipping partners.”

FedEx employees volunteered to work extra shifts on Christmas to complete deliveries. A few FedEx stores were open to enable customers to pick up packages on the day.

Much like two years ago, an avalanche of complaints about FedEx landed on social media with many labeling FedEx the “Christmas Grinch.”

Many news reports traced the shortfalls to accelerated online spending. Both FedEx and UPS were also delivering well below average in the first week of December following a Black Friday Weekend surge. Online holiday sales are expected to grow from 6 to 8 percent (National Retail Federation) to as high as 14 percent (Comscore).

Both carriers have been investing and resetting strategies to handle peak delivery periods while also partnering and enforcing volume limits with retailers.

A spokesman at UPS, which didn’t report any unusual rate of botched deliveries, told the Wall Street Journal on Dec. 23 that the company “has worked closely with customers to establish detailed operating plans to ensure available capacity and cut-off times are understood, so there are no surprises for either party.”

But on FedEx’s second-quarter conference call held on Dec. 16, Fred Smith, CEO, indicated that some retailers were collaborating better than others. Mr. Smith remarked, “The people that have the real problem in the e-commerce business by and large are those that view the transportation companies as some sort of utility or a vendor and they make some really, really bad decisions.”

What lessons should retailers take from FedEx’s challenges meeting Christmas Eve delivery targets this year? What pain points are likely frustrating collaboration between retailers and third-party carriers?

Braintrust
"This is terrible! I know that FedEx has been working hard to attempt to understand what’s coming, but I can’t figure out how they missed it. On some level, this really isn’t rocket science (the term "brain surgery" is forever ruined for me) ..."
"Retailers, don’t over-promise. Don’t assume that harried carriers will be able to deliver that package to Timbuktu by December 24 if it’s ordered on December 23. And stop giving customers a reason to order on December 23."
"I would just add to manage expectations. The breathless way all online retailers promised "there’s still time" on December 23 and even 24 had not a whiff of "but we might not make it." Sorry, I put this solely at the feet of the marketing departments of the retailers, not FedEx."

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26 Comments on "FedEx ruins Christmas for some"

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Max Goldberg
BrainTrust

Retailers need to help customers learn when packages will be delivered. For years they’ve trained consumers to wait for deals, and then guaranteed that packages would arrive in time for Christmas. Perhaps a little more reality in shipping estimates will ensure that packages arrive on time.

Paula Rosenblum
BrainTrust

This is terrible! I know that FedEx has been working hard to attempt to understand what’s coming, but I can’t figure out how they missed it. On some level, this really isn’t rocket science (the term “brain surgery” is forever ruined for me) … I get that planes are expensive to roll out, but how did they miss so badly?

The lesson remains: don’t make promises your carriers can’t keep. And maybe Amazon really should buy its own planes after all …

Dick Seesel
BrainTrust

This is a repeat of the 2013 problems that seemed to hit UPS especially hard. The two big carriers seem to be unwilling or unable to “train” their big retail customers to stop taking orders by a safe fulfillment date — and I can’t blame the retailers for wanting to close as many sales as possible.

The reality is that e-commerce is accelerating faster than anybody foresaw, and this trend isn’t slowing down anytime soon. If you’re a retailer, how to plan better next year? (Not an easy question to answer, since most retailers don’t have the resources to develop their own fleet of jets like Amazon.) Instead of putting their eggs entirely in the FedEx or UPS basket, consider making more use of the Postal Service or local resources (like Uber drivers) in 2016.

Al McClain
Guest
Al McClain
1 year 5 months ago

It is a pretty sorry state of affairs when this seemingly happens every other holiday season or so. Some of the consumers on social media were over-the-top in their reactions, basically faulting FedEx for “ruining their lives,” but it is an issue. Not sure exactly what has to be done, but it would seem the shipping services should know by now that the holidays come every year, and bad weather typically affects at least some major portion of the country. And, e-commerce is growing — duh! Fred Smith’s comment seems out of touch — they are indeed a vendor, and perhaps could be viewed similarly to a utility or a cable company, and we know how much consumers love them.

Cathy Hotka
BrainTrust

Retailers, don’t over-promise. Don’t assume that harried carriers will be able to deliver that package to Timbuktu by December 24 if it’s ordered on December 23.

