Handling the late holiday rush proves tough for FedEx and UPS

BY MATT LINDNER Associate Editor

More than 60 million packages were delivered on Christmas Eve, according to ShipMatrix. FedEx even made deliveries on Christmas Day after a surge in online orders and bad weather kept the carrier from delivering some orders by Christmas Eve.

FedEx Corp. improved its on-time delivery performance on Christmas Eve to 96.2% from an on-time rate of 77% on Dec.  23, according to data from software provider ShipMatrix Inc., but those gains weren’t enough to prevent some e-commerce orders from not arriving in time to be opened Christmas morning.

A surge in last-minute online orders before Christmas caused delivery delays for FedEx, which says it handled a record number of packages during the final week of the holiday shopping season, though it declined to specify volumes

“A surge of last-minute e-commerce shipments, combined with severe weather in several areas of the country, did cause delays in some markets,” a spokeswoman says. “FedEx Express expanded delivery operations on the Saturday following Christmas, delivering delayed shipments along with our normal Saturday volume, and resumed normal pickup and delivery services on Monday.”

The past week has not been kind to FedEx, which serves as the shipping carrier for 307 of Internet Retailer’s Top 1000 online retailers, according to Top500Guide.com. On Tuesday,FedEx reported service delays stemming from winter storms that hit the Midwestern and Southwestern United States. Last week, bad weather on Dec. 23 also caused unspecified shipping delays.Another FedEx spokeswoman says the company delivered packages on Christmas Day.

The weather also affected United Parcel Service Inc., which posted on-time delivery rates of 79.5% on Dec. 23 and 97.7% on Christmas Eve, according to ShipMatrix.

“The drop on Wednesday (the 23rd) for both carriers was largely due to bad weather,” says Satish Jindel, founder of SJ Consulting Group, a sister company of ShipMatrix. “These figures are different from prior weeks, as these reflect what actually got delivered and are not adjusted for errors by shippers and consumers, such as shipping to a wrong address, etc.”

ShipMatrix reports that FedEx, UPS and the U.S. Postal Service combined to deliver more than 60 million packages on Christmas Eve, up 70% from a typical day.

“Even with on-time performance of 99%, 600,000 packages will be delivered late,” ShipMatrix writes. “Complaints by a few people on social media, who expect their packages to take priority over safety of FedEx and UPS employees working in bad weather, is not a reflection on the service provided by these carriers.”

FedEx declined to confirm ShipMatrix’s numbers, saying only that the company is “extremely proud of our team members who worked around the clock to deliver the holidays.” A UPS spokesman previously told Internet Retailer that “UPS will not attempt to validate third party consultants’ data.” 

Data from marketing software company Custora shows that 5.4% of all online orders during the holiday season were placed during the final week of the holiday shopping season, from 12/20-12/24, down from 6.5% during the same time last year. Custora also reports that social media drove 1.8% of overall online sales during this year’s holiday shopping season, down from 1.9% last year.

Some industry experts say the last-minute push may already have carriers thinking about next holiday season.

“No major storms took out any major hubs and so the work-arounds were adequate to keep product flowing,” says Jim Tompkins, CEO of supply chain consulting firm Tompkins International. “The more significant delays that did occur were the result of the volume of parcels exceeding expectations (8- 10% above plan). This was a result of strong online sales, huge mobile shopper volume and savvy shoppers that cherry-picked promotions. UPS and the USPS handled these unexpected volumes better by prioritizing customer satisfaction above profitability, whereas FedEx reversed those priorities.”

FedEx would not say whether it would compensate shippers or consumers for late deliveries. “We work directly with each affected customer on a case-by-case basis,” a spokeswoman says.

Amitai Sasson, vice president of marketing and development with online art retailer OverstockArt.com (No. 812 in the Internet Retailer 2015 Second 500 Guide), a FedEx client, says his company experienced  a surge in last-minute shoppers but didn’t notice shipping delays. Sasson declined to provide specifics on OverstockArt.com’s last-minute orders.

“We attributed (the last-minute surge in orders) to our improvement in messaging on shipping timelines along with our improved positioning for our gift certificates,” he says.

Data from IBM, based on millions of transactions from retail websites of its clients, shows that all online sales grew 13.3% from Nov. 1 through Dec. 26 compared to the same period last year. IBM did not break out last-minute online shopping statistics.

Other holiday shopping trends reported by IBM include:

• Mobile devices accounted for more than half (52.1%) of all traffic to retailer websites, up 16.7% year over year.
• Shoppers who used both their desktop computers and mobile devices to shop spent more this year, with an average order value of $127.49, up 2.5% from $124.33 last year.
• Consumers used their smartphones more in the past for holiday shopping, and more than they used tablets. Smartphones accounted for 16.3% of all online sales this year, a jump of more than 90% year over year, while tablets accounted for 14.5% of online sales. The contrast between tablets and smartphones is starker when looking at online traffic figures. Smartphones accounted for 40.2% of e-commerce traffic during the holiday shopping season compared with 11.8% for tablets.