UPS and FedEx are working hard to avoid a Christmas shipping fiasco like the one last year. WSJ's Laura Stevens reports on the News Hub with Sara Murray. Photo: Getty.
In terms of package deliveries, last Christmas was a perfect storm of shopper procrastination, bad weather, a compressed calendar and retailers that overpromised, resulting in millions of gifts that were too late for Santa.
This year, United Parcel Service Inc. UPS +1.70% and FedEx Corp. FDX +2.33% are working hard to avoid a repeat of the fiasco.
Their challenge is convincing retailers to change their ways.
UPS is trying to persuade e-commerce companies to hold their big sales in mid-December instead of in the countdown to Dec. 25. It also wants them to stagger special offers geographically—so a GoPro GPRO +1.77% camera might be on sale one day in Texas and a different day in Florida.
To prepare for the annual crush of packages, UPS is spending $500 million to modernize buildings, and increasing seasonal hires by 95,000. Getty Images
Perhaps most of all, UPS is lobbying retailers to banish any and all free overnight-shipping offers on Dec. 23, as well as promotional emails going out that day.
If all else fails, UPS executives say they can’t guarantee they will ship anything that exceeds what retailers projected.
UPS CEO David Abney says his company is more focused on providing retailers with options than cutting them off. “But,” he adds, “you can’t just encourage everyone to say, ‘Hey, just wait and ship the last day.’”
Retailers are listening, and they say they are working more intensely to provide package volume projection updates—but they are reluctant to back away from the final rush. Nordstrom Inc. JWN +2.12% has been working with UPS, which has added additional cargo flights for the department-store chain on Dec. 22 and Dec. 23, a spokeswoman for the retailer says. And Nordstrom is rolling back its last-minute guaranteed-to-get-there-by-Christmas deadline—but only by three hours, to noon Dec. 23 this year, from 3 p.m. last year.
A Macy’s Inc. M +2.14% spokesman said the retailer has been working closely with its carriers on “forecasting and capacity requirements.” And this year, Macy’s has expanded to all of its more than 800 stores the option for in-store pickup for online orders. Last year, only 10 stores offered that service.
But Macy’s—which uses UPS, FedEx and the U.S. Postal Service—isn’t changing its deadlines for guaranteed Christmas delivery. Shoppers can order until noon Dec. 23 for expedited delivery, the spokesman said.
E-commerce is a retailer’s “best opportunity to squeeze in those last few dollars,” says Steve Osburn, a director and supply-chain expert at consultant Kurt Salmon. “With e-commerce, you can make a decision on the 22nd that you’re going to extend the shipping deadline to the 23rd,” he says, “and you can immediately communicate that to your customers.”
Mr. Osburn says he is advising retailers to move up by a day or two the last shipping day a customer can order and still get an item by Christmas to build in a cushion, in case there is a problem. They have been receptive, but he isn’t sure they will listen.
Ahead of the holiday rush, UPS is lobbying retailers to banish any and all free overnight-shipping offers on Dec. 23, as well as promotional emails going out that day. But most retailers are sticking to their plans.Philip Montgomery for The Wall Street Journal
Numerous retailers say they have no intention of staggering holiday promotions or rolling back their deadlines for guaranteed Christmas delivery. J.C. Penney Co.JCP +3.84% this year is actually extending the deadline by three days. Standard shipping orders placed before midnight Dec. 20 will be guaranteed to arrive by Christmas Eve. The cutoff for two-day shipping will be 3 p.m. Dec. 22 and for next-day delivery 3 p.m. on Dec. 23.
FedEx, for its part, isn’t trying to persuade retailers to change their ways. Rather, it is collaborating with them on forecasts and advising them on how much business it can handle in the weeks before Christmas—and warning what will happen if it is overwhelmed.
“For larger retail and e-tail customers, they understand, and we’re in conversations right now as far as what sort of volumes we’re able to deliver. If they were to launch a promotion that caused a surge beyond what we had discussed, we’ll make every effort to meet that increased need—but we can’t commit to it,” says Patrick Fitzgerald, senior vice president of marketing and communications for FedEx.
FedEx is also agreeing to carry a certain number of packages for retailers, but will turn away those that exceed that agreement if the shipper’s network is full. It did the same last year, which allowed it to avoid the worst of the missed deliveries.
This holiday season, e-commerce is expected to grow about 14%, according to financial consultant Deloitte LLC. And like last year, Thanksgiving falls late, making for a condensed shopping season.
Late shopping has become common. About 30% of Americans have purchased a gift online with five or less days to go before the holidays, according to a survey of 1,000 adults conducted by Pitney Bowes. PBI +1.50% Of those, 60% said they plan to do so again this year.
Last year, an estimated 2 million express packages due to be delivered Christmas Eve were left stranded on trailers and delivery trucks across the nation, according to tracking software developer Shipmatrix Inc.
The sheer volume of packages overwhelmed the system last year, as more consumers opted to shop from home amid nasty weather, and retailers egged them on with 11th-hour delivery guarantees.
Last Dec. 23, more than 70 retailers were promoting guaranteed next-day delivery on purchases made as late as 11 p.m., according to UPS. Growth in online orders that day spiked by 63% from the year before, according to Mercent Corp., which works with more than 550 retailers.
Kohl’s Corp. KSS +1.05% , Wal-Mart Stores Inc. WMT +1.43% and Groupon Inc.GRPN +2.43% all reported delivery problems during the 2013 holiday season.Amazon.com Inc. AMZN +1.36% didn’t help matters any: The largest e-commerce shipper dropped off hundreds of trailers full of parcels at UPS’s biggest air hub in Kentucky last year, helping overwhelm the number of available unloading docks and stalling some deliveries. But Amazon fared relatively well. Of the approximately 1.1 million packages Amazon shipped last minute to arrive by Dec. 24, only about 178,000 didn’t make it, according to Shipmatrix estimates.
To appease angry customers, retailers including Wal-Mart, Amazon and Groupon all issued customers gift cards and refunds for shipping costs for some items that didn’t arrive before Christmas last year. UPS itself last year issued some $50 million in refunds related to missed holiday deliveries.
Delivery companies’ first step in the wake of the mess was to promise upgrades and more hands on deck for this year. UPS is spending $500 million to modernize and expand buildings, adding 6,000 new loading spots for its big brown vans and increasing seasonal hires by as much as 73% to 95,000 from last year’s initial hiring projections.
FedEx Ground is spending 90% of its $1.2 billion in total capital spending this year to expand capacity. FedEx is hiring 50,000 seasonal workers, an increase of 25%.
In years past, retailers preferred to apologize to customers by offering them gift cards if items didn’t arrive by Christmas instead of losing a sale. Now, they are at least more aware of the downstream issues.
“Even if I’m looking out the window on Dec. 22 and roads are closed because it’s snowing so badly, retailers would still promise delivery before Christmas because they didn’t want to lose the sale,” said Jim Barnes, president of supply chain consultancy enVista. “Now, marketing and logistics are working much more closely.”
Write to Laura Stevens at laura.stevens@wsj.com, Suzanne Kapner atSuzanne.Kapner@wsj.com and Shelly Banjo at shelly.banjo@wsj.com
Corrections & Amplifications
Macy’s shoppers can order until noon on Dec. 23 for expedited delivery, the same as last year. An earlier version of this article incorrectly said the cut-off was 2 p.m.