And stop giving customers a reason to order on December 23. When you slash prices even further than they were on Black Friday, you train your audience to wait till the end … a self-inflicted wound.

Chris Petersen, PhD.
BrainTrust

Lesson learned: online sales have exceeded logistics capacity for holidays!

Frankly, U.S. consumers have grown accustomed to, and even spoiled by, two-day reliable shipping. It simply can not happen the last few days before Christmas when all the carriers are at capacity. Throw in a storm or two, and it is an impossibility for even 95 percent reliability the last week.

Increasingly, logistics and delivery in the last mile will play a critical role in the continued growth of online sales. While carriers like FedEx can add planes and automation to move packages between hubs, it still takes people in trucks to get those packages to your door.

Only a few national retailers like Walmart have their own fleets of trucks. But unless consumers come to the stores for pickup, even Walmart has to get packages to customers doors.

Maybe Amazon isn’t so crazy in pushing drones for the last mile of delivery!

Gene Detroyer
BrainTrust

Two issues are in play here.

The first is that even the biggest proponents of online retail are unable to forecast how fast this trend is growing. When you plan on a healthy increase of 8 percent and get an increase of 14 percent to 17 percent it is impossible to meet that demand. Adjustments in forecasting will be made for next year, but when you come up against a behavior phenomenon, forecasting is difficult. The typical methods simply do not work.

The second is that there is no downside for the retailers talking late orders. They take the order. They make the money and when it doesn’t get there in time, they blame the carrier as does the customer. I don’t really have an answer to this challenge.

But, in today’s news, what was even more striking to me was the fact that Amazon signed up over 3,000,000 more Prime customers. How long ago was it that we were discussing how the increase in the Prime fee would limit the size of the membership? Apparently not.

Ken Lonyai
BrainTrust

One important take away is that local delivery services might be worthy of a second look. My guess is that the problem was with long-haul deliveries more than shorter ones, but some e-tailers might do better to spread the load and incorporate smaller, localized services that can be squeezed harder for last-minute deliveries than the big guys. No doubt Amazon and Google are looking to leverage this situation.

Tony Orlando
BrainTrust
The lesson will never be learned from all angles. Do you think FedEx is going to tell its stores that they can’t get this done on time for Christmas? Of course not, and they never will. The problem, in simple terms, is that the expectation from consumers and retailers is unrealistic, and there is no other PC way to say it, as the bar has been raised too high for FedEx to get all this stuff delivered before Christmas. If you were FedEx, would you invest many millions of dollars in new planes and trucks for a two-week super-high demand scenario, and then the other 50 weeks a year have all that money (planes) sitting idle as the demand returns to normal? My guess would be NO, and the solution lies in dealing with the customers to make them understand what the real cut-off dates for Dec 24th delivery should be. Yes real honesty is the key here, and then the retailers who use this service can tell their customers what the actual cut-off date is, with no exceptions period! Yes you can Uber and use other agencies to help out with the load, but we need to simply tell… Read more »
Mohamed Amer
BrainTrust

First of all, no one controls the weather and each year expects customers to boost online orders more than anticipated. Also, they will order as late as possible and still want immediate delivery.

Deliveries are part of the overall customer experience and the ultimate orchestrator is the retailer. Collaboration with delivery services means sharing more than just physical packages and creating integrated flex options with shared risks.

Roger Saunders
BrainTrust

Too much finger pointing on this issue.

It has to start with the consumer and the retailer having a strong understanding of the logistics issues. For consumers and retailers who accepted orders within a three-day delivery prior to Christmas, both have to be made aware that those gifts might arrive after the holiday season, OR, one or both of the parties have to agree to higher shipping fees for overnight delivery.

This isn’t about “Grinch.” This is about naivete.

Bob Phibbs
BrainTrust

Many good comments here. I would just add to manage expectations. The breathless way all online retailers promised “there’s still time” on December 23 and even 24 had not a whiff of “but we might not make it.”

Sorry, I put this solely at the feet of the marketing departments of the retailers, not FedEx. Things happen in the real physical world, don’t market it like a product is a download.

