Can retailers avoid a late holiday delivery ‘apocalypse’?
With holiday shipping volumes typically 30 to 40 percent higher than at other times of the year, the pandemic-fueled acceleration of online purchases this season is already pushing distribution networks to the limit.
On Cyber Monday, UPS instructed drivers across the U.S. to temporarily stop picking up packages at six retailers — Macy’s, Nike, Gap, L.L. Bean, Hot Topic and New Egg — after their shipments exceeded volume agreements, according to The Wall Street Journal.
“The temporary limits, which some drivers say they haven’t seen during previous holiday seasons, are a sign that UPS is metering the flow of packages into its network to preserve its performance during one of the busiest shipping weeks of the year,” wrote the Journal’s Paul Ziobro.
UPS and rival FedEx have raised shipping fees, added surcharges for peak deliveries, encouraged retailers to spread out promotions earlier in the season and promised to strictly limit the number of packages retailers can send out each day to manage expected record online volume this year due to the pandemic.
The National Retail Federation reported last week that the number of online shoppers jumped 44 percent over the five-day Black Friday weekend as pandemic-related restrictions and fears stifled in-store shopping.
LateShipment.com predicts 20-to-25 percent of packages won’t arrive on time this holiday season, up from about nine-to-10 percent in recent years.
“It’s absolutely going to be a shipping apocalypse,” LateShipment.com’s CEO Sriram Sridhar told The Dallas Morning News.
Amazon.com, which already delivers about half of its own packages in the U.S., is seen having an advantage. Other retailers, particularly smaller ones, have minimal leverage against UPS and FedEx.
Retailers have an opportunity instead to maximize use of the pickup options that they have been expanded during the pandemic.
For online orders, early cutoff dates are another option for retailers. Abercrombie & Fitch is insisting that shoppers order by December 4 for Christmas delivery at standard shipping rates. Most others have set their free-shipping cut-off around mid-December. Instacart, Shipt and other third-party delivery platforms may be an available yet expensive last-minute option.
[Update: An Abercrombie & Fitch spokesperson reached out to inform RetailWire that its cutoff date has been extended past Dec. 4. The spokesperson said in an email, “We continue to monitor the shipping situation very closely. Our strategy to increase distribution capacity and add regional parcel carriers is working and, because of that, we’ve recently extended the date that customers can order with standard shipping to receive by 12/24. The extension is for a limited period of time and with the fluid situation, customers should check the website before placing an order.”]
More loudly encouraging early orders is another ploy. A West Elm email to customers read: “The postal services are predicting one of the busiest shipping seasons ever. To ensure your items arrive on time, we encourage you to place your orders extra early.”
- UPS Slaps Shipping Limits on Gap, Nike to Manage E-Commerce Surge – The Wall Street Journal
- With 3 Billion Packages to Go, Online Shopping Faces Tough Holiday Test – The New York Times
- Holiday Shoppers Take Advantage of Early, Thanksgiving Weekend Deals – National Retail Federation
- Shipping delays are expected to surge – The Dallas Morning News
- UPS places shipping limits on some retailers as holiday shopping heats up, report says – CNBC
DISCUSSION QUESTIONS: What options do retailers have left to best manage expected shipping capacity constraints over the rest of the holiday season? What messaging to customers may help manage the risks?