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November 19, 2018 1:30 PM, EST

Increase in Online Shopping Could Lead to Package Delays

Packages Erik S. Lesser/Associated Press

Area shoppers will want to purchase their holiday gifts earlier this year, as a major jump in online holiday shopping could complicate the delivery system.

Target, Walmart and other retailers have started offering free two-day delivery with no minimum purchase amounts for the holidays, a move to compete with Amazon’s Prime delivery options. Upping the ante, Amazon announced that Prime members would have access to free same-day delivery on some products and everyone else would receive free standard delivery this season.

“Where things will get interesting is the amount of congestion it causes in the network, especially when you compare the ground versus express networks,” said Sri Sridhar, CEO of lateshipment.com, one of the largest independent trackers of companies’ carrier packages.

While the service seems to all but guarantee timely delivery, experts say shoppers should still plan to purchase holiday gifts and send their packages early as an increase in online sales is likely to congest delivery networks.

That National Retail Federation expects consumers to spend about $720.89 billion this holiday season, up roughly 4.8% amid a healthy economy. That includes a 15% increase in e-commerce sales, as forecast by Adobe Analytics.

With the increased sales, United Parcel Service, FedEx and the United States Postal Service expect to handle a record number of packages this year.

FedEx Employees

FedEx employess handling holiday packages. (Michael Dinneen/Associated Press)

While ground shipments typically have more volume, the major hike in free two-day shipments could lead to an increase in number of delays among express shipments compared to the average holiday season, Sridhar said, reaching potentially 14 to 15%. Across all service types including standard shipping, about 15 to 23% of packages are usually delayed during the holidays.

“The easier technology makes it for consumers to shop, the sooner, the earlier, consumers really need to be willing to pick the gifts, order their gifts and be willing to accept the gifts…If they don’t do that, they just jeopardized being able to have the products they want delivered in time for Christmas, ” said retail analyst Brittain Ladd.

During the last several holiday seasons, delivery companies like UPS, FedEx and the United States Postal Service have struggled to keep up with a growing number of online holiday sales. Consumers last year had major concerns as the second week of December 2017 rolled around and the delivery companies still had major delays after a record Cyber Monday.

UPS Plane

Wilfredo Lee/Assocaited Press

And this year, they plan to have record years again, with UPS expecting to handle more than 800 million packages between Thanksgiving and New Years Day, up from 700 million last year and nearly double the peak of most normal delivery days, said spokeswoman Kim Krebs. UPS is No. 1 on the Transport Topics Top 100 list of for-hire carriers in North America and No. 2 on the TT list of top 50 logistics companies in North America.

FedEx also plans to deliver a record number of packages this year, with the Mondays between Black Friday and Christmas expected to be the busiest in FedEx history, spokesman Jonathan Lyons said. FedEx is No. 2 on the Transport Topics Top 100 list of for-hire carriers in North America and No. 8 on the TT list of top 50 logistics companies in North America.

“The biggest challenge that shipping carriers face during the holiday season, they know the rush is coming and forecast that it’s going to be record volume again, but then it’s almost impossible for them to find temporary resources…so there is going to be a crunch,” Sridhar said.

UPS plans to hire 100,000 seasonal employees to work at its facilities, including some new and expanded. FedEx also plans to hire 55,000 over the next several weeks while operating extended shifts and increasing hours for current employees.

“The technology has simply made it easier to engage with retailers, but the supply chain, the logistics, the last-mile delivery, it doesn’t have an ability to become that much more efficient in that short period of a time. There’s only so many trucks; there’s only so many fulfillment centers, there’s only so many drivers,” Ladd said.

Black Friday

Getty Images

Retailers are exploring ways around the congested package carriers during the peak holiday season, including early Black Friday-like sales in the first days of November. The deals attempt to convince consumers to shop early as a way to spread out the delivery congestion following the Thanksgiving, Black Friday and Cyber Monday sales.

They’re also experimenting with in-house delivery options and third parties like Shipt, Deliv and Instacart that primarily deliver grocers but could also handle general merchandise used for gifts.

And in the future, consumers can expect to hear about Christmas in February and March as retailers look to use artificial intelligence and machine learning to determine what consumers want for the holidays by July, which could eliminate inventory issues slowing down delivery, Ladd said.

“This is really an evolution; every year there is a change in technology, an improvement in the supply chain,” he said.

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