Stacey Silliman
Guest
Stacey Silliman
1 year 5 months ago

Remember when the guaranteed delivery time was four to six weeks? I know that was a lifetime ago but again, customers cannot order product at the last minute and expect Christmas miracles. Retailers need to make realistic promises and not point fingers at their delivery third parties. And yes, FedEx needs to step up their game. Again, though, customers have to be realistic and plan ahead. This happens every year and it’s all those last minute shoppers and/or those “amazing” deals offered by retailers with “guaranteed delivery by Christmas.” Buyer beware. Get the shopping done early!

Larry Negrich
BrainTrust

No surprise here. Some regional overload, weather complication or unknown yet predictable snafu will visit and delay some deliveries as surely and regularly as the holidays themselves. Perhaps retail can innovate and create a channel where consumers could acquire last-minute gifts in person.

Ed Rosenbaum
BrainTrust

I do not want to place the blame on FedEx or UPS for late deliveries this season. I think retailers can do a much better job of getting customers to buy earlier by placing more realistic deadlines on “ship by” dates. How realistic is it to “assure” deliveries shipped on December 23 will arrive on the 24th? If the retailers are telling the customers that then shame on them. If the shipping company is telling the retailers they can do it then shame on them. Reality has to come into play somewhere along the way.

Richard J. George, Ph.D.
BrainTrust

It appears the biggest problems were with the legacy brick-and-mortar retailers. Case in point, my wife ordered seven gifts from Macy’s on December 8 and was promised delivery by the 15th, which became the 19th, 21st, 23rd and finally the 26th. In fact, she had to log on to her account on the 23rd to learn the Christmas packages would not arrive until after Christmas. She did not receive any communications from either Macy’s or FedEx.

To be successful retailers need to be omnichannel. Omnichannel is about customers, not channels. The purchase, payment, shipping, returns and customer service need to be seamless, transparent, convenient and customer-friendly. Online shopping can not be perceived by brick-and-mortar retailers as a bolt-on option to their physical stores. A fully integrated system, covering the above-noted aspects of omnichannel with failsafe mechanisms in place needs to be in place before these firms can really be Amazon-like.

Shep Hyken
BrainTrust

Retailers need to look at the shipping companies as partners. They are an important part of the process. Negotiated rates, shipping dates and more are part of this. The conservative approach to guaranteed delivery means consumers must make their purchases by a certain date. Can retailers and consumers accept these dates?

FedEx is being singled out, but really all shippers need to guarantee their services. If they promise it will be there and it doesn’t show, the customer should be compensated — if nothing more than a refund on shipping costs. While a few bucks may not seem like much, when there are hundreds of thousands of packages that don’t make it by deadline, that number adds up.

With all of the sophisticated data and analytics, how is it that any shipper can be impacted by weather? FedEx had to see the rain coming. They had to notice the trend in sales. They are big and may not be able to turn on a dime, but they should be able be come close (maybe turn on a quarter). In other words, they should be able to adjust somewhat quickly.

gordon arnold
Guest

The word “guaranteed” will kill profit margins with little or no response time if placed in the hands of third-party service and/or support. When a company uses this as a sales tool to the general population the consumer almost never reads the fine print which increases the overhead costs starting with customer service call lines and ending with returns.

A recent RetailWire discussion focused on Amazon’s interest in acquiring a means to supply a limited amount of their own air cargo needs. Designed to stabilize the freight fluctuations seen with the expanding use and service expectations from e-commerce retail customers they will experience the same labor, weather and traffic jam interruptions as the giants do. No amount of effort will effectively reduce the consumer awareness and reliance on free or included next-day services. We will probably continue to see expanding attraction and demand for this option. Finding a means to absorb the cost of performance failures is where retail must go with this. Providing insurance by way of absorbing the costs or add-on pricing offered to the consumer might be worth investigating.

Li McClelland
Guest
Li McClelland
1 year 5 months ago

There is only so much water a bucket can hold. No matter how much overtime is offered or how many temporary workers the shipping companies hire, there are just so many planes and trucks available (including rentals). And drivers and dispatchers who are not used to the routes and familiar where to put the packages at the customers’ premises are naturally slower and more inefficient. Everybody’s at fault here all along the chain. Buyers who wait till the last minute. Retailers which are willing to stretch the “delivery truth” to make a last ditch sale, and the shippers who fear turning down retailers’ business.

