Call it “shipaggeddon” or just call it trouble for the digital-first economy. The fulfillment and delivery crunch predicted for eCommerce as it fights to keep up with an exponential increase in orders is here and it’s serious. The extensive nature of the problem became evident when word spread Wednesday that UPS was limiting shipments from several major retailers as a strategy to manage its workload.
According to The Wall Street Journal UPS 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.
“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.”
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 The “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 US.
“This holiday season, like everything else in 2020 is … going to be unprecedented,” says Brie Carere, executive vice president and chief marketing and communications officer for FedEx. “We were at holiday level volumes in March and April. So now … you’ve got a peak on top of a peak.”