Shippers Scrambling to Meet Onslaught of Holiday E-Commerce Orders

December 16, 2016 by Carly Schaffner, @carlyschaffner

Santa’s sleigh might face gridlock this Christmas.

Online shopping has morphed into a heavyweight contributor this holiday season as overall retail sales in November and December climb toward new heights.

Holiday online sales are expected to reach $91.6 billion, an increase of 11 percent compared with 2015, according to marketing research firm Adobe Digital Insights, or ADI.

Target Corp. has already reported double-digit growth and its best-ever online sales on Black Friday. Online retailer Amazon recorded a record-breaking Cyber Monday for sales of its Amazon devices, which doubled year-over-year.

“It’s clear that consumers have become more comfortable spending money online,” said Tamara Gaffney, principal analyst at ADI. She said the behavior change is due in part to consumers looking to avoid the “stress and strain” associated with holiday shopping.

In response to the spike in online sales, shippers are pushing the limits of their logistical capability in order to fulfill orders placed for delivery before Christmas.

Consumers may be able to avoid mall traffic with online shopping, but the streets will be packed with delivery trucks well into the New Year.

“E-commerce has completely changed the landscape of shipping, and there is more road transport every day,” said Cathy Roberson, an analyst for global logistics research company Logistics Trends & Insights.

The U.S. Postal Service is already delivering seven days a week, and FedEx has added Saturdays, with UPS not far behind as it tests Saturday delivery in certain markets, Roberson said.

Additionally, consumers’ increased comfort with purchasing big-ticket items online, like washers and dryers, has forced UPS and FedEx to turn to small freight and third-party logistics companies for extra support.

That’s why there are big rigs maneuvering around residential streets creating more congestion,” Roberson said.

UPS workers compare the holiday season to the Super Bowl. All of the shipper’s 105,000 vehicles – including cars, vans, semi-trucks and motorcycles – are in motion. The company has opened 23 seasonal processing facilities and hired 95,000 seasonal workers.

“We are prepared for a six-week period that starts with Black Friday and Cyber Monday, moves into Christmas shopping peak week and ends mid-January as customers use gift cards to shop online as well as return and exchange merchandise,” said Kim Krebs, a UPS spokesperson.

The company estimates it will double the 15 million average daily number of packages it typically delivers during the year during the peak period of Dec. 19 through 23.

UPS projects it will send out a record 204 million tracking emails to customers awaiting an update on their packages Wednesday, at the height of the Christmas delivery rush.

Rival FedEx is also bracing for a record holiday shipping season, with every Monday for the four weeks preceding Christmas expected to be among the busiest in the company’s history.

“A lot more people are shopping online over the weekend, and the orders start to fill in our network on Monday causing an overall spike on Mondays in general,” said FedEx spokeswoman Katie Wassmer.

FedEx said its average 12 million deliveries per day likely grew to about 27 million on Dec. 5 and 12 and is expected to reach that number again on Monday.

The Postal Service estimates it will handle approximately 750 million packages this holiday season, an increase of more than 12 percent over last year.

Adding to the increased activity is “Free Shipping Day,” which is slated for today. The campaign, started in 2008, helped online sales reach nearly $1.5 billion last year, according to ADI. More than 1,000 retailers spanning categories from automotive to home décor have signed up for the program that requires participants to offer consumers free shipping without a minimum purchase.

Christmas falling on a Sunday provides shippers an extra day to deliver packages, but not without limitations.

FedEx, for example, will only be delivering packages on Dec. 24 via its airline network FedEx Express, which offers a time-specific delivery option, including overnight shipping.

Amazon is pushing delivery up until midnight Christmas Eve through Prime Now, its superfast one- and two-hour delivery service, to late shoppers in more than 30 cities that offers ultra-fast delivery from local stores and restaurants.

Prime Now is not the company’s first creative shipping solution. Amazon also offers Prime Flex, a crowd-sourcing delivery option much like Uber or Postmates.

“Amazon has upended the traditional hub-and-spoke network. Amazon not only taps traditional shippers like UPS and FedEx, it uses DHL and all the regional carriers, as well as operates its own fleet of trucks and planes, and has the ability to move ocean freight for itself and others,” Roberson said.

“Amazon is completely redrawing the way you ship,” she said.

Related: Shipping, Trucking Companies Adapt to Black Friday and Cyber Monday

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