But with that said, the retailers are the only ones who can actually put a stop to this last minute frenzy and idiocy and they must do this by limiting their final offers and promises in the few days immediately preceding Christmas.

Patricia Vekich Waldron
BrainTrust

If FedEx is the Grinch, I think it’s heart grew three sizes that day, with workers avail on Christmas to meet commitments that were made by retailers and were impacted by record-breaking bad weather.

When you’re the last person at the “crack of the whip,” it’s not an enviable position. Better collaboration (and forecasting using weather data) will be a requirement for 2016. 

Lee Kent
BrainTrust

Retailers and their partners need to be in lock step as the holidays progress. FedEx has only one hub and when weather delays hit that hub, they really don’t have any workarounds.

So what is the answer? Don’t play so close to the date during the Holidays. December is prime for weather problems. Cut it off Dec 23rd. Customers can get their shopping done earlier if you train them.

And that’s my 2 cents.

Craig Sundstrom
Guest

There seems to be a typo in the headline: shouldn’t it read “People Waiting to the Last Minute Overwhelm FedEx”? (Disclosure: I own FedEx stock.) The lesson this reinforces (I won’t say “teaches” because if you haven’t learned it by now, you probably never will) is that (even) well-run systems will from time to time be overwhelmed … indeed the reason they’re “well-run” is they allocate resources efficiently — i.e. for likely conditions – rather than having a duplicate system sitting around.

Camille P. Schuster, PhD.
BrainTrust

Retailers are emphasizing their online presence. Consumers are increasing their online purchases. Retailers can not afford to choose a third party delivery service and abdicate their responsibility. Retailers need to monitor processes, work with partners to continuously improve processes, and alert consumers to problems.

The fact that UPS and FedEx both had problems last year, but UPS did not this year is going to hurt FedEx’s credibility with retailers.

Tom Martin
Guest
Tom Martin
1 year 5 months ago

Nothing makes consumer emotions run hotter than a missed a gift during the holidays. There’s so much anticipation and pressure placed on finding the right gift, with the right price and at the right time, that missing deliveries during this timeframe will hurt a brand more than any other time of the year.

The issue is two-fold: retailers are heavily promoting “last chance” offers that guarantee shipping on time when ordered by a certain date. This inundates an already strapped system with last-minute orders from a variety of retailers. With that said, this isn’t the first time that FedEx has found itself in this position. Something needs to change. They did remain open for a time on Christmas day for package pickup, but even that is a disruption in someone’s holiday schedule. Having employees working Christmas shifts and staying open, does help right the wrong in some fashion. It probably didn’t help in everyone’s situation, but at least we have a brand acknowledging fault and doing what they can to rectify the issue.

Maybe Amazon has the right idea after all. I wouldn’t be surprised to see a fast-tracked timeline on their cargo operations.

Arie Shpanya
Guest

I think we can all agree that it’s a wonderful thing that online retail is growing, but it’s clear that the industry is experiencing growing pains when it comes to shipping. This year, holiday sales started earlier than ever before, so it could be procrastinating shoppers and unrealistic retailers that had the biggest hand in this delivery issue. It’s not a coincidence that Amazon is trying to take control of its delivery logistics with its own planes.

Next year, retailers need to use the longer holiday season to offer deals earlier to make sure deliveries arrive on time.

Andy Casey
Guest
Andy Casey
1 year 5 months ago

If I’m a brick and mortar, I’m focusing on availability versus online ordering maybe with a commercial mocking the old FedEx theme — “When it absolutely, positively has to be there by Christmas.”

wpDiscuz
Braintrust
"This is terrible! I know that FedEx has been working hard to attempt to understand what’s coming, but I can’t figure out how they missed it. On some level, this really isn’t rocket science (the term "brain surgery" is forever ruined for me) ..."
"Retailers, don’t over-promise. Don’t assume that harried carriers will be able to deliver that package to Timbuktu by December 24 if it’s ordered on December 23. And stop giving customers a reason to order on December 23."
"I would just add to manage expectations. The breathless way all online retailers promised "there’s still time" on December 23 and even 24 had not a whiff of "but we might not make it." Sorry, I put this solely at the feet of the marketing departments of the retailers, not FedEx